Murtha Ally Indicted in Kickback Scheme

Murtha photo Paula Reed Ward and Dennis B. Roddy reported [1] today in the Pittsburgh Post-Gazette:

Federal prosecutors filed corruption charges yesterday against a onetime defense contractor who has ties to both John Murtha and a suburban Johnstown defense contractor currently under criminal investigation.
Richard S. Ianieri, former president and CEO of Coherent Systems International Corp., was accused of accepting $200,000 in kickbacks. He is charged through a criminal information and is expected to plead guilty.

The indictment of Ianieri represents the first charges leveled as a result of investigations into firms receiving defense earmarks – many of which benefited former aides and associates of Rep. John Murtha (D-PA).

Ianieri’s ties to Murtha go back to his role as the former president and CEO of Coherent Systems International Corporation. When Coherent decided to get involved in defense contracts in 2006, it hired KSA Consulting, a Washington, D.C.-based firm that once employed Murtha’s brother Kit, and is currently headed by partners that include Carmen Scialabba, a onetime Murtha aide.

Coherent worked closely with Kuchera Defense Systems on a series of contracts worth $30 million to develop and manufacture high-tech tools for the military. Coherent served as the prime contractor which designed and tested the products. As subcontractor, Kuchera did the manufacturing.

In April 2006, Murtha publicly touted [2] the relationship between the two companies. A Murtha press release announced that Coherent and Kuchera were “working virtually as one company.” Murtha stated, “Coherent is a small business with high growth potential, and pairing its engineering expertise with Kuchera’s widely recognized manufacturing skills is a natural fit.”

Bill Kuchera, CEO of the Kuchera companies, said, “The partnership with Coherent has reaped many benefits for Kuchera, and the relationship is growing every day.”

Kuchera has since become the target of a major corruption probe by the FBI and IRS. In January 2009, the FBI raided its offices. Carol D. Leonnig and Paul Kane reported [3] in the Washington Post on February 11:

In the January raid at the offices of Kuchera Industries, sources said, investigators requested a broad range of documents from the company and its sister firms, and are examining the possible improper use of federal money at a hunting club owned by the company’s co-founder.

The story went on to say [3]:

Former prosecutors said the fact that the FBI raided the offices and homes – rather than issuing subpoenas for documents – indicates that authorities may be building a case around evidence they already have. Raids also often indicate that authorities are concerned about the destruction of evidence.

In the case involving Coherent, court filings charge that Ianieri “solicited and accepted kickbacks from” a subcontractor identified as “K.” Ianieri is accused of taking the kickbacks from an unknown date through January 2006. The government alleges that Ianieri took checks – one for $102,832.29 and another for $97,153. 56 – “which…were provided for the purpose of improperly obtaining and rewarding favorable treatment in connection with ‘K’s’ subcontract relating to a government prime contract.”

Since 2003, Ianieri and his colleagues at Coherent have directed $72,950 in political donations to congressmen with ties to the defense industry.

Of that amount, $14,000 were given to Murtha’s re-election campaigns or to his political action committee.

Coherent became a subsidiary of Argon ST in August 2007 and Ianieri left the company in the summer of 2008.

The indictment of Ianieri may only be the first of what will be several indictments of individuals with ties to Murtha and who benefited financially from those ties through lucrative defense earmarks.

Last week, I detailed [4] a lawsuit filed by the Badenoch company against the once-powerful PMA Group, the defense lobbying group founded by longtime Murtha ally Paul Magliocchetti. Badenoch sued because PMA didn’t deliver a $3 million defense earmark it had promised. The case showed that there was a clear understanding that retaining PMA meant access to earmarks. PMA shut down after federal authorities raided it in November 2008. Magliocchetti is under investigation for arranging political contributions to Murtha and other House Democrats that may have violated federal election laws.

In a sign that Murtha may be getting uncomfortable with so many of his associates and favored companies under investigation, Matt Mazonkey, the communications director for Murtha, complained in an email that I mischaracterized Magliocchetti [4] as a former aide to the congressman. He focused on the trivial technicality that while working as a staff analyst for the Defense Subcommittee, he didn’t actually work for Murtha.

The distinction is irrelevant since it is well-known that Murtha and Magliocchetti are longtime allies who have worked closely together.

How will Murtha’s office respond to the indictment of Richard Ianieri, whose company Murtha once boasted about for receiving tens of millions of dollars in defense contracts?

Murtha-Linked Firm Charged
Pa. Defense Contractor Might Be Cooperating With Feds
By Paul Singer
Roll Call Staff
July 8, 2009, 12 a.m.

The Justice Department this week filed criminal charges against a defense contractor who has received millions of dollars worth of earmarks from Rep. John Murtha (D-Pa.), bringing together two parallel cases that are swirling around a host of firms with ties to the Congressman.

