Arthur Morgan got himself a GSA (General Services Administration) contract to supply ballistic vests, helmets, riot gear, and other items to the military and to law enforcement agencies. All GSA contracts are subject to the Trade Agreements Act which requires that all products listed on GSA contracts must be manufactured domestically or in a designated country. China is one of many countries not on the "designated country" list.
Various agencies placed orders with Mr. Morgan, nine orders in fact totaling $640 thousand. The Navy was one of those agencies that bought helmets from Mr. Morgan. The problem however was that Mr. Morgan was not manufacturing the helmets nor was he purchasing them from domestic suppliers or from suppliers in a designated country. He was purchasing them from China.
In a series of email exchanges with the Navy over meeting agreed upon delivery schedules, Mr. Morgan falsely advised the Navy that he had a factory in southern Virginia, that the helmets for the order were in production there and the the delays were due to a back-order of materials need for helmet production. However, on the same day that the Navy sent Morgan a partial payment of $127 thousand, Morgan made a payment to a Chinese company that manufactures the exact same helmet as Morgan ultimately delivered to the Navy in the amount of $68 thousand. Now that's a nice profit - based on just the partial payment amount, Morgan earned nearly 100 percent profit. We wonder what the profit percentage amounted to after the Navy made the full payment.
The scheme finally unraveled but the Justice Department is not saying how. Mr. Morgan has been criminally charged and is currently under house arrest (perhaps a flight risk?). Criminal charges do not mean he is guilty. A trial or plea agreement will determine his guilt or innocence at a later date.
The Justice Department press release on this matter can be read or downloaded here.