Ore. defense contractor target of investigation

AP News
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Posted: Jul 25, 2012 5:22 PM
Ore. defense contractor target of investigation

GRANTS PASS, Ore. (AP) — Federal authorities are investigating whether a U.S. Army Corps of Engineers program manager made sure an Oregon defense contractor won nearly $160 million worth of contracts as part of a cozy relationship that included snowboarding and fishing vacations, trips to Singapore and Bali, and sex with female employees hired to work with him.

Affidavits filed in U.S. District Court in Eugene outline findings and witness statements that allege Jerry Hodgson, a program manager for the corps in Omaha, Neb., rigged bids on eight contracts dating back to 2004 for Sky Research Inc. of Ashland. The company specializes in aerial surveys of old military bombing and gunnery ranges to find old weapons debris.

No charges have been filed.

Assistant U.S. Attorney Sean B. Hoar said the investigation is ongoing.

"We take seriously our role as a financial steward of the public's money and the trust that is put into us," said corps Omaha District Assistant Special Counsel Tom Tracy. "We are looking into the allegations, and taking them seriously."

An attorney for Hodgson said the allegations against his client were unfounded.

"Mr. Hodgson has enjoyed a long and distinguished career with the Omaha District of the Army Corps of Engineers," his attorney Andrew D. Strotman said in an email. "These allegations are unfounded and inaccurately portray the contracting practices of both Mr. Hodgson and the Omaha District."

Attorneys for Sky Research owners Sky (his singular legal name) and his wife, Anne Sky, did not immediately return calls for comment. An attorney for Sky Research issued a statement denying the allegations.

"Although the company has not had much time to examine the information released last week, it appears that the accusation against it is the product of rumor and speculation," Douglass H. Schmor said in a statement. "The company is finally in a position to gather evidence and other information about the accusation and is confident that it will be able to rebut it."

The investigation was first reported by the Eugene Register-Guard.

Based on the affidavits, U.S. District Magistrate Judge Thomas Coffin in Eugene authorized search warrants that seized computers and records from offices of Sky Research in Oregon and Colorado and the homes of Sky and his wife, as well as Hodgson's personal email account, according to court records unsealed last week.

The investigation focused on potential charges of bribery of a public official, conspiracy to defraud the United States, wire fraud, padding bids and bid rigging, affidavits said.

U.S. Army Special Agent Derek W. Lindbom wrote that the investigation was sparked by a confidential informant who contacted the Army's inspector general in 2010 with allegations that Hodgson returned bids to Sky Research with instructions on how to change them so they would be sure to win a contract, that Sky Research hired personal assistants to work just with him, and that Hodgson arranged for their salaries to be billed to the government.

The informant also alleged that the Skys billed the government for a vacation to Singapore and Bali, listing it as a marketing cost, Hodgson arranged for them to be paid advances for work not yet finished to carry them through slow periods, the Skys arranged for cars to be sold below cost to Hodgson, and bought an airplane from Hodgson's son, which was upgraded at government expense.

When an investigator interviewed Hodgson, he admitted taking his kids on annual snowboarding vacations with Sky and his kids, and considered Sky a good friend, the affidavits said. Shown invoices for a fishing trip to Alaska paid for by Sky, Hodgson said he paid him back in cash, but couldn't recall which account he had withdrawn the money from.

Hodgson also acknowledged having a romantic relationship with one woman who worked at Sky Research, which included sex, and having sex with two others, an affidavit said. One former Sky Research program manager said she was fired after refusing to have sex with Hodgson.

Hodgson denied statements from women who worked at Sky Research that he sat in on hiring interviews for women who would be working with him.

Hodgson told investigators he first met Sky in 1997 or 1998 when working on a project at the former Lowry Bombing and Gunnery Range outside Denver.

Sky Research has an office in the Denver suburb of Englewood and a residence in Centennial, Colo., where employees told investigators that Hodgson was a frequent guest who was lavishly wined and dined because he was responsible for all the company's contracts.

The affidavit includes excerpts from emails indicating Hodgson told Sky Research how to massage bids to be sure to win a contract, and offered to pad contracts with extra money.

"Based on discussions with afcee (Air Force Center for Engineering and Environment) today I think this will get funded - to whatever level I decide is appropriate," read one from Hodgson to a Sky Research employee. "So we'll want a scope put together (draft for me to massage) and an estimate (detailed) as we need it ready to go - timing is the key, plan is to capture monies I send back on other projects ... can't let it sit or someone else will grab it - that's why we need a "firm" cost/number. This is a huge deal for us and will put us so far ahead of everyone else doing this."

Former Sky Research project manager Andrew Biaggi told Lindbom that on a contract for work at Dyess Air Force Base outside Abilene, Texas, Hodgson told him to bid on work for 50 acres, when the site was actually only half an acre.

Former Sky Research senior accountant Kimberly Walker told investigators she recalled one project in Puerto Rico had a profit of 400 percent. She said excess profits from one project were routinely used to cover cost overruns on another, a practice they referred to as "Jerrying."

Cayla Vitko, who formerly worked in accounts payable for Sky Research, told investigators that when she questioned expenses related to Hodgson, "She was told they needed to keep Hodgson happy because they get all of their contracts from him," an affidavit said.