Why SPAWAR and North Island fell for bribes

In an old New Yorker cartoon, a judge on a high bench peers down imperiously at a disheveled, scraggly-faced defendant. Intones the judge, “Crime doesn’t pay at your level.” For decades, that mindset has epitomized San Diego law enforcement, which worked diligently to put little crooks away and just as diligently to get big crooks off the hook.

The four scam centers of the United States are Wall Street, South Florida, Las Vegas, and Southern California. But San Diego is known as a safe haven for white-collar thieves. When the new owners of U-T San Diego declared that the paper would henceforth be cheerleaders for local business and the military, I envisioned pom-pom girls rooting for a gang of cattle rustlers while the posse hunted down an Indian boy who had stolen a chicken.

But give credit where it is due. The U.S. attorney’s office, aided by investigators from the Federal Bureau of Investigation (FBI), Internal Revenue Service (IRS), and other governmental bodies, has done much to clean up a corrupt relationship between local business and the military, the U-T’s two favorite untouchables.

In early 2006, former congressman Randy (Duke) Cunningham was sentenced to eight years and four months in prison for taking $2.4 million in bribes and underreporting his income to tax authorities. Later, his partners in crime also got justice, thanks greatly to the U.S. attorney’s office.

Two years ago, the last of seven defendants in a case of military contracting corruption at Space and Naval Warfare Systems Command (SPAWAR), an operation expected to propel the local economy, was sentenced. SPAWAR employees had accepted cash bribes and valuable items from subcontractors. The payoffs for companies passing the bribes were juicy contracts. Among participants were employees of Kratos Defense & Security Solutions, a publicly held local company.

This year, another corruption scam broke at the Naval Air Station North Island. Defense contractors gave Navy civilian employees more than $1 million in cash, checks, retail gift cards, household items, etc. In return, the contractors got millions of dollars in defense contracts.

On October 9, four Navy employees and three contractors got varying sentences. Their greed and book-juggling skills were eye-popping. Donald Vangundy, who had overseen tool control in the Navy’s E2/C2 aircraft program, was sentenced to 41 months in custody. According to plea documents, Vangundy took in $413,500 from contractors, including, in just one case, $49,000 in cash; $20,000 in gift cards; $20,000 in electronics items; $38,000 in bicycle shop goods; $78,000 in hobby shop merchandise; $35,000 in home remodeling services; $15,000 in cabinets and countertops, and the like.

He also arranged to have more than $33,000 in goods and services go to two different friends. Then, Vangundy excluded $97,355.21 in taxable income from his 2009 tax returns. Navy employees Kiet Luc, David Lindsay, and Brian Delaney got varying sentences for similar but less serious behavior. On October 18, Kenneth Ramos pleaded guilty to bribery charges.

John Newman, former sales manager of L&N Industrial Tool & Supply of Poway, was sentenced to 18 months in custody. According to the plea documents, Newman was involved in $759,937.50 of fraudulent billings. He provided $325,000 in checks, $96,000 in gift cards, $21,900 in electronics items, and other wages of sin to the Navy personnel. These gifts were charged to the Navy but steered to its rogue employees. Then Newman turned around and billed the Navy $151,987.50 for a 25 percent markup on the grease money. Two other contractor representatives, Michael Graven of X&D Supply of Carlsbad and Paul Grubiss of Centerline Industrial of Poway, also got 18 months.

Here’s how it worked: the companies would pass the bribes to the Navy employees. Then those bribes would be disguised in documents submitted to the Navy. Requests for procurement, bids from contracts, sales orders, and invoices were doctored to make it appear that the contractors were furnishing tools and related items. Then would come the markup on the phony invoices.

All told, it was a good investigative job by the United States attorney’s office, FBI, IRS, Naval Criminal Investigative Service, and General Services Administration. The investigation resulted from citizen complaints on a hotline that was set up after the indictments in the SPAWAR case. The number is 1-877-NO-BRIBE. Or information can be sent securely over the internet to tips.fbi.gov/.

Contrast this case with one of the most egregious in the history of San Diego law enforcement. John Moores, then majority owner of the Padres, was pushing for a $300 million subsidy from the City for construction of Petco Park. In the year 2000, the Reader’s Matt Potter reported that then-councilmember Valerie Stallings had bought initial public offering shares in a hot new issue of a Texas-based stock, Neon Systems, controlled by Moores.

Local so-called law enforcement officials found numerous reasons they couldn’t take on an investigation. So the United States attorney’s office took the hot potato; the FBI handled the investigation. It came out that Stallings had been on the “friends and family” list of special people who could get cut in on the certain-to-be-sizzling stock at the offering price of $15. The stock zoomed, as expected; Moores tipped her to sell within $1.10 of the all-time high of $50.25, and she dumped it for a nifty 267 percent profit in only 26 days.

It turned out that Moores had showered other gifts on her as well. But there were no charges of insider trading of Neon shares, on which Moores had shown such prescience. The then–United States attorney astoundingly said it is not a crime to give gifts to public officials, but of course it is when the giver expects something in return. Moores got Stallings’s vote on the ballpark, as well as information from closed council sessions that she passed to him, according to a Union-Tribune story of the time. She got off with a light wrist slap and Moores walked completely.

FBI special agent William Gore could find no evidence of a quid pro quo. Gore is now sheriff of San Diego County. ■

Contact Don Bauder at 619-546-8529