Contractor scams $20.5M from Pentagon

A South Carolina defense contractor pleaded guilty Thursday to bilking the Pentagon out of $20.5 million over nearly 10 years by adding hundreds of thousands of dollars to the cost of shipping spare parts such as metal washers and lamps.

The parts were bound for key military installations, including those in Iraq and Afghanistan. In one instance, in 2006, the government paid C&D Distributors $998,798 in transportation costs for shipping two 19-cent washers. Charlene Corley, 47, co-owner of C&D Distributors, used the money to pay for luxury homes, cars, plastic surgery and jewelry, according to court documents in Columbia, S.C.

"It is a troubling case because the fraud took place during a time of war," said Kevin McDonald, the first assistant U.S. attorney for South Carolina. The $20 million "that could have gone to assist our military was diverted and used in a fraudulent manner for excessive personal enjoyment."

C&D supplied small hardware, plumbing fixtures and electronics to the military, according to court records. The company used a government system that fast-tracked items to priority military installations. C&D submitted the shipping costs separately and the system paid them automatically, the documents said.

The Pentagon paid 112 of the fraudulent invoices until the scheme was detected last September, according to the documents. Since then, steps have been taken to improve the system's internal controls, said a Pentagon spokesman, Lt. Col. Brian Maka.

Among the invoices:

• A 2004 order for a single $8.75 elbow pipe that was shipped for $445,640, according to the documents.

• Also that year, a $10.99 machine thread plug was shipped for $492,096.

• Last year, six machine screws worth a total of $59.94 were shipped at a cost of $403,436.

Corley acknowledged her role in the fraud but maintains that her twin sister, co-owner of the business, was the main benefactor, said her attorney, Greg Harris. The sister, Darlene Corley, committed suicide last October after being approached by federal investigators, according to a statement from the U.S. Attorney's Office.

"We do not dispute that we participated and benefited in and from the conspiracy," Harris said. "We have, however, always maintained that her sister was the primary actor in this fraud, the primary beneficiary of this fraud, and unfortunately she is not here today to assist us in distinguishing their roles in the fraud."

Corley is hoping to reduce her potential prison time — 20 years each for two counts of conspiracy — by continuing to cooperate with authorities, Harris said. "Over the past eight months, we have assisted the government with identifying, maintaining and liquidating assets purchased with monies from this fraud," he said. "We will continue to do this during the coming months."

Among the items Corley and C&D will forfeit, according to court documents, are six pieces of property, a bank account with $2.6 million in cash and 10 vehicles, including a 2007 BMW and a Mercedes.