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Sentencing May End DOJ Earmark Probe

A defense contractor accused of diverting money from an earmark provided by Rep. John Murtha (D-Pa.) has been scheduled for sentencing at the end of February, suggesting that his cooperation with federal agents investigating earmarks is coming to a close.

Rick Ianieri, former CEO of Coherent Systems International, pleaded guilty last summer to diverting $1.8 million from an $8.2 million earmark and distributing it to companies for items that were not part of the original project. His sentencing was originally scheduled for September, but as part of his plea, Ianieri agreed to cooperate with ongoing federal investigations.

Roll Call reported last year that the original earmark was inserted into a 2005 tsunami relief bill by Murtha. At the time, Coherent was represented by KSA Consulting, a lobbying firm that employed Murtha’s brother, Kit Murtha.

The $8.2 million was transferred from an earmark Rep. Murtha had previously obtained for another KSA client, called AEPTEC Microsystems. The earmark for Coherent was passed shortly after KSA terminated its relationship with AEPTEC.

Murtha’s office has said that no one there has any recollection of how the earmark made it into the tsunami bill.

Air Force program manager Mark O’Hair pleaded guilty and Richard Schaller, owner of a Florida defense contracting firm called Schaller Engineering, was convicted by a jury of taking part in the scheme with Ianieri. The Justice Department alleged that O’Hair approved bogus purchase orders for Ianieri to buy materials from Schaller and that the proceeds of these transactions actually ended up being rerouted to O’Hair, Schaller and Schaller’s business partner Theodore Sumrall.

Sumrall pleaded guilty and received probation, O’Hair was sentenced to six months in prison and Schaller received 18 months in prison.

Schaller Engineering was a client of the now-defunct lobbying firm PMA Group, which had a close relationship with Murtha before it was raided by the FBI in November 2008, reportedly as part of an investigation of improper campaign contributions and earmarks. PMA ended its representation of Schaller on Dec. 21, 2006, the day after federal investigators first interviewed Schaller in connection with the skimming allegations.

According to the government’s notes of that interview, Schaller told investigators that he intended “to employ an alternate business model wherein [the company] could receive Congressional ‘add’ funding to develop its ideas. Essentially in this model, a company ... would go to Congress, and state that it had an idea and a customer [agency] willing to buy that idea. If Congress backed the company, then the funding was provided through a host.”

In Schaller’s case, the host was the Air Force research lab in Florida where O’Hair worked.

Schaller was also a partner with Ianieri in another company called American Electric Vehicles, which won an earmark provided by Rep. Bill Young (R-Fla.) to build a “clandestine electric reconnaissance vehicle.”

Ianieri’s Feb. 23 sentencing in Florida will also cover a guilty plea he lodged in Pennsylvania, admitting that in January 2006, he accepted $200,000 in kickbacks from a subcontractor identified only as “K” in exchange for providing that company with favorable treatment under a government contract Ianieri controlled.

Ianieri’s Coherent Systems at the time shared a Pennsylvania facility with Kuchera Industries and Kuchera Defense Systems, and the companies had received millions of dollars worth of earmarks from Murtha. Kuchera executives and employees have donated more than $60,000 to Murtha’s political action committee and campaigns since 2002.

According to the Florida charges against Ianieri, in December 2005 he paid Kuchera $650,000 for products that were not part of the project Coherent was building for the Air Force.

A year ago, federal agents raided Kuchera, reportedly as part of an investigation of alleged misuse of government contract dollars. The Navy suspended the company from receiving additional federal contracts but revoked the suspension later in the year. On Dec. 22, the company was suspended again, and the Navy said the suspension was due to the kickbacks allegedly provided to Coherent.

No criminal charges have been filed against Kuchera, and the company has field an appeal of the December suspension.

Ianieri’s plea also indicates that he diverted money to other contractors who were clients of KSA, but neither the lobbying firm nor any of the other companies have been charged with any crime.

The House Committee on Standards of Official Conduct has said it is investigating the PMA Group and its relationship to lawmakers, but late last year the independent Office of Congressional Ethics closed its investigation of PMA’s relationships with Murtha and Young over the past three years and recommended no further action by the ethics committee.

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