Friday, March 30, 2007
Feds Allege Inflated Bills Cost Taxpayers
By Mike Gallagher and Scott Sandlin
Copyright © 2007 Albuquerque Journal; Journal Staff Writers
The long-anticipated public corruption indictments handed up Thursday outline a scheme breathtaking in scope and star power.
The accused include one of the most powerful legislators in state history, a former mayor of New Mexico's biggest city, a high-profile architect and the former boss of one of the state's busiest courts.
Together, prosecutors allege, the defendants conspired to rip off $4.2 million in taxpayer money in the construction of the $83 million Metropolitan Court complex in Albuquerque.
Read the indictments and plea agreements at the U.S. Dept. of Justice/District of N.M. Web site
Find out more about the Metro Courthouse corruption case from the Journal archives here
Their roles ranged from the lawmaker accused of securing state money in Santa Fe to the court boss who signed off on inflated invoices that generated cash for the conspirators.
Former Democratic state Sen. Manny Aragon of Albuquerque is perhaps the most prominent person named in the sweeping 26-count indictment.
A former president pro tem of the state Senate, Aragon is accused of receiving $700,000 from the fraud.
But former Metropolitan Court Administrator Toby Martinez and his wife, Sandra Mata Martinez, were accused of hauling in just over $2 million.
The fourth defendant is Albuquerque engineer Raul Parra, who was associated with a firm called P2RS. He is accused in the indictment of pocketing $773,000.
Also unsealed Thursday were plea agreements in which former mayor and lobbyist Ken Schultz, Albuquerque architect Marc Schiff and contractor Manuel Guara admitted taking part in the scheme. They have agreed to testify on behalf of the government.
Schiff claimed he participated only because he had to or his company would have lost its contract.
The FBI and federal prosecutors have reportedly been looking into other public construction projects.
And one official told the Journal on Thursday that "the corruption probe in the Metropolitan Court is not concluded. Prosecutors and FBI agents are continuing their investigation."
Thomas McClenaghan, special agent in charge of the FBI's Albuquerque office, said public corruption "has been, and will continue to be, the number-one priority" of the local office's criminal investigative program.
Although the investigation at one time was referred to informally as "Operation Black Robe," Martinez was the only court official indicted.
Chief Metro Judge Judith Nakamura, who was not in that position during construction of the building, said through a representative that she wanted to reserve comment until she had a chance to read the documents.
She has previously said that she ordered court staff to cooperate with the investigation.
A trail of invoices
The indictment accuses Aragon, Parra, Toby Martinez and Sandra Martinez of subverting the procurement process by including millions of dollars of fraud in contract proposals and inflated contract modifications for installation of audiovisual equipment and communications wiring.
Schiff and others would submit phony invoices to Martinez, who would approve them and make sure they were paid. The excess money would then be funneled back to the participants, in some cases by Schultz or Schiff.
"That we had people inside the court clerk's office who enabled this whole thing to go forward is extremely distressing, to say the least," said lead prosecutor Jonathan Gerson.
"We've alleged extremely pervasive fraud in important public works projects," he said.
Aragon's attorney, David Cunningham, was unavailable for comment, as was Billy Blackburn, attorney for Toby and Sandra Martinez.
Parra's attorney, Robert Gorence, said he had no comment other than to say, "I am heartened that the government has decided that my client's cooperation to date has meant they are allowing him to appear voluntarily in court. We look forward to clearing his good name."
Defendants have been sent summonses to appear and arraignments are expected to take place April 12.
The indictment charges one count of conspiracy, eight counts of mail fraud, 11 counts of money laundering and five counts of laundering monetary instruments.
Gerson said maximum penalties on the conspiracy counts are five years in prison and 20 years on each of the fraud and money-laundering counts.
Schultz in his plea deal admitted being the "go between" carrying money from Schiff to Martinez, and Schiff admitted making payments through Schultz under threat of losing his contract.
Guara said in court documents that he was approached by Parra to handle the overcharges on the audiovisual installation and communications wiring and was guaranteed $100,000 if everything went according to plan.
Schultz's attorney, Peter Schoenburg, said his client has been cooperating since before he had legal representation.
"He's cooperated since before I got in the case. He has met with FBI repeatedly. It's a tribute to Ken. He's a pretty straight shooter," Schoenburg said.
