Defendant’s sentence includes jail time, restitution of $18 million and a fine.
Case highlights importance of government contractors using compliance programs to identify wrongdoing and avoid operational consequences, including business closure.
In another win for President Obama’s Financial Fraud Enforcement Task Force, Ralph M. Mariano, a former Navy engineer who directed an $18 million kickback scheme, has been sentenced to 10 years in prison and ordered to restitute the money.
Mariano was a civilian program manager and senior systems engineer for the U.S. Navy’s Naval Undersea Warfare Center (“NUWC”) in Newport, R. I. and Washington, D.C. He admitted in May 2013 to having used his position for the last 15 years to direct over $120 million in Navy contracts to a technology services firm called Advanced Solutions for Tomorrow (“ASFT”). ASFT then passed roughly $18 million to a series of subcontractors that Mariano had helped to set up, and that money eventually went back to Mariano and others close to him, including his 82-year-old father, Ralph Mariano, Jr. The illicit funds were paid out to Mariano himself, his family and co-conspirators – including the founder and CEO of ASFT, Anjan Dutta-Gupta. Mariano’s father had received $2.5 million, and was recently sentenced to four years of probation. Others involved in the fraud will be sentenced shortly. According to his indictment, the younger Mariano was responsible for monitoring the quality of work performed under the Navy contracts, which put him in position to prevent the unlawful activity from being noticed.
ASFT shuttered its doors after the charges were announced, laying off hundreds of staff at locations in Rhode Island, Virginia, and Georgia. When news of the scandal broke, the Naval Sea Systems Command (“NAVSEA”) temporarily revoked the authority of the NUWC to issue new contracts or delivery orders on existing contracts. Those decisions had to pass through an additional level of review at NAVSEA, which greatly disrupted payments to the many contractors and subcontractors working with the NUWC.
In May, in the U.S. District Court for the District of Rhode Island, Mariano pleaded guilty to charges of theft of government funds under 18 U.S.C. § 641 and to conspiracy under 18 U.S.C. § 371. He also pleaded guilty to one count of tax evasion under 26 U.S.C. § 7201, for failing to pay over $700,000 in taxes on a portion of his criminal income.
At sentencing on November 1, Mariano was ordered by U.S. District Court Chief Judge Mary M. Lisi to repay the $18 million he siphoned from the Navy, to pay a $10,000 fine, to serve 10 years in prison, and then to serve three additional years of supervised release. He was directed to self-surrender to the Bureau of Prisons by November 26, 2013.
The scope of Mariano’s wrongdoing and the disruptions it caused throughout the community of contractors working with the Navy highlight the need for contractors to develop compliance programs that can quickly uncover wrongdoing. It is possible that such a program could have brought Mariano and Gupta’s scheme to light at an early stage, which could have prevented the job losses and delayed payments that they ultimately caused.