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Case 1:11-cr-00067-RC -KFG Document 80

Filed 11/28/11 Page 1 of 8 PageID #: 909

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS BEAUMONT DIVISION UNITED STATES OF AMERICA VS. CALVIN GARY WALKER

CRIMINAL NO. 1:11-CR-67

TRIAL BRIEF OF THE UNITED STATES TO THE HONORABLE JUDGE OF SAID COURT: Comes the United States of America, by and through its Assistant United States Attorney, Robert L. Rawls, and files this Trial Brief in the above matter and would show the Court as follows: Government exhibits 1 - 48 The Government exhibits are organized and bound into five different binders. A large number of the exhibits are bulk documents supporting various summary exhibits. To make use and referral of the exhibits easier for the witnesses, the government has organized a set of the exhibits so that the bulk supporting documents (Summit invoices for 2008-2010, bank records, invoices/bank records in re financial analysis) are in separate binders than the government exhibits to be primarily used by the witnesses. A similar set of the primary exhibits will be provided to the court. The background facts expected to be proven at trial The Beaumont Independent School District (BISD) competitively awards a number

Case 1:11-cr-00067-RC -KFG Document 80

Filed 11/28/11 Page 2 of 8 PageID #: 910

of time and materials contracts for the routine maintenance of its buildings and grounds, including masonry and carpentry work, alarm systems, aluminum walkway covers, heating and air conditioning, and electrical systems. Since 2006 the defendant, Calvin Gary Walker, operating as Walker's Electric Co. (WEC) has been competitively awarded the annual electrical systems repair, installation and maintenance services contract for BISD. This written contract provides that materials and rental equipment on all jobs are to be provided at cost plus a 10% percent markup. Labor is charged at fixed hourly rates ranging from $36$45. (GE1;1A). Generally, prior to each job or project being approved the defendant submits an estimate of materials cost, the agreed markup, and labor costs. A purchase order is then issued by BISD allowing the job to proceed. The purchase order allows funds to be obligated for budget reasons and is adjusted should additional costs be incurred. Upon completion of the job the defendant submits an invoice for the cost of materials, the agreed markup, and labor costs. This invoice, if compatible with the purchase order, is then paid. The projects the defendant worked on spanned a variety of tasks from changing out parking lot lights to the wiring of large temporary campuses and the erection of new stadium lights. In the summer of 2009, the BISD was in the process of spending a $389 million bond issue passed by the citizens of Beaumont to build ten new schools and an athletic complex, and renovate about 17 other schools and facilities. In one of the early phases of the bond project two elementary schools had to be demolished to build their replacements, Regina Howell and South Park. The district elected to construct at two other locations temporary

Case 1:11-cr-00067-RC -KFG Document 80

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campuses of portable trailers for the students using bond funds. For the electrical work on the temporary campuses, instead of bidding out this contract for competitive bids, BISD chose defendant's company to do the electrical wiring of these temporary campuses - Regina Howell & South Park - under his maintenance agreement. A number of other large projects were also delegated to defendant under his maintenance agreement rather than competitively bid out. Fraudulent conduct to be established at trial The indictment contains 32 charges of fraudulent billing activity charged under a variety of jurisdictional grounds. The fraudulent activity is centered on fourteen invoices for thirteen different projects where the government alleges either materials, labor, or rental equipment is inflated beyond the cost plus ten percent mark-up allowed by the maintenance contract. The fraudulent conduct includes the defendant submitting altered Summit

Electrical Supply (Summit) invoices to support the inflated WEC invoices to BISD as well as copies of unnegotiated WEC checks payable to Summit, a materials vendor. These misleading documents satisfy in part the element of fraud contained in counts 1, 4, 7, 8,11, 17, 18, 19, 20, 21, 22, 23, 24. The fraudulent or misleading documents were submitted in connection with the Ozen Softball and Baseball lighting project, the Regina Howell/South Park campuses, and the Dunbar Elementary invoice. To further establish fraudulent conduct, using subpoenaed records of the defendant's business and personal bank accounts and his electrical materials suppliers, the government

Case 1:11-cr-00067-RC -KFG Document 80

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calculated the actual costs of materials used on each project, giving the defendant every benefit of the doubt as to whether an expenditure was for a BISD project. The differences in what the defendant invoiced BISD for and what was actually expended, including the defendant's 10% markup, are the amounts of the false material costs alleged in the indictment (GE 24-36; counts 1-30). Investigator Les Worden, Jefferson County District Attorney's Office, will testify about the extensive financial analysis of the BISD projects in the indictment. (GE 24-36). Other testimony to be presented at trial Naomi Lawrence-Lee, director of purchasing at BISD, will establish the terms of WEC's maintenance contract, the requisition process, and give an overview of the invoices the defendant presented for payment. Each invoice presented by the defendant in the indictment, except for the Ozen Softball and Baseball Lighting project, contained a 10% markup called for in the contract. She and other current and former BISD personnel will also point out the various supporting documentation presented by defendant along with the invoice. As to the Ozen project Mrs. Lee will point out a purchase order she approved for the actual lighting apparatus and later supporting documentation submitted by defendant, a WEC invoice containing a 10% markup for the lighting equipment and a Summit invoice (altered), and an unnegotiated WEC check for the inflated amount. (GE 2, 4.80-83). David Wascom, Chief Information Officer of Summit Electrical Supply, will describe a sophisticated computer system utilized by the company which tracks a contractor's project

