CORONADO: Jurors convict three in NAS North Island corruption case

(CNS) – A federal jury convicted two San Diego-area defense
contractors and a corporation Monday of conspiracy and bribery in connection
with a fraud and corruption scheme at Naval Air Station North Island.

The defendants — Robert Ehnow, 46, owner and president of Poway defense
contractor L&N Industrial Tool & Supply Inc.; Joanne Loehr, 52, owner and
operator of Poway defense contractor Centerline Industrial Inc.; and Centerline
itself — were charged with conspiracy to commit wire fraud, bribery and money
laundering out of the Coronado military base.

The case went to trial Feb. 20. After two days of deliberations, jurors
this afternoon returned verdicts of guilty for each defendant on the conspiracy
count and on one or more bribery counts. The panel also returned verdicts of
not guilty for each defendant on one or more bribery counts.

As part of the conspiracy, according to prosecutors, defense contractors
provided Navy officials with a wide range of personal benefits — including
cash, checks, retail gift cards, flat-screen television sets, luxury massage
chairs, bicycles costing thousands of dollars, model airplanes and other items –
– in return for millions of dollars worth of government orders.

The contractors also prepared and submitted fraudulent invoices to the
Department of Defense, making it appear that they were billing the government
for goods and services within the scope of legitimate contracts, according to
evidence presented at trial. In fact, the Defense Department was unknowingly
paying for, among other things, the cost of bribes provided to the Navy
officials.

Compounding the cost of the fraud, the defense contractors also
routinely charged a markup on the fraudulent invoices, according to evidence
presented at trial.

L&N and Centerline also engaged in money laundering by using their
government contract to fraudulently bill the Navy for items that were never
supplied, and then, at the request of Navy co-conspirators, pass along the
criminal proceeds to Centerline.

During the course of the conspiracy, the Department of Defense paid
Ehnow's company, L&N, more than $3 million. Centerline obtained in excess of
$1.5 million in payments from Defense Department during the conspiracy. A third
defense contractor, Carlsbad-based X&D Supply Inc., was paid over $2 million
during the conspiracy.

L&N, also known as Mardoc Corporation, filed for Chapter 7 bankruptcy in
June 2011. Centerline remains in business.

The verdicts bring to 11 the total number of defendants convicted in
connection with the scheme. Of the eight previously convicted, five were Navy
officials who admitted to receiving a total of more than $1 million in cash,
goods and services for their personal use, all fraudulently charged to and paid
for by the Department of Defense in connection with this fraud and bribery
scheme.

The other defendants previously convicted were owners or sales managers
of San Diego-area defense contracting firms.

The investigation grew out of citizen complaints that followed the July
2009 indictment of six individuals on fraud and corruption charges centered at
the Space and Naval Warfare Systems Command in San Diego.

As part of the SPAWAR corruption case, the government publicized a “hot
line” dedicated to the reporting of possible waste, fraud, and abuse related
to government and military contracts.

Ehnow, a Coronado resident, Loehr, who lives in La Jolla, and Centerline
are scheduled to be sentenced May 20.