ONE TOUGH BIRD
Feds say illegal scheme kept federal cash flowing to ‘Big Crow’ for a decade
This is the story of an obscure Albuquerque-based government agency with a mostly classified mission that managed to stay alive by hook or by crook for 10 years after it was cut loose financially by its parent organization, the U.S. Army.
The agency was called the Big Crow Office Program, and its mission was to analyze electronic warfare testing data for the Army.
But the Army dropped the program from its budget in 1999. Despite that, Big Crow managed
to keep its doors open as an Army agency at Kirtland Air Force base until 2009.
Federal prosecutors now claim that the program’s funding hook was a politically connected lobbyist, and that the crook was an elaborate scheme to pay his company hundreds of thousands of dollars by funneling government funds through employees and subcontractors to keep the federal money faucet open through so-called congressional “earmarks.”
The elaborate subterfuge was necessary because it is illegal to use government funds to lobby for government funding.
Four men have been indicted in the scheme. Three have pleaded not guilty and are fighting the charges. A fourth key player recently pleaded guilty and has agreed to cooperate with prosecutors.
The indictment doesn’t explain how Big Crow stayed alive between 1999 and 2004, when prosecutors allege that Milton Boutte, 72, then director of the Big Crow Program Office, conspired with Washington, D.C., lobbyists — including George Lowe, 55, a former chief of staff for former Sen. Ted Stevens, R-Alaska — to obtain money for the program from sources other than the Army, including the Department of Interior and the Alaska National Guard.
But the indictment charges that, beginning in 2004, Boutte, Lowe and two other men diverted more than $500,000 from federal contracts to pay for Lowe’s lobbying services. The scheme required using subcontractor companies run by Joe Diaz, 58, and Arturo Vargas, 54, both of El Paso, to create phony invoices to make the payments.
Charges against the men include conspiracy to defraud the United States, conspiracy to commit wire fraud against the United States, and making false, fictitious and fraudulent claims.
Three contracts
The Big Crow Office Program oversaw the use of two modified NKC-135 jet airplanes used as airborne electronic warfare laboratories to provide the Army an airborne platform with the capability of creating “electronic warfare environments for the susceptibility/vulnerability analysis of missile and support systems.”
Most of its work was considered classified.
The indictment centers on three contracts issued by the Department of the Interior and the Alaska National Guard. It isn’t clear from court records why those agencies would need the services of the Albuquerque-based Big Crow office.
However, they paid more than $5 million to the Big Crow Program Office from 2004 through 2009, when the office was finally closed.
And, according to the indictment, more than 10 percent of that went to pay lobbyists, which prosecutors say is against the law.
Dismissal motions
Lowe, Boutte and Vargas are fighting to get the 48-page indictment dismissed.
Lowe, who admits lobbying for the Big Crow Program at least prior to 2004, argues that the charges are so old they hinder his ability to mount a proper defense.
His attorneys, Robert Gorence and Jason Bowles of Albuquerque, argue that many members of Congress whom Lowe and others lobbied on behalf of Big Crow — including the late U.S. Sen. Pete Domenici — are no longer in Congress and that their offices are long closed.
“With their Congressional offices closed it would be impossible to obtain the documentation that would substantiate Mr. Lowe’s legitimate lawful lobbying activity,” Gorence and Bowles wrote in a motion to dismiss. They also claim that physical evidence, such as bank records, is no longer available and should have been obtained at the start of the investigation in 2010.
The normal statute of limitations for white collar crimes is five years.
But under the 1942 Wartime Suspension of Limitations Act (WSLA), “war” temporarily stops the statute of limitations clock, and, at the war’s end, the government has an extra five years to institute a prosecution.
In 2008, because the military actions in Afghanistan and Iraq lacked formal declarations of war, Congress passed a law giving prosecutors the same extra five years for modern military operations like those in the Middle East and Afghanistan.
Lawyers for Boutte, who now lives in Texas, argue that the indictment fails to spell out any criminal act or offense he may have committed.
“Based on what is actually alleged and contained in the indictment, Mr. Boutte has been seemingly lumped into the indictment just because he happened to be the Director of Big Crow Program Office (“BCPO”) at the time,” his attorney, Byrant S. Banes of Texas, said in a motion to dismiss the charges.
Prosecutors are fighting both dismissal motions, arguing that the 48-page indictment contains ample detail about the criminal charges and surpasses the standards required by law and court rulings.
They also say that, once the investigation began, it took Army criminal investigators a long time to unravel the many criminal allegations and leads they received concerning the Big Crow Program Office.
“Although investigators and analysts devoted considerable time to examination of the various contracts, rather than endlessly attempting to untangle the Gordian knot of issues presented in the multiple contracts for the Big Crow Program Office, investigators eventually cut that knot down to a manageable segment,” Assistant U.S. Attorney Timothy Vasquez said in court filings responding to the motions to dismiss.
Invoices questioned
The indictment outlines an elaborate scheme to cover up the source of payments to Lowe.
Prosecutors allege that Joe Diaz, president of a Big Crow subcontractor called Miratek, at the direction of Boutte, represented that Lowe and other lobbyists working with him were “consultants and contractors” and that their work was billed on an hourly basis under the category of “Project Manager/Senior Auditor/CPA.”
Miratek, a data analysis company with offices in Albuquerque and El Paso, allegedly structured and divided Lowe’s large invoices into multiple invoices with inflated hours of work so they would not be challenged by federal officials who processed them for reimbursement.
The indictment charges that Lowe initially charged Miratek $15,000 per month for his services and subsequently demanded and received larger sums, but they were broken down into smaller amounts through fraudulent invoices.
The indictment claims that in 2006 — because Miratek was losing its minority-owned business preference after operating for 10 years — Boutte and Diaz sought out another small business to take Miratek’s place in the scheme and to keep the federal money flowing.
Diaz recruited Arturo Vargas and Vargas P.C., a small accounting firm in El Paso, to create a new joint venture called Vartek LLC — claiming that Vargas P.C. was diversifying into the information technology field.
Prosecutors claim that Vartek was then used to submit invoices showing that Lowe and others were Vartek employees, to disguise the nature of the payments.
According to court records, as the program was ending in 2009, reports began to surface concerning misuse of government resources and fraudulent practices at the Big Crow Program Office.
The Army conducted an informal administrative investigation that found Boutte had misused his position to charter a Lear jet at government expense and that management and oversight of the contract by the Army had broken down.
By the time the Army’s administrative investigation concluded, its criminal investigation was in the preliminary stages.
It centered on reports that Boutte and others at the Big Crow Program Office had misused government resources for personal gain and eventually led to the probe into contracting issues that are at the heart of the indictment.
Guilty plea
The guilty plea of Miratek’s Diaz could present difficulties for the other defendants, because he has agreed to cooperate and testify.
He has an incentive. His guilty plea to one count of conspiracy to defraud the federal government and two counts of fraud each carry a potential 10-year prison sentence — which could be significantly reduced based on his cooperation.
In a series of admissions, Diaz detailed how the company created and submitted phony invoices to cover up the payments to Lowe, admitting that the contracts his company had with Big Crow were used to funnel more than $500,000 in lobbying fees to Lowe.
His guilty plea also details a dispute over the payments between Diaz and Lowe.
According to his guilty plea, Diaz told Lowe that the “$530K” Lowe’s company had received satisfied their agreement.
Lowe responded by email on Aug. 29, 2005: “Well … You think wrong! You seem to forget that I am the one that placed those funds on that account. I have also received verification that they processed ALL of my invoices which total in excess of $850K and have diverted funds for other uses. That in and of itself is a major problem, it is known as diversion of funds.
“I don’t appreciate the tone of your email. I am meeting with my attorneys … to move forward. I will not be treated like this by you, Milt (Boutte), Ron and/ or Joe (Diaz).”
Later that same day, Diaz forwarded this email strand to one of his employees with the comment that Lowe’s “lawyer talk is a big bluff … unless he wants to go straight to Leavenworth.”
In his guilty plea Diaz admitted, “I was aware that the diversion of funds to Lowe was illegal, and while I did not believe that Lowe would make good on this threat to report the diversion if his demands were not met, I directed Miratek to continue to make payments to Lowe based on demand from Boutte.”
A sentencing date for Diaz has not been set.