In Schultz's plea agreement, the U.S. Attorney's Office agrees to recommend a sentence lower than the federal guidelines, meaning Schultz could hope for a non-custodial sentence, Schoenburg said.
Schiff's attorney, Joseph Riggs, said the plea agreement "makes it clear that Marc did what he did only after being threatened with loss of the contract. He has cooperated fully and is taking responsibility for his actions."
Schultz pleaded guilty to one count of conspiracy and one count of mail fraud. He faces potential sentences of five and 20 years.
Schiff pleaded guilty to the same counts and faces similar prison time, as does Manuel Guara who made a similar plea deal.
The indictment outlines three different ways in which the courthouse construction project was milked for cash.
In the first instance, payments based on false vouchers were made to the court architect, Design Collaborative Southwest, headed by Schiff.
In some cases, Schultz acted as a delivery agent from Schiff, carrying money to Martinez, who either kept it or transferred the money to Aragon. Schultz kept a cut as well, the indictment says.
In other cases, the indictment charges that Schiff gave the money directly to Aragon.
In the second instance, Martinez, Aragon and Parra subverted the court's procurement process by inflating contracts for the installation of audiovisual equipment and communications wiring.
The money came from a capitol outlay request made by Aragon in the Legislature for $3.6 million for audiovisual and data-processing equipment and infrastructure for video arraignments.
Parra is accused of recruiting a subcontractor, Datcom. Inc., owned by Manuel Guara. Guara would submit inflated bids to the general contractor on modifications that would be approved by Martinez.
After paying legitimate bills, Guara allegedly transferred excess money to Parra, who was neither a contractor nor a subcontractor.
Parra is charged with retaining $733,000 in this particular scheme.
The government accuses Parra, Aragon, Martinez and his wife, Sandra, of moving large amounts of money around between companies and various back accounts.
Aragon used a personal checking account and his law firm's accounts to move and retain funds, according to the indictment.
Parra established a company called Parra & Gagnon Consulting and Sandra Martinez created a company called Smart Solutions Inc.
Money moved between the companies and their personal bank accounts.
Federal prosecutors also filed forfeitures against Toby Martinez, his wife Sandra and Aragon.
The government wants Martinez to turn over a $600,000 investment in a barge casino in Tennessee, among other assets.
The government is also seeking forfeiture of an undisclosed amount of money in a California financial account belonging to Aragon.
The indictment brings to an end months of rumors that federal charges were imminent in the lengthy investigation into the Metropolitan Court construction.
The investigation has gained national prominence because former U.S. Attorney David Iglesias has said he felt pressured by Sen. Pete Domenici, R-N.M., and Rep. Heather Wilson, R-N.M., to bring indictments in the case last year before November's hotly contested congressional election.
Domenici and Wilson admit calling Iglesias but deny pressuring him.
Powerful politico accused of securing state money, pocketing $700,000.
TOBY AND SANDRA MARTINEZ
Court boss and wife. He is accused of approving phony invoices; couple is accused of raking in over $2 million.
Accused of reaping $773,000 from scheme, funneling thousands more to other defendants.
Former Albuquerque mayor-turned-lobbyist. Was go-between in money transfers.
Architect, senior partner in charge of court project. Funneled money to others.
Subcontractor, inflated vouchers and kicked back money.
TWO CASH TRAILS
As outlined in the indictment
The DCSW Contract
Architect Marc Schiff, DCSW partner in charge of contract, submits false invoices and excessive requests to Metro Court.
Court administrator Toby Martinez authorizes payment by the state.
Schiff makes cash payments to Ken Schultz from proceeds of the false invoices.
Schultz keeps a cut, gives the rest to court administrator Martinez.
Schiff also makes payments to Manny Aragon.
The ATV Contract
Raul Parra recruits subcontractor Manuel Guara and his company Datcom, Inc., to install audio visual and communications wiring.
Guara submits inflated bids and requests for payment to the main contractor, ICS.
ICS, which is not accused of wrongdoing, submits invoices to court administator Martinez for authorization.
ICS, as general contractor, pays Datcom for its invoices.
After paying legitimate bills of its own contractors, Datcom's Guara transfers to Parra much of Datcom's proceeds.
Parra keeps some, transfers the rest to Toby and Sandra Martinez and Manny Aragon.