Huge Fraud Scheme Against Port Found; Ex-Worker Arrested

A former Harbor Police lieutenant was charged Friday with conspiracy to defraud and two counts of grand theft, the first indictment stemming from a long investigation into a purchasing scam allegedly involving at least $700,000 at the San Diego Unified Port District.

The San Diego County district attorney’s office says the arrest and arraignment of William Clair, 59, of Ramona, is the first of several expected by the end of the month. The arrests are expected to include those of the masterminds behind a scheme that operated for at least three years.

As outlined in court documents detailing the charges against Clair and in statements by the district attorney’s office, the scam originated with low-level employees at the Port District working with accomplices at a Genuine Parts/Napa auto parts store on 12th Avenue.

The workers allegedly used a blizzard of phony and altered business documents, such as invoices and requisition forms, to cover up illegal purchases that were paid for by Port District funds.

The Port District paid for items it never received and the bogus charges made by the auto parts store contained a 60% profit mark-up, investigators reportedly found.

The investigation also purports to show that those involved gave gifts to fellow workers who, in most cases, apparently accepted them without knowing they were fraudulently paid for by the Port District. A statement by the Port District described these as “Robin Hood-type” activities.

‘Laundered’ Purchases

Apparently a key to the fraud was that, although individual purchases may have cost several thousand dollars each, they were “laundered” through the Port District’s purchasing system by way of a series of low-cost invoices, each of which were kept below $250. This allowed them to be routinely paid without question. Invoices over $250 faced a stricter review.

Anthony D. Samson, chief of the district attorney’s fraud unit, alleged Friday that the ringleaders of the scam are two former Port District employees and two others who worked at the Napa store. He said that his office may charge four to seven more people by the end of the month and that the investigation is still looking at workers employed by the Port District.

“Some still are employees at the port . . . we are focusing in on them and trying to make a decision on them,” he said.

Authorities don’t believe that high-ranking officials at the Port District were aware of or involved in the scheme.

The main reason the investigation has taken 16 months is that the district attorney has had to re-create thousands of business documents because the originals were altered or forged, making them unreliable. As a result, the district attorney’s office has had to pore over 48,000 documents and interview more than 140 people, while exploring the paper trail of purchases made during a three-year period ending in June, 1987.

The task of sorting through the transactions has involved a special computer program and, at the peak of the investigation, eight investigators and prosecutors. The extraordinary cost of the probe is being paid by the Port District.

“We’re still sorting the documents, and, every time we sort them, we find something,” Samson said. “People are working overtime on this” to complete the investigation by the end of the month. The district attorney has been able to document fraud totaling $700,000, Samson said, adding that the true amount, spread over at least five years, may add up to $1.5 million.

Not Core Group Member

Although Clair, who worked at the Port District for 18 years until his retirement in April, 1987, allegedly participated in the scam, authorities said he was not a member of the “core group” that initiated it.

In all, the costs of goods, services and materials allegedly provided to Clair and paid by the Port District amounted to $16,045 for the three-year period under investigation. The criminal complaint lodged against Clair alleges that he received repair services on his truck, a microwave oven, a custom trailer hitch, a radiator, and a patio and fencing for his home in the 600 block of Kirks Way in Ramona.

All of the work and materials provided by various companies were billed to Napa, which in turn passed on the cost plus its 60% markup to the Port District, which had a large account with the auto parts store.

As a regular practice, the Port District each week accumulated all the bills from Napa and then issued one check, totaling several thousand dollars, to the store.

One example of how Clair allegedly participated in the scam, as outlined in the criminal complaint:

In July, 1985, Clair obtained an estimate from Balboa Fence Co. that it would cost $3,380 to build a fence at Clair’s Ramona home. Allegedly working with Rudi M. Enriques, 36, a former Port District purchasing department employee, Clair had the fence company bill Napa for construction of the fence.

Then, according to the complaint, Enriques and Paul Manes, 48, a former Napa store employee, caused the bill to be increased by $2,264--the 60% mark-up. The bill, now totaling $5,644, was passed on to the Port District through a series of about 20 fraudulent invoices, according to the documents.

