Here is a case that demonstrates the US government’s impotent response to war profiteering, even when it has proof, and even when private greed endangers the lives of troops.What began several years ago as a serious federal fraud prosecution that had four corporate executives facing a combined 160 years in prison ended yesterday with the executives getting off almost scot-free—despite an admission of guilt in the case.
The companies involved—Western Titanium, Inc. and its subsidiary, Mach 2 Metals, Inc.—pleaded guilty to mail fraud for selling falsely certified, substandard titanium for use in US military aircraft, including the C-17 transport aircraft; the F-15, F-22 and Joint Strike Fighters; and NASA’s Kepler spacecraft. According to the government’s January 2007 indictment, “engine mounts produced from the substandard and non-conforming titanium…were installed on two separate F-15 aircraft in active use by the United States Air Force.”
These corporate
What of the actual, flesh-and-blood executives? These fortunate gentlemen will have the charges against them dismissed, so long as they promise not to run the same scam again.
Here’s a link to the December 2008 news release announcing the indictment of Western Titanium president and owner, Daniel Schroeder (pictured), along with sales executives Brian Misak and John Cotner, and “quality assurance” manager Cheem Ang (pdf).Initially, the four defendants were originally charged with eight counts of “Fraud Involving Aircraft or Space Craft Parts,” a crime that carries a maximum penalty of 20 years imprisonment and a $1 million fine.
Now, here’s the full text of yesterday’s press release announcing the resolution of the case. “There will be no guilty plea or plea bargain. No way. Not Western or Dan Schroeder,” a corporate defense attorney told a Georgia newspaper last year. She was bluffing, as it turns out, but that doesn’t matter—what attorney wouldn’t be happy with a deal like this?
NEWS RELEASE SUMMARY – January 12, 2011
United States Attorney Laura E. Duffy announced that defense contractors Western Titanium, Inc., and Mach 2 Metals, Inc. (a wholly owned subsidiary of Western Titanium) pled guilty today in federal court to committing mail fraud by falsely certifying that titanium they sold complied with certain military specifications.
According to court records and the defendants’ admissions at today’s hearing, Western Titanium reduced titanium ingot by having it forged into a large block of titanium. They then sold this material as forged bar. In doing so, employees of both defendants falsely certified to customers that the titanium met the requirements of AMS 4928, when in fact it did not. The defendants admitted that the loss caused by this offense was $51,350.
As part of today’s plea, the government also entered into deferred prosecution agreements with Daniel Schroder (Chief Executive Officer of Western Titanium), John Cotner (V.P of Sales, Western Titanium), Brian Misak (V.P of Sales, Western Titanium) and Cheem Ang (Quality Assurance Manager, Western Titanium). These agreements resulted in the dismissal of charges without prejudice against them on the condition that they not improperly sell titanium or titanium alloy certified to military or aerospace specifications.
A sentencing hearing is scheduled for April 29, 2011 at 9:00 a.m., before Judge Janis L. Sammartino.
Criminal Case No. 08-CR-4229-JLS
DEFENDANTS
Western Titanium, Inc.
Mach 2 [Metals]
SUMMARY OF CHARGES
Title 18, United States Code, Section 1341 and 2 – Mail Fraud. Maximum sentence: $500,000 or twice the gross gain/loss caused by the offense, $400 special assessment, a term of probation of 5 years and mandatory restitution of $51,350
According to a November 2010 item in this metals trade journal, “Schroeder ‘apparently suffered a severe mental breakdown’” before the holidays last year.
How quickly things change. In a holiday 2008 real estate porn piece in its home-and-gardens section, the San Diego Union-Tribune featured Schroeder’s 4,775-square foot mansion in La Jolla, California (pdf). Evidently, Schroeder had run into some trouble with “neighborhood skeptics” and permitting agencies, concerned about the gaudy structure’s impact on the environment, and “the potential for Indian artifacts and burial sites on the property,” which the U-T describes as a “magical” site near the beach.
Inside, the home is appointed with “a linear fireplace from Canada…a radiant heat system in the floor… The master bath includes a shower/steam room with a view to the ocean” and a “compact spa tub”… “The floor is paved…in fossilized sandstone…” The kitchen boasts a “four-burner Wolf stove, two Sub-Zero refigreator freezers, two Dacor convection ovens… Just beyond the countertop is a 130-bottle wine rack… the Schroeders prefer reds.” In the relatively modest living room, they have a “60-inch Aquos flat-screen TV.” Shroeder has another flat-screen in his “man cave”—a converted “three-car detached garage, complete with heated floor, grease pit…satellite radio [and] car and motorcycle collection.”
Here is a picture of the master bedroom. Yet another TV hidden in the foot of the bed “rises into view at the touch of a button.”
“The Schroeders did not want to reveal the cost of the home, but they did admit that they went over budget…According to the U-T, the roof on the home is made of a titanium alloy. We can only assume that it was fully tested and certified.
“‘We kind of sucked it up,’ [Shroeder's wife] Lisa said.
h/t to W.I.B. contributor Dave Maass in San Diego.
Documents: Western Titanium February 2009 grand jury indictment; December 2008 press release, US Attorney Karen P. Hewitt’s office.
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