Friday, September 6, 2019

Prison Time for Selling Non-Conforming Parts to the Government

The owner of two companies with defense contracts will now spend the next three years in Federal prison and must also pay $8 million in restitution for selling non-conforming parts to the military for use on fighter jets and helicopters. Mr. Sobrado was convicted of a number of charges including conspiracy to commit wire fraud, conspiracy to violate the Arms Export Control Act, and income tax evasion but the root cause that precipitated all of these charges was selling non-conforming parts to the Government and certifying that they met contractual requirements.

According to a Justice Department press release announcing this sentencing, the particular contracts specified that the parts in question were critical application items for military equipment, including fighter jets and helicopters. Additionally, the contract required that these parts be purchased from one of a small group of 'authorized manufacturers'. Mr. Sobrano found local manufacturers to supply non-conforming parts at significantly reduced cost. As a result, Mr. Sobrano made windfall profits, some of which was not reported for income tax purposes.

Another aspect to this case was Mr. Sobrano's application to DoD for access to export controlled drawings and technical data on behalf of a family member's company. Access was to be restricted to U.S. Citizens and to those lawfully in the United States. The family member in question was in the United States illegally but was able to access and download hundreds of drawings that were sensitive in nature and that required special access.

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