The invoices, ranging in amounts from $150 to $230, sought payment for items such as “posts,” “stakes,” “rails,” and “brackets,” and contained the typed code “BF” or “BFC” as reference to the Balboa Fence Co., which, like most vendors caught up in the scam, had no idea what was really going on, according to the district attorney.

At the Port District, the invoices were altered by hand. The description “rails,” for example, was changed so that the “s” was obliterated and the handwritten word “filters” added, so that the item was described as “rail filters.”

In each case, requisition forms were forged to make it appear as though port employees had ordered the materials or services being charged on the port’s account at the Napa store.

After the Fence, a Patio

After the fence was put in, Clair, Enriques and Manes allegedly worked together to provide a patio at Clair’s home. As outlined in court documents, in November of 1985, Imperial Patio Builders provided Clair with an estimate of $4,135 to build the patio.

A month later, Imperial, at Clair’s direction, submitted its bill to Napa. In January, 1986, Enriques and Manes changed the bill so that it appeared that Napa had obtained materials and supplies for the Port District.

Then, again using the method that formed the foundation of the scam, Napa added its 60% mark-up, amounting to $2,770, and billed the Port District for $6,905. Again, the cost was spread over many invoices, in this case about 30, all of which were in the price range of $150 to $230 and contained the code “IPB,” for Imperial Patio Builders.

Neither Enriques nor Manes have been charged in the case and neither could be reached for comment.

On June 6 of this year, Clair was interviewed by Ned Downham, who for more than a year has been the chief investigator in the scam case.

According to a declaration filed in support of Clair’s arrest warrant, Clair told Downham that he had received a part for his motor home in 1982 through Port District contacts, but denied receiving any other items through the Port District. (The district attorney’s investigation only covered the period from about mid-1985 to June, 1987.)

After a series of questions, during which Downham showed Clair receipts he had signed for work later billed to the Port District, Clair changed his story, according to the declaration. He acknowledged receiving many items arranged through Enriques but denied knowing who paid for them.

“Downham then asked if there were any other items obtained through Enriques, and Clair briefly described the painting of his trailer in early 1985, the installation of an air conditioner in his truck in the spring of 1985, the rebuilding of the engine in his truck in approximately May, 1985, and finally, a brake job on his truck in early 1987. Clair admitted that he did not pay for these items,” according to the declaration.

Clair “indicated he did not ask because he did not want to know; he preferred playing dumb and not knowing. When asked why he accepted the items without making any payment, Clair stated that he resented how he had been treated by Port District management and was seeking revenge,” said the declaration. “Downham again asked if Clair knew the Port District was paying for items and Clair responded, using the affirmative inflection, ‘Unhunh.’ Clair further stated that he never tried to hide anything; as far as he had been concerned, if he got caught, he got caught and would fry for it.”

Plea of Not Guilty

On Friday, Clair voluntarily turned himself over to authorities. At an arraignment hearing before Municipal Judge Robert P. McDonald, he entered a preliminary plea of not guilty to all the charges, felonies that carry a maximum sentence of three years and eight months in prison.

He was represented in court by attorney Dan R. Krinsky, who said he is a friend of Clair’s, whom he described as “absolutely rock solid” and a retired Navy man who has lived in the county for 30 years. The only incident to mar Clair’s professional life, Krinsky claimed, was an incident many years ago when Clair, while off duty, punched a cab driver on the nose and was fined $100.

Clair asked the judge to assign him a court-paid attorney. The judge, after reviewing Clair’s financial statement, did so, assigning San Diego lawyer Gary Bloch to represent him.

A preliminary hearing was set for Dec. 30, and Clair was released without bail.

The Port District issued a statement after the hearing. In it, the agency said it had made changes in its purchasing procedures that stopped the scam and that are aimed at preventing any similar scheme.

The agency also said it has hired an outside attorney to help the Port District seek restitution and discipline any current employees involved in the scheme.