Case 1:11-cr-00067-RC -KFG Document 80

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from a quote to delivery. Every form generated by its branch offices, including Beaumont, originates from its corporate headquarters in Albuquerque, New Mexico, thus generating a wire transmission across state lines for purposes of the wire fraud statute.(counts 6,7, and 8). Chris Rybacki, Beaumont branch manager, Summit Electric Supply, will compare the supporting documentation submitted by the defendant to BISD purporting to be Summit documents and will demonstrate their lack of authenticity and fabricated nature. (GE 7). He will also testify about the actual payments received by Summit from WEC and that several of the checks submitted by defendant to BISD as payable to Summit in very large amounts were neither presented nor owed. Rybacki's purported signature on these checks as receiving them are not his signature. (GE 7). Several former employees of WEC will testify that the thousands of hours billed to BISD at $40 hour purporting to be their labor at Regina Howell or South Park campuses is false as they did not work on either campus or did not work such hours. WEC's bank records corroborate such testimony. (count 23; GE 3.126-129; 21A-D). Special Agent Tim Brewer, FBI, will testify about the search of the defendant's residence and office. The search produced a copies of altered Summit documents on the Regina Howell and South Park project where mistakes in making them are evident and which are earlier versions of the document eventually submitted to BISD. (GE 16.006-008, 010011), copies of the unnegotiated checks payable to Summit submitted on that project with "void" written across them (GE 16.004-005), original and altered Summit invoices for the

Case 1:11-cr-00067-RC -KFG Document 80

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Ozen lighting project (GE 16.050-051), and original and inflated altered subcontracts submitted to a bonding company for the Ozen project (GE 16.074-080). Greg Mokrzycki, a forensic document examiner with the FBI Laboratory, will testify that the Summit invoices ultimately submitted to BISD by defendant originated from the earlier versions of the documents recovered from defendant's residence as well indentation evidence indicating some of the documents were worked on in close proximity to each other. (GE 17A-J). Robert Zinglemann, the current Chief Business Officer for BISD, will testify that he negotiated with the defendant for the South Park Lighting project (counts 9 and 30) and that it was to be done under the electrical maintenance contract. Mr. Zinglemann will also testify and introduce documents establishing that BISD receives approximately $36,000,000 of federal funds each fiscal year during the period alleged in the indictment, establishing the jurisdictional element of the 18 USC 666 counts of the indictment. (GE 22; counts 15-32). Other witnesses will establish various jurisdictional grounds for the other charges. BISD electrician Debra Cormier received an invoice from WEC for the South Park Lighting project by email which traveled in interstate commerce. (GE23.001-002). Greg Schumacher, Information Technology, BISD, will introduce the computer header for this email. (GE 23A). Richard Harman, a Time Warner representative, will either testify in person or by stipulation that the email traveled in interstate commerce based upon the email header. (count 9). BISD employees Debra Allen and Cora Mallett will establish that several BISD checks

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from projects listed in the indictment were sent to WEC through the United States mail. (GE 5.024;046;050; counts 1-3). Brad Koosman, with Goldleaf Surety, a bonding company in Minnesota, will introduce a number of facsimiles and emails between the defendant and Goldleaf which contain altered documents relating to the Ozen lighting project and contain admissions by defendant that the project was being done under his maintenance contract. These transmissions form the basis of the wire fraud counts (GE 18.145-148; GE 18.007;058-060;177-180; counts 4-5). Joe Jeffries, a Capital One representative, will testify that the five BISD checks listed in counts 10 -14 traveled in interstate commerce during the clearing process. (GE 12). Money laundering counts 33 - 37 The money laundering counts are summarized in several charts for the jury. (GE 47A, B, C). Banking records will establish that BISD checks the defendant received for the Ozen lighting project ($1,236,000 ) and the Regina Howell/South Park project ($1,285,064) were deposited directly into defendant's WEC checking account at Capital One. From this account the defendant purchased a Mercedes-Benz (GE 46) and a parcel of land on Pleasure Island (GE 45). (counts 34 and 36). Banking records will establish that the defendant received a check for $1,592,839.10 as the second payment of the Regina Howell and South Park project. This check was deposited directly into an investment account of the defendant at JPMorgan Chase. (GE 13.079-084;091-92 ; count 33). This investment account received other transfers of funds

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from the WEC checking account directly related to payments from BISD for the MLK and Smith Middle School repairs, the Ozen lighting project and the Regina Howell and South Park projects. (GE 13.070-71; 089-90). From this account the defendant purchased two TransAmerica annuities for $1.6 million and $1.8 million. (GE 13.093; 087; GE 43; GE44; counts 35 and 37). Respectfully submitted, JOHN M. BALES UNITED STATES ATTORNEY /s/ Robert L. Rawls ROBERT L. RAWLS ASSISTANT U.S. ATTORNEY

CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of the above Trial Brief has been forwarded to the attorney of record for the Defendant, this 28th day of November, 2011, by electronic filing. /s/ Robert L. Rawls ______________________ ROBERT L. RAWLS