While the case is being litigated in Florida, key elements of the government’s allegations refer to contracts provided to companies with long-standing ties to Murtha.

The indictment — which was unsealed by a federal judge in February — alleges a complicated scheme in which a former Defense Department employee who managed contracts was also partners with and being paid by contractors that he was overseeing and hiring for the Air Force.

The indictment in the case alleges that an Air Force employee, Mark O’Hair, steered contracts to his business partners, Richard Schaller and Theodore Sumrall, and then split the proceeds of those contracts with the men.

Lawyers for the men could not be reached or would not comment on the case, but their allies say the charges are bogus and may even be retribution by the government for O’Hair’s innovative attempt to expand the Air Force research program that he worked on, called the “Battlefield Airman.”

Schaller and Sumrall were partners in a Florida company called Schaller Engineering, which filed incorporation papers in January 2005 and hired the PMA Group as its lobbying firm a month later.

The PMA Group is a now-defunct lobbying firm that was raided by the FBI last fall as part of an investigation that reportedly involves questions about the company’s campaign contributions.

From June 2004 to September 2006, Schaller Engineering received about $8 million worth of contracts from the Air Force Research Laboratory at Florida’s Eglin Air Force Base. O’Hair, an Air Force program manager, awarded those contracts, but the government alleges that he was also part owner of Schaller Engineering and received payments from the company.

The government alleges that while he worked for the Air Force, O’Hair was also employed by a Colorado company called Pathfinder Technology, a subcontractor to Schaller Engineering that was also a PMA client.

According to the indictment, O’Hair presented Pathfinder with a business development plan in September 2005 in which O’Hair indicated Pathfinder could secure future subcontracting work from Schaller Engineering and American Electric Vehicles under the Battlefield Airman program. Pathfinder paid O’Hair $25,000 for preparing the plan.

A month later, American Electric Vehicles was incorporated in Windber, Pa., which is in Murtha’s Congressional district. The company was a partnership of three people — Richard Schaller, Daniel Rivers and Rick Ianieri. Rivers ran Colorado Power Systems, a company that developed battery packs for electric vehicles; Ianieri was the CEO of Coherent Systems, a company that had received millions of dollars in earmarks from Murtha over the years.

Coherent Systems also had a close partnership with Windber-based Kuchera Defense Systems. In a 2006 press release, Murtha said the two firms “working virtually as one company ... have garnered more than $30 million in 14 prime contracts for high tech tools for warfighters.” Federal agents raided Kuchera in January, though it is not clear what they are investigating.

Coherent Systems was bought in 2007 by defense contractor Argon ST — another PMA client with a long history of earmarks from Murtha — and Ianieri now works at Kuchera as a consultant, according to a person answering the telephone there.

Coherent Systems’ lobbying firm was KSA Consulting, the company that at the time employed Murtha’s brother, Kit Murtha. Kuchera is represented by Ervin Technical Associates, another lobbying firm with close ties to Murtha.

The indictment does not allege any wrongdoing by Coherent Systems, Pathfinder or American Electric Vehicles.

Rivers told Roll Call that American Electric Vehicles received only one contract from the government for about $2 million to build four prototype “Clandestine Electric Reconnaissance Vehicles,” an electric buggy with a 200-mile range and seating for four people that would fit inside the V-22 Osprey tilt-rotor aircraft.

Rivers said the money for that project came from an earmark inserted in the 2006 appropriations bill by Rep. Bill Young (R-Fla.).

Young’s spokesman Harry Glenn confirmed that the Congressman requested $3 million for Schaller to build the CERV after a staff member went to Florida to see a prototype and an Air Force general told Young that it was a worthwhile project. Congress approved the earmark for $1.7 million.

Young’s office later learned that there had been a problem with the contracting office that was managing the program and that the money for the contract was never released, Glenn said.

“As far as we know, the company never got the funds,” Glenn said, and it was the only time Young’s office dealt with Schaller.

Rivers said it became clear in 2007 that the CERV was not going to get additional funding, so he bought out Ianieri and Schaller. American Electric Vehicles is now the new name of Colorado Power Systems, and it is no longer based in Windber.

Rivers said that Kuchera later built copies of the CERV and paid him to provide batteries for them, but that he has no idea what became of them. An August 2007 story in the Johnstown (Pa.) Tribune Democrat indicates that Kuchera and Coherent Systems were looking for ways to market the vehicle to law-enforcement and security organizations.

Rivers told Roll Call that O’Hair is “a patriot and a thoroughly good guy” who would not even allow Rivers to buy his lunch at a local sandwich shop. “Everything I have seen has been thoroughly ethical and right on his part.”

“These guys are classic type-A people and aggressive types,” Rivers said. “When you cause waves, you may rightly or wrongly get wet.”

According to the indictment, O’Hair signed off on an $8.1 million contract for Coherent Systems in September 2005 to build four “Ground Mobile Gateway Systems.” Air Force documents indicate that these systems were communications platforms that would allow the integration of information from various sources on the battlefield. That contract included $200,000 to Schaller Engineering to provide miniature radio frequency tracking devices that could be used to tag targets in the field.

The indictment alleges that Coherent Systems paid the $200,000 to Schaller Engineering but never received the “target tags.” Schaller Engineering then wrote three $60,000 checks to other businesses owned or controlled by Sumrall, O’Hair and Richard Schaller, the government alleges.

Murtha’s office said the Congressman provided a $1.7 million earmark for Ground Mobile Gateway Systems in fiscal 2007. His office had no information about funding for the program in other years.

Mark Shellans, the chief scientist at Pathfinder Technology, said the allegations against O’Hair and Schaller are untrue.

Shellans argued that O’Hair had disclosed to the military his consulting arrangement with Pathfinder and that the military had approved it. Shellans said he provided documents to the U.S. Attorney’s Office and offered to testify before the grand jury to explain the relationships with O’Hair and Schaller, but was never invited to do so.

O’Hair was targeted — and the other firms involved were barred from federal contracts — as part of a turf battle over the expansion of the Battlefield Airman program, Shellans said. Pathfinder was barred and then reinstated, but Shellans said the Air Force never provided a rationale for either action.

Shellans said Members of Congress — including Murtha — were pursuing $64 million worth of earmarks for the Battlefield Airman programs that O’Hair was overseeing, but his bosses wanted to use that money for other purposes. Murtha’s office said it had no information about these earmarks.

O’Hair is “a guy of absolute integrity,” Shellans said. “The fact that he has gotten caught up in this is an absolute tragedy.”