Former Defense Contractor Arrested for Attempted Espionage: South Dakota Man Emailed Classified Information To FBI Undercover Posing as Russian Agent

 The U.S. Attorney’s Office Eastern District of Pennsylvania released the below information: 

PHILADELPHIA – United States Attorney Jennifer Arbittier Williams and Assistant Attorney General Matthew G. Olsen of the Justice Department’s National Security Division announced that John Murray Rowe, Jr., 63, of Lead, South Dakota, a former employee of multiple cleared defense contractors, was arrested in South Dakota for attempting to communicate classified national defense information to aid a foreign government.  

The defendant was charged by a criminal complaint that was unsealed and made public today upon Rowe’s arrest in the District of South Dakota. According to the complaint, Rowe, who is originally from Massachusetts, was employed for nearly 40 years as a test engineer for multiple security cleared defense contractors. In connection with his employment, the defendant held various national security clearances from SECRET to TOP SECRET//SCI (Sensitive Compartmented Information) and worked on matters relating to the U.S. Air Force’s aerospace technology, among other things. After committing a number of security violations and revealing a fervent interest in Russian affairs, including asking whether he could obtain a security clearance from the Russian government, Rowe was identified as a potential insider threat and terminated from employment.

Based on his conduct, the FBI began an undercover operation to determine the defendant’s willingness to communicate classified information to a foreign government. In March 2020, Rowe met with an FBI employee operating in a covert capacity and posing as an agent of the Russian government. 

Over the course of the next eight months, Rowe exchanged over 300 emails with the purported Russian agent, confirming his willingness to work for the Russian government and discussing his knowledge of classified information relating to U.S. national security and military interests. In one email, Rowe explained, “If I can’t get a job here then I’ll go work for the other team.” In another email, Rowe disclosed national defense information classified as SECRET that concerned specific operating details of the electronic countermeasure systems used by U.S. military fighter jets.

Rowe will make his initial appearance in federal court on these charges in South Dakota tomorrow. If convicted, the defendant faces a maximum possible sentence of life in prison.

The case was investigated by the FBI Philadelphia Field Office and is being prosecuted by Assistant United States Attorney Sarah Wolfe and Justice Department Trial Attorney Scott Claffee of the National Security Division’s Counterintelligence and Export Control Section. Valuable assistance was provided by the Lead Police Department in South Dakota, the U.S. Attorney’s Office for the District of South Dakota, the U.S. Air Fore Office of Special Investigations, and the FBI’s Minneapolis Field Office and Rapid City Resident Agency.

FBI: Spy Recruitment Of U.S. Engineer Four Decades Ago A Warning for Today

The FBI offers the below information: 

Marian Zacharski (seen on the left above) was young, charming, and handsome. In his mid-20s, he was a sales rep and rising star in the U.S. operations of the Polish American Machinery Corporation and was living a leisurely life in the suburbs of Los Angeles in the late 1970s.

He was also a spy.

Zacharski was an “illegal”—a foreign intelligence agent living on U.S. soil, operating undercover and unknown to American authorities, much like the Russian spies arrested by the FBI in 2010 that partly inspired the television drama The Americans.

In 1977, Zacharski was sent to California by the Polish government, then an Eastern bloc country working in concert with the Soviet Union, to uncover military and industrial secrets in the aerospace industry.

It wasn’t long before Zacharski found an ideal target.

His name was William Holden Bell (seen on the right above). A longtime engineer at Hughes Aircraft Company—an aerospace and defense firm founded by Howard Hughes in 1932—the nearly 60-year-old Bell had a security clearance and access to vital classified information. Just as important, he was struggling financially and emotionally and was vulnerable to recruitment.

The previous months had been trying for Bell. His debt was mounting. His childhood sweetheart and wife of nearly three decades had divorced him, saddling him with a regular alimony payment. He had worked long assignments in Europe, further increasing his expenses. Compounding his misery was the loss of his youngest son in a fatal accident.

After remarrying, Bell moved to an apartment complex in the beachside community of Playa del Rey. One of his new neighbors was Zacharski. The two shared an interest in machine technology and a love for recreational tennis. They soon began spending time together both on and off the court. Bell would later tell a Senate committee that Zacharski eventually became his best friend. Or so it seemed.

Financially, Bell’s troubles lingered, and he declared bankruptcy. To make matters worse, his community was being converted into condominiums, and he would have to move. Zacharski offered to help. He asked Bell to help him make connections for his company at Hughes. Perhaps, Zacharski proposed, Bell could share some of his knowledge on various engineering matters as a paid technical consultant. Bell agreed, and the money began to flow. But ultimately Zacharski wanted more: classified information.

Bell began to show Zacharski projects he had worked on, like sophisticated radar systems and fixed weapons platforms. Zacharski supplