Group Bilks US Navy Out of $2.7M

A Virginia man helped bilk the US Navy out of nearly $200,000 by setting up a sham company to sell the service nonexistent training devices, say federal prosecutors.

Michael Kitrel, 42, was charged this week with conspiracy to commit larceny of government money. His alleged crimes were part of a larger $2.7 million scheme involving two Navy lieutenants and a senior chief petty officer who are already serving punishments for their roles in the brazen operation.

“The potential damage from procurement fraud extends well beyond financial losses,” explains a 2018 report from the Department of Defense (pdf). “This crime poses a serious threat to the DoD’s ability to achieve its objectives and can undermine the safety and operational readiness of the warfighter.”

Between 2013 and 2017, the department gave more than 15 million contracts (pdf) to companies that had been indicted, fined, or convicted of fraud, valued at more than $334 billion, according to the DoD’s own data. It was only a slight improvement over the period between 2001 and 2010, when the department awarded more than $1.1 trillion worth of contracts (pdf) to companies that had been found guilty of fraud against the government. Some recent frauds, as first reported by Quartz, have included vendors selling the Navy Chinese-made ballistic vests and helmets that were labeled as having been manufactured in America, and shipping hundreds of counterfeit radio antennas to the Navy SEALs.

According to court filings, Kitrel was operating at the direction of Lt. Randolph “Kaz” Prince, who is mistakenly identified as “Rudolph” in charging documents related to the Kitrel case. (The US Attorney’s Office acknowledged the error and confirmed that it is the same person, but declined to comment further.) Prince, 46, was the supply officer for his Virginia Beach–based unit, Explosive Ordnance Disposal Training and Evaluation Unit 2 (EODTEU 2). He had the authority to make purchases for his unit, and could steer the orders wherever he chose. So Prince, who had an expensive gambling habit, hatched a plan to funnel some of that money into his own pocket.

To set the operation in motion, Prince approached Kitrel, a civilian, with an idea: If Kitrel established an LLC, Prince would send no-bid contracts his way. The LLC wouldn’t actually provide any product, however. Upon “delivery,” Prince, who was responsible for confirming receipt of all goods coming in to EODTEU 2, would sign phony packing slips indicating the phantom items had arrived. Prince and Kitrel would then split the proceeds between themselves.

But Kitrel had never set up a company before. He asked Lt. Courtney Cloman, a naval flight officer with experience operating an LLC, to help him start the business. (How Prince, Kitrel, and Cloman knew one another to begin with is not specified in court documents.)

At the beginning of June 2014, with the help of Cloman, Kitrel registered a company he called L&K Technology and Logistics. Run out of Kitrel’s house in Chesapeake, Virginia, L&K “maintained no inventory or warehouse, was not registered to do business with the Department of Defense…never purchased any military training devices or goods, never held any such items in inventory, and never made deliveries of any such items to the USN,” a charging document explains. “L&K had no business expenses whatsoever, and thus operated at one hundred percent profit.”


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