El Toro Man Pleads Guilty to Cheating Defense Dept.

An El Toro businessman accused of bilking the U.S. Defense Department of $350,000 by doctoring government expense reports pleaded guilty Monday to two criminal counts arising from the scam.

Roger L. Edmonds, 53, faces a maximum sentence of 10 years in prison and a $500,000 fine as a result of his plea in U.S. District Court in Los Angeles to counts of mail fraud and making false claims to the government.

As head of a small, now-closed machine shop called SME Prime Co. in Maywood, Edmonds over several years sent the government inflated bills for in-progress work that was never completed on three defense contracts--in one case, simply adding a zero to an invoice, according to government prosecutors.

“In other words, he wasn’t doing the work, but he told the government he was, just to get paid,” Assistant U.S. Atty. George B. Newhouse Jr. said after the trial. The contracts in question were for the production of aviation hose assemblies, tank gear assembly carriers and automotive work tables.

At a time when the Pentagon has been hit with charges of widespread abuses in its procurement methods, Newhouse said, the Edmonds case points up potential problems that the government itself faces in dealing with small contractors who are not subject to the same checks and balances as larger, more frequent Defense Department contractors.

Because many of these small contractors do not have large bases of capital, they often rely on what are called “progress payments”--reimbursements for labor and materials as the contract progresses--to keep them going. That may mean that the government is paying for a product it has not yet seen, Newhouse said.

“It is a relatively common form of abuse that we run into in the defense procurement industry,” Newhouse said. “Especially among these small contractors, we find a lot of expense padding.”

Kept Company Afloat

Edmonds used the money from his inflated billings to keep his struggling company afloat and to pay such personal expenses as credit card and country club bills, Newhouse said.

The reporting fraud came to light after an Arizona company that did business with SME began receiving complaints from unpaid subcontractors and after Edmonds then abruptly closed the doors to his 10-employee workshop and dropped out of sight, Newhouse said.

An ensuing investigation led to discovery of the abuses and a 30-count indictment against Edmonds. The remaining counts were dropped under Monday’s plea agreement.

Edmonds, believed to be still living in El Toro, could not be reached for comment after entering the guilty pleas before U.S. District Judge William M. Byrne Jr. His attorney, Joel Levine of Los Angeles, said: “There was evidence that there had been some false billing--not to the extent alleged in the indictment, but to the point that it was in (Edmonds’) best interest to plead guilty.”

Levine, while maintaining that the government’s losses to Edmonds in the expense scam were lower than the $350,000 cited by federal prosecutors, declined to provide an estimate of his own.

The lawyer also asserted that Edmonds intended to complete the three government contracts on which he reneged but ran into financial difficulties.

“The motive for doing this (fraudulent reporting) was not to buy a Mercedes and run to Brazil. The money that was extracted from the government was put right back into the business to try and stay alive,” Levine said.

Sentencing in October

He said Edmonds lost his own savings in the company, losses that exceeded those of the government. But he added that Edmonds is now running another machine shop that does not do business with the government.

Edmonds’ sentencing is set for Oct. 23 in Los Angeles, but one former business associate said he has already made up his mind as to what he believes to be proper punishment.

“It’s my opinion that the guy ought to do some time,” said Del Sturman, who runs a machine shop in Tempe, Ariz., that contracted with Edmonds on one of the government contracts. “The guy was a fraud--he put me into bankruptcy.”

Sturman said Monday in a telephone interview that he was forced to file for federal bankruptcy protection after the government demanded $130,000 in reimbursement for an order of automotive work tables that never was filled. Edmonds, a subcontractor in the project, had filed expenses with the government for work that was never done and then disappeared, Sturman said.