The 2020 Mid-Year Economic Update_long

Former Tools and Metals President Sentenced to 87 Months in Jail

to 87 months in jail and ordered to pay $20 million in restitution March 27,
2006, after pleading guilty to conspiracy to defraud the U.S. government with
false and fraudulent claims.


overcharging Lockheed Martin Aerospace at least $18 million for MRO supplies it
used in Department of Defense contracts at three plants. The charges began a
downward spiral for the distributor, based in Fort Worth, TX, that culminated in
Chapter 7 bankruptcy in September and a civil suit against Loftis and other
former board members by TMI’s new owners, JHW Greentree Capital LP. (Read a
detailed account of the charges and the civil lawsuit in href=”/stories/TMI3524.html” target=_blank>this December 2005 MDM

JHW bought TMI just six months before the
probe into the fraud began.


Lockheed accounted for up to 90 percent of
TMI’s annual revenues, according to civil suit documents.

TMI entered into a sole-source agreement
with Lockheed in 1998. TMI provided tens of thousands of specialized industrial
cutting tools under the sole-source contract to three Lockheed plants for the
manufacture of Department of Defense airplanes, including the F-16 and the F-22.
Loftis and TMI started overcharging Lockheed for the tools, and covered up the
fraud by creating fake invoices for the items.


Under TMI’s contract with Lockheed, the
company would charge Lockheed 15 percent above acquisition cost for first-time
sales of a product, and 20 percent above acquisition cost for subsequent sales.
But Loftis and others at TMI directed buyers and customer service
representatives to present a higher acquisition cost to Lockheed than TMI
actually paid in order to boost TMI’s profits.

So TMI could pass muster in Lockheed’s
twice-a-year audits, Loftis took supplier invoices, scanned them into TMI
computers, and changed them, increasing the price paid by TMI for the tools.
They were then run through a copy machine to make them look more authentic.
Lockheed examined the invoices to confirm that its purchase prices were
consistent with TMI’s acquisition cost plus the agreed-upon markup of 15 percent
to 20 percent. Loftis later had the false invoices destroyed and the evidence
removed from TMI computers.


target=_blank>Distributor Fraud Case
Plays Out

About the Author
Leave a Reply

Leave a Comment

Sign Up for the MDM Update Newsletter

The MDM update newsletter is your best source for news and trends in the wholesale distribution industry.

By subscribing, you are agreeing to MDM’s Privacy Policy.


articles left

Want more Premium content from MDM?

Subscribe today and get:

  • New issues twice each month
  • Unlimited access to, including 10+ years of archived data
  • Current trends analysis, market data and economic updates
  • Discounts on select store products and events


articles left

This is your last free article

Subscribe to MDM Premium today and get:

  • Unlimited access to
  • 1 year digital subscription, with new issues twice a month
  • Trends analysis, market data and quarterly economic updates
  • Deals on select store products and events



You have one free article remaining

Subscribe to MDM Premium to get unlimited access. Your subscription includes:

  • Two new issues a month
  • Access to 10+ years of archived data on
  • Quarterly economic updates, trends analysis and market data
  • Store and event discounts

To continue reading, you must be an MDM Premium subscriber.