USACE official in Afghanistan goes undercover to help FBI snare contracting cheats
April 16, 2010
- Kevin Lynch is credited with thwarting the largest procurement fraud scheme ever perpetrated against the Corps of Engineers.
- Lynch is awarded the Decoration for Exceptional Civilian Service from the Secretary of the Army.
- "His actions will serve as a strong deterrent to others who might attempt contracting fraud." - Lt. Gen. Robert L. Van Antwerp, Army Chief of Engineers
<b>KABUL, Afghanistan</b> - U.S. Army Corps of Engineers contracting specialist Kevin Lynch, who became suspicious of a bogus reimbursement request by a Lebanese construction company in late 2008, worked undercover with the FBI for months to expose a multi-million-dollar bribery and corruption scheme.
His work led to the arrests and convictions of former Corps of Engineers contract administrator Gloria Martinez; her sister Dinorah Cobos, who served as an executive with the Lebanese-based military construction firm Sima Salazar Group; and Raymond Azar, who was the president of Sima Salazar.
<b>The sting operation in Kabul thwarted one of the largest procurement fraud schemes ever perpetrated against the Corps of Engineers.</b>
In recognition of Lynch's efforts, Secretary of the Army John McHugh on April 14 awarded him the Decoration for Exceptional Civilian Service medal, the highest Army award for civilians.
"His actions will serve as a strong deterrent to others who might attempt contracting fraud," Lt. Gen. Robert L. Van Antwerp Jr., Army Chief of Engineers and USACE commanding general, wrote in a letter nominating Lynch for the award.
Martinez, Cobos and Azar all were sentenced to prison in the United States in the case that involved construction projects in both Afghanistan and Iraq. Martinez and Cobos are U.S. citizens, while Azar is a Lebanese citizen. The three conspired to trade jobs, money, jewelry, housing and other gifts for favorable treatment in contract matters.
The scheme unraveled because Lynch, whom they believed to be their newest recruit, wore a wire for the FBI.
"A number of us have the view that the case would have never come together and never have been prosecuted had it not been for Kevin's role in it," said Dale Holmes, former legal counsel for the Corps' district office in northern Afghanistan.
<b>Lynch's role in the case has been largely unknown - at least publicly.</b>
Lynch and the federal agents largely conducted the sting at the Corps of Engineers' district headquarters in northern Afghanistan without the knowledge of Lynch's colleagues at the Qalaa House compound in Kabul. Furthermore, federal prosecutors referred to Lynch only as "Person One" in public court documents, and Lynch himself didn't publicly discuss the matter.
FBI agents had been investigating Sima Salazar, its affiliated companies, Martinez and Cobos since August 2007, but lacked enough evidence to arrest the sisters, according to documents written in support of Lynch's award.
By December 2007, Martinez had retired from a 26-year career with the Corps of Engineers, a stint during which she had served as chief of contracting in Afghanistan for a year, and as the chief of contracting in Iraq for two years. During her tenure, the Corps of Engineers awarded Sima Salazar and its affiliated companies at least $155 million in construction contracts in Afghanistan and Iraq, but none before or after.
The scheme worked this way: Martinez gave her sister inside information about upcoming bids, assuring Sima Salazar won several competitive contracts. When the company failed to perform some of the work, Martinez got the company paid anyway. Azar showered the sisters with jewelry and shopping bags filled with cash. He also gave Cobos lucrative jobs, and private school tuition for her children, and a luxury condo in Dubai. The sisters pocketed more than $400,000 in cash and gifts, according to court documents. At the time, Corps of Engineers personnel were unaware that Martinez and Cobos were related.
For a while, Martinez and Lynch worked together in the contracting department in Kabul, where billions of dollars in war-zone contracts are awarded each year to U.S. and foreign companies to build infrastructure projects, such as army bases, police stations and roads.
"I worked with her very closely, actually," Lynch said. "I really liked her professionally at the time."
