2006, after pleading guilty to conspiracy to defraud the U.S. government with
false and fraudulent claims.
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
article.)
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.
Related
Stories:
target=_blank>Distributor Fraud Case
Plays Out