Late Monday, Mary Beth Buchanan, the U.S. attorney for the Western District of Pennsylvania, filed a criminal information against Richard Ianieri, the former head of Coherent Systems International, a defense contractor with several Pennsylvania facilities that Murtha has provided with millions of dollars in earmarks. Ianieri sold the Maryland-based firm in 2007.

A criminal information is usually filed in advance of a guilty plea by the defendant, suggesting that Ianieri may have agreed to cooperate with the Justice Department in a broader investigation. Ianieri’s lawyer declined to comment for this article.

The charges against Ianieri stirred suspicion that the government is targeting firms close to Murtha as part of an investigation of the lawmaker himself, but the Justice Department has never confirmed it is interested in Murtha.

Murtha spokesman Matt Mazonkey said Tuesday that his office was unaware of the charges against Ianieri, “and since we are not involved

with or following the case we have nothing to comment on.”

The charging documents allege that for an unknown period of time ending around January 2006, Ianieri solicited and received $200,000 worth of kickbacks from a subcontractor identified only as “K.”

Legal Woes of Firms in Murtha’ Orbit on Dipity.
At the time, Coherent was working closely with Kuchera Defense Systems, a Pennsylvania defense contractor closely tied to Murtha. Kuchera was raided by federal agents in January and in April was barred by the Navy from additional contracts because of concerns about overbilling. Coherent had also hired a lobbying firm called KSA Consulting, which included Murtha’s brother, Kit Murtha, and his former appropriations aide, Carmen Scialabba.

Ianieri is also a central figure in a federal case in Florida alleging that a government employee and two contractors skimmed money from government contracts. Though he was not charged in that case, the charges filed in Pennsylvania provide parallels suggesting that the cases may be linked.

In the Florida case, which is scheduled to go to trial later this month, the government alleges that at the end of 2005, Coherent received a $6 million payment from the government to build a high-tech battlefield communications system called the Ground Mobile Gateway. Coherent, the government alleges, then paid $200,000 to a Florida company called Schaller Engineering for “RF target tags” that Schaller never provided. The indictment alleges that Schaller then distributed that money to himself, a business partner named Theodore Sumrall and Mark O’Hair, the Defense Department official who had approved the government’s payment to Coherent.

Through their attorneys, Schaller and O’Hair have denied the claims. Sumrall has a plea hearing scheduled this morning.

People familiar with the Ground Mobile Gateway project explain that it was intended to be a mobile communications platform that could help airmen in the field better target airstrikes. Schaller’s tags were apparently small radio-frequency devices that could be attached to or even fired at enemy objects, making it easier for airstrikes to pinpoint their target.

The funding for Ground Mobile Gateway originated in an $8.2 million earmark Murtha provided to Coherent in the 2005 tsunami relief bill. As Roll Call reported last month, Murtha used that bill to transfer the money to Coherent, a client of his brother’s lobbying firm, from a Maryland company called AEPTEC, a former client of his brother’s lobbying firm.

In October 2005, Ianieri and Schaller also jointly formed a company in Murtha’s district called American Electric Vehicles, which was intended to build long-range electric buggies for the military called “clandestine electric reconnaissance vehicles.” The project was funded by an earmark from Rep. Bill Young (R-Fla.). O’Hair was also the Air Force official overseeing that program. The group produced several prototypes for the military, but federal funding for the project dried up. Coherent and Kuchera ended up jointly marketing the buggies to law enforcement agencies.

In April 2006, Murtha issued a press release praising the cooperation of Kuchera and Coherent, noting that the two firms combined had received “more than $30 million in 14 prime contracts for high-tech tools for warfighters. Coherent designs, develops and tests the products, and Kuchera manufactures all or parts of them.”

Murtha’s release also mentioned that “among the $30 million in contracts is one with the Air Force under which Coherent developed, and Kuchera builds, a sophisticated electronic precision targeting and communications system that reduces the time between target identification on the ground and engagement from the air and reduces the likelihood of friendly fire events,” which appears to be a reference to the Ground Mobile Gateway system.

In October 2006, Murtha announced that Coherent had awarded Kuchera a $1.9 million subcontract for work on “wireless targeting” to “further the development, manufacturing and deployment of Coherent Systems’ strategic products, which include the Ground Mobile Gateways.”

Dennis McGlynn, the Johnstown, Pa., attorney who represents the Kucheras, told the Associated Press on Tuesday that he didn’t know anything about the charge filed against Ianieri.

In 2007, Coherent was bought by Argon ST, a Virginia defense contractor that had also received millions of dollars worth of earmarks from Murtha. Shortly thereafter, Murtha’s top appropriations aide left Capitol Hill and joined Argon as vice president of government affairs. Roll Call recently reported that Argon agreed to provide information to the federal government for its investigation of Schaller and O’Hair.

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