His job involved managing contracts, and negotiating settlements on claims submitted by contractors when the scope or conditions of their contracts had changed. Martinez appeared to value his work and she nearly always followed his recommendations, he said.
<b>His participation in the sting began simply enough.</b>
About a year after Martinez retired from the Corps of Engineers, Sima Salazar submitted six claims. Company officials sought $13.5 million in compensation to pay for unexpected security expenses, the cost of rebuilding a road that had been damaged by rain, the outlay for completing additional work beyond the scope of its contracts, and other matters.
"I started digging into these things. As a negotiator on behalf of the government, my first instinct was that they're all bogus," said Lynch, 32. "These claims appeared to be outrageous - and impossible, frankly, in some cases."
<b>One claim in particular stood out.</b>
It involved a section of road that Sima Salazar had agreed to build. Lynch knew from weekly briefings that the project was an unmitigated disaster.
The company hadn't laid an inch of pavement and was nowhere close to being ready to begin work. Corps of Engineers personnel had lost faith that Sima Salazar could complete the job, and had asked the company's executives to propose a settlement for eliminating the road from their contract.
He expected the executives to request reimbursements for, perhaps, some design work and administrative expenses. Small stuff.
"It came back at $2 million and it was very strongly worded. 'We spent $2 million on this, and if you want to take it away from us, that's what it's going to cost you. Oh, and by the way, we're racking up costs of $20,000 a day for every day until you make a decision on this,'" Lynch recalled.
"It was really absurd. That $2 million represented 50 percent of the cost of that road - and they hadn't even started on it. From a claims standpoint, it was really outrageous. It just got my blood boiling," he said.
Lynch tried to reach Sima Salazar executives to discuss the inflated figure. Everyone he contacted referred him to the company's new Afghanistan manager, who, they said, was the only person authorized to discuss the issue. That executive was Cobos.
Eventually, Lynch reached her by e-mail. She responded that she'd be happy to meet with him. In fact, she couldn't wait. However, she was traveling for the Christmas holidays, so she couldn't meet with him for two weeks. They agreed to meet when she returned.
"It's funny, because none of this may have happened if she had not been on vacation at the time," Lynch said. "Literally, there were probably 20 pounds of folders that these claims consisted of. And they were sitting on my desk. Already I was not happy with them, and I was just staring at them day after day."
He read through the documents and discovered a list of expenses supposedly compiled by one of Sima Salazar's subcontractors related to the unbuilt road. The document listed debts for equipment and materials, plus expenses for laborers and security personnel, which seemed incredible since construction hadn't started.
<b>There was another quirk: The subcontractor's letterhead appeared to have been pasted on the body of the document. </b>
Lynch called a phone number on the letterhead.
"The guy I talked to could not even figure out what I was talking about," Lynch said. "When I finally got through to him what I was talking about and the specific piece of road that I was talking about, he started laughing. He said, 'We have never been there. You can't even get there. The bridge is washed out. You're crazy. What are you talking about''"
Lynch e-mailed a copy of the document to him. Within an hour, the president of the company called back. The man only spoke broken English, but he used the word "fake." He made it clear that the document did not originate from his company, and he requested an immediate meeting with Lynch to determine the true source of the forged paperwork.
At that point, Lynch knew he had enough evidence to show that Sima Salazar executives were trying to bilk the U.S. government. "I said to myself, 'Finally, I got one of these guys!' You're always suspicious. That's how it's supposed to be," said Lynch, a Kansas resident and Corps of Engineers employee since 2003. "This was fraud and it was big. It was over $1 million."
He reported his findings to Holmes, the legal counsel at the time, and together they notified officials at the U.S. Embassy and the FBI, which already had an anti-fraud task force in place. They briefed two federal agents at the Qalaa House compound, and after reviewing Lynch's findings, the agents concluded that an audit, rather than an investigation, would be the best way to proceed, Lynch said.
