Sentencing to Close Point Mugu Billing Scam Case

More than a decade ago, auditors with Unocal complained to federal authorities about an employee-operated kickback-and-billing scam they uncovered at their Ventura County facilities.

Small Ventura County supply companies were billing the oil giant for nonexistent materials and splitting the proceeds with dishonest Unocal employees.

Federal investigators followed the complex paper trail from the offshore oil platforms to the suspect companies in western Ventura County.

But to their surprise, the trail did not end there. Instead, it led to the Naval Air Weapons Station at Point Mugu, where investigators uncovered a similar scam that cost taxpayers at least $1 million and probably much more.

The case took three years to crack and then another five years of litigation to gain 11 convictions. On Tuesday, Anthony Joseph Ditzhazy, the last of the convicted bilkers, is scheduled to be sentenced in federal court for billing the government for phantom deliveries.

“Because of six children and some poor-health problems, he succumbed to the temptation of the easy buck,” said Howard Beckler, Ditzhazy’s attorney.

Ditzhazy, who owned a machinery store that supplied parts to the base, served 30 years as a Ventura County sheriff’s deputy before retiring in 1991. While Beckler said he will argue for probation, prosecutors in the case expect Ditzhazy to be sentenced to prison, bringing a case that drastically changed the way Point Mugu does business to a close.

Last Thursday, in fact, the Department of Defense ordered a “stand down” for all workers in the Navy’s acquisition program, a procedure that has become common since the indictments were handed down. The 808 workers at Point Mugu spent the day reviewing the base’s revised purchasing and receiving policies.

The court case began when a federal grand jury handed down the first indictments in August 1991. Since then, 11 conspirators--including Richard Tingstrom, the cousin of Ventura’s mayor--have pleaded guilty to fraud and income-tax evasion charges.

A handful of other workers at Unocal and the base were not charged but were fired because of their alleged participation.

No military personnel were ever implicated and base officials are quick to point out that no weapons hardware was involved. Instead, the scam centered on building and plumbing supplies, investigators said.

Ditzhazy, for instance, admitted bribing two civil servants on the base to sign off on bogus invoices for more than $130,000.

Federal officials said this kickback scheme dates to the mid-1970s at least--and cost the Navy millions.

The scam was simple. Uncovering and following the money, however, proved difficult, investigators said. Despite their strong suspicions that the scam was decades old, they decided early on to focus the investigation on transactions made over a three-year period ending in 1989.

“It was very difficult to pull this thing apart,” said Patricia Beaman, the federal prosecutor assigned to the case. “It was totally a paper trail.”

And proving that the base did not receive the phantom goods also proved difficult because of the millions of dollars worth of materials processed there each week, said IRS Special Agent George Lindholm.

“They sign for 20 phantom widgets but then point to 20 widgets sitting in a corner,” Lindholm said. “It was difficult. But it was also a good investigation.”

All 11 indicted in the scam bypassed a jury trial and quickly pleaded guilty. “We built a good case,” Beaman said.

Employees would routinely accept bribes and kickbacks to claim that nonexistent material was received. Their signatures on the bogus invoices naturally prompted base and Unocal officials to issue checks.

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Unocal and the Navy were each bilked out of close to $1 million during the three-year period investigated, Beaman said.

“It was the way they did business out there for years,” said Lindholm, who devoted two years of full-time work to the investigation. “It was a real good ol’ boys network.”

Ditzhazy, who lives in Camarillo, admitted to plotting with two civilian Point Mugu employees to file false invoices for merchandise that was never delivered to the base between 1987 and 1989. At that time, Ditzhazy was a lieutenant with the Ventura County Sheriff’s Department.

Ditzhazy owned Pacific Proline, a supplier of industrial machinery, and defrauded the base out of more than $130,000 with the help of Point Mugu employees Joseph Martin Vach and Gary Dale Roberson.

Court documents show that Ditzhazy deposited government checks on three occasions in 1988 and 1989 while on active duty with the Sheriff’s Department. While making the deposits, Ditzhazy would also make withdrawals of more than $40,000 that he admitted using to bribe Vach and Roberson.

Investigators said Ditzhazy and the other vendors would shower Vach and Roberson with cash bribes and gifts in exchange for their cooperation. Vach and Roberson received two-year prison terms for signing their names to bogus invoices.

When Camarillo resident Vach pleaded guilty to fraud charges, he told U.S. District Judge William M. Byrne Jr. that the kickback system was in place when he began working as a controller at the base in 1970.

Byrne characterized the defendants as crooks who got caught “sticking their hands in the till.”

Ditzhazy even deducted the bribes as expenses on his annual income-tax returns and has pleaded guilty to tax evasion.

Former Unocal platform workers Richard H. Tingstrom and Alfred T. Morrison were convicted of running a similar operation with many of the same vendors, Beaman said, adding that the two received cameras, VCRs, televisions and other bribes to sign off on phony invoices.

“It was ridiculous,” Beaman said. “Tingstrom even asked for a fishing pole and tackle box.”

Tingstrom acknowledged his wrongdoing in a recent interview, and added: “I have a whole different life now. It’s been five years since I’ve been to court, and I’ve been through hell.”

Tingstrom said the Justice Department offered him immunity for his testimony, but then the Internal Revenue Service charged him with tax evasion for failing to claim the booty he received as income. He and Morrison avoided prison terms when they pleaded guilty to income-tax evasion.

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Today, Navy workers are required to physically check in goods received at the base, a spokesman said. During the scam, the dishonest workers would simply telephone superiors and tell them the phantom goods had arrived at the base.

“Also, there is no longer just a single buyer in each department,” Navy spokesman Alan Alpers said. “Instead, the buyers are rotated. It is hit or miss which buyer a vendor will deal with on any given day.”

Alpers said the Navy is confident that it has cleared up an embarrassing and expensive problem.

Ditzhazy, who suffers from diabetes and a host of other health problems, faces a maximum sentence of five years in prison when he is sentenced Tuesday. He declined to comment on his case when reached at his home.

“He’s really a gentle guy,” said Beckler, his lawyer. “You wonder how 30 years of social service devolved into this.”