<b>He returned to his office and requested an audit.</b>
Two or three weeks later, one of the FBI agents contacted him to request a second meeting, just to ensure that they hadn't missed anything the first time. They met at the U.S. Embassy and Lynch retold his story. "The only difference that I could think of was that for some reason I mentioned the name of the woman I was supposed to be negotiating with when she gets back in the country," Lynch said.
"I gave them the name Dinorah Cobos."
The agents stared at each other, then at him, that at each another again. Lynch asked them if they knew something about his new contact. In fact, they knew quite a bit about her. They told him that the FBI had spent 2A,A1/2 years investigating her involvement in a far-reaching fraud and bribery scheme, but that they hadn't come up with enough hard evidence to arrest her.
"Within about five minutes, they said, 'This changes everything. We're not exactly sure how this is all going to play out, but we're probably going to ask you to wear a wire and set you up to take a bribe,'" Lynch recalled. "I said, 'What' Are you serious' What the heck is going on''"
A few days later, the federal agents told Lynch that his former supervisor, Martinez, and Cobos were sisters and that they believed Martinez was involved in the scheme. Furthermore, the agents told him they had reason to believe that Cobos would try to bribe him.
<b>Suddenly, a number of business transactions during Martinez's tenure at the Corps of Engineers made more sense, Lynch said.</b>
For example, Sima Salazar, which had never before done any reconstruction business in Afghanistan, emerged on the scene in 2007 and submitted textbook perfect proposals for projects. The company's proposals were so good, Lynch said, it was as if company executives had access to the Corps of Engineers' evaluation criteria when they prepared the proposals.
Yet after winning a number of contracts and instantly becoming one of the biggest contractors in the theater, Sima Salazar failed to deliver on many of its projects, including several high-profile construction jobs. The company didn't have the proper management in place. In some locations, its workforce was nonexistent. Sima Salazar couldn't even begin some jobs.
Lynch, as part of his duties, looked into the matters and recommended terminating the stalled contracts for default. Martinez appeared to consider his recommendations, but rejected them, stating that the Corps of Engineers was partly responsible for awarding more work than the company could handle.
Instead of terminating the contracts for default, she instructed Corps of Engineers personnel to negotiate terminations for convenience, which was a far more lucrative arrangement for Sima Salazar. Lynch said he objected, and Martinez said she would order audits to ensure that her reasoning was correct. He never heard about the audits again.
<b>Lynch agreed to wear a wire.</b>
The FBI agents instructed Lynch to meet with Cobos as he had previously scheduled. They showed him how to wear a hidden recording device for personal meetings and how to tape phone calls. They also told him they were monitoring his e-mail correspondence with Cobos.
The agents asked him to try to convey four messages - he had more authority than his job title suggested, he was upset with his supervisors, he was preparing to leave the Corps of Engineers, and that he was broke.
<b>They instructed him not to suggest a bribe; Cobos had to introduce that topic.</b>
The personal financial struggles part of the discussion was easy, Lynch said, because he had recently taken a hit in the stock market. The rest of it made him nervous.
"The first two meetings that I had with her did not go well from a criminal-investigation perspective, because I just fell right back into my old comfortable routine of arguing with every single point in their proposal," he said.
"I knew that that was not what I was supposed to be doing, but it would be weird if I just stopped and changed topics all of a sudden. Really, the first couple of meetings were pretty disastrous. I mean, I was just negotiating hard like I tend to do. I didn't know how to initiate that conversation," he said.
The FBI agents closely monitored his interactions with Cobos. They urged him to keep meeting with her and to express to her that he was dissatisfied with his job and irritated by his bosses. They suggested he mention to her that he did the bulk of the difficult work in his department, but that his supervisors unfairly took the credit.
<b>He continued to meet with her, usually somewhere on the Qalaa House compound. Tape ran every time.</b>
"I'll tell you what - by the end of this thing, it was like I was living a separate life when I was talking to her," Lynch said. "I got good at it. I could lie easily. And that's what they said, those agents. I was like, 'What if she says this' What if she says that'' All they ever could say was, 'Go with it, man! There's no rules here - well, there's a few rules; you can't entrap - outside of that, you can lie."
Lynch made a breakthrough during a meeting when he proclaimed that he planned to leave the Corps of Engineers to seek work at a private construction company, perhaps even a company like Sima Salazar.
From that point, Cobos seemed more comfortable with him. Their meetings, which previously had been heated negotiations, became warmer and friendlier, Lynch said. There seemed to be acceptance that someday they would work together.
More than three months after Lynch had begun to wear a wire, the FBI agents believed Cobos was close to suggesting criminal activity, Lynch said. Cobos had been in Lebanon and e-mailed Lynch to ask if she could bring him a bottle of wine, a box of candy or some other gift. "They're like, 'This is how it starts. This is good,'" Lynch said.
When she returned to Afghanistan, Cobos told Lynch that Azar, the company president, wanted to meet him at their next meeting. She said Azar planned only to greet him briefly, then hustle off to another meeting outside of the Corps of Engineers' compound. Lynch figured Azar wanted to check him out personally.
Lynch scheduled the meeting for Feb. 22, 2009, in a secluded training room.
<b>"This guy, the president, he was the politician type - all smiles and BS and handshakes.</b>
"They gave me the bottle of wine. They gave me the box of truffles. He gave me a big fat Cuban cigar," Lynch said.
"He was shaking my hand and patting me on the back and was basically telling me, 'Listen Kevin, what do you want me to do' We underbid these jobs. We're in some trouble here. We need a lifeline and you're the man, you're going to save us,'" he said.
Azar pulled out his wallet and showed Lynch a photo of his four children, insisting that they were depending on him. Azar said he envisioned creating a second company and making Lynch a shareholder. Then he left.
Cobos and Lynch continued the meeting for two or three hours.
They agreed that most of the money Sima Salazar was seeking was bogus. "I basically said, 'I can make this happen. There are probably $1 million or $2 million or $3 million worth of legitimate claims here, but not $13 million, but I can make it $13 million, but I don't know why I would. Why should I''" Lynch said.
Cobos didn't speak. Instead, she drew a large dollar sign next to a blank line on a sheet of paper. She slid the paper across the table. A camera hidden in an overhead smoke detector recorded it all.
They discussed the details of the arrangements. They agreed that Lynch would get kickbacks totaling 1A,A1/2 percent of any payments he got approved on the bogus claims. She encouraged him to set up a bank account in Dubai. She said the company would delay work on other contracts, including an Afghanistan National Army commando facility, until the fraudulent claims were paid.
<b>Cobos left the meeting telling Lynch that she would tell Azar about their arrangement.</b>
The next day, she e-mailed him details about the agreed-upon kickback formula, crudely camouflaged as a cocktail recipe. Still, the FBI agents wanted more. They wanted Sima Salazar to actually give Lynch a bribe.
They quashed the idea of setting up a bank account in Dubai, because of jurisdictional concerns. Instead, they opened a bank account in the town of Manassas, Va., and concocted a story that it belonged to Lynch's cousin, who supposedly owned a lawn equipment company.
Initially, Cobos balked at the idea, fearing a transfer to the Virginia account could be traced. She told Lynch she would give him a suitcase full of cash if he could get to Dubai, but he told her that his boss wouldn't let him leave the Corps of Engineers district headquarters in Kabul. Lynch even canceled a scheduled three-week vacation in Kansas to support the story.
"I had to start getting aggressive - aggressive in a criminal way - which was unusual, because I had to start saying things like, 'This is not going forward any more until I start getting paid, until I start getting money,'" Lynch said. "It was just weird. It was just me being a different person."
<b>Finally, money appeared in the Virginia account.</b>
First, $16,947 on March 10, according to federal court documents filed in Alexandra, Va. Then $39,955 on March 25, and $49,985 on April 6. The total: $106,887.
In exchange, Lynch gave Cobos a document stating that Sima Salazar was due millions of dollars, to be payable when the funding became available. The document was bogus, of course.
Lynch set up a final meeting for April 7.
At the time, the Corps of Engineers' district commander Col. Thomas E. O'Donovan had been calling in contractors for one-on-one conferences that he termed "partnering meetings." Lynch warned Cobos that O'Donovan would demand explanations for Sima Salazar's impressive list of misfortunes.
However, Lynch said, if Cobos and Azar met with him before the partnering meeting, he would tell them how to sidestep O'Donovan's wrath.
They agreed to meet at the Green Beans Coffee shop at Camp Eggers, a large multi-national military base across the street from the Corps of Engineers' compound in downtown Kabul. But Lynch never showed up.
Instead, FBI agents waited inside the coffee shop and cuffed Cobos and Azar the moment they walked through the front door, according to court documents. The agents whisked them to Bagram Airfield and to a waiting jet typically used by the head of the FBI. With the authorization of Afghan authorities, they flew Cobos and Azar to the United States to be indicted.
Authorities later served search warrants on Martinez's home in Gretna, La., and arrested her, too. All three defendants filed guilty pleas, Cobos and Azar in U.S. District Court in Alexandria, and Martinez in U.S. District Court in New Orleans. Sima Salazar's attorneys filed a corporate guilty plea in Alexandria.
"Kevin is essentially the hero of all this stuff. The dude was under cover, wore the wire for 3A,A1/2 months and just played this beautifully," Holmes said.
The attorney noted that the FBI offered to put Lynch in the Witness Protection Plan, for fear of Middle Eastern-style retaliation, but he declined.
<b>Prison sentences for all three conspirators.</b>
Martinez was sentenced to five years in prison and ordered to forfeit to the government $62,000 and 16 pieces of jewelry, including a Rolex watch valued at more than $25,000. She was 61 years old when she was sentenced on Jan. 28 of this year.
Cobos got two years in prison when she was sentenced on Nov. 20, 2009. She was 52.
Azar got six months on Nov. 13. He was 45.
Sima Sazalar was fined more than $650,000, all its contracts were canceled and it was banned from bidding for future work.
Lynch went back to work for the Contracting Branch. In November 2009, he suffered appendicitis and underwent emergency surgery. He returned to the United States to recover, but has since resumed his job in Kabul.
The contracting agent from Kansas said he believes he made the right decision when he agreed to go undercover to help crack the conspiracy, but the sting operation developed so quickly, he didn't give it much forethought. The pressure, he said, was daunting, and he was relieved when it came to an end.
Van Antwerp commended Lynch for willingly accepting the job at great personal risk and for gathering evidence that was so compelling, the defendants opted to forgo their right to public trials. "Mr. Lynch demonstrated exceptional maturity, great courage and personal integrity of the highest level," the general wrote in his nominating letter.
In hindsight, Lynch also feels some level of sorrow for his former supervisor.
"I'm not a trained law enforcement officer. There's definitely a human side of me that doesn't want to see a 60-year-old woman go to prison for five years. That's pretty scary," he said.
"I'm not a hard-core guy. It's too bad. I mean, the whole thing is a tragedy that they committed a crime in the first place, and that their lives and their careers and all that are going to be tainted by this stupid thing," he said.
Lynch believes that the huge amounts of money, the go-go-go attitude and high turn-over of personnel in the war-zone environment could have created an illusion of opportunity. He wonders if Martinez would have made similar decisions if she had finished her award-winning career somewhere in the United States in a more typical work setting.
"It's important for people to know that eventually, somebody's going to be looking into all of these transactions," Lynch said.
"At the time, it seems like there's no oversight and the arrests aren't made until years after the fact, but this is not the wild, wild West. We still need to be good people, even when we're in a bad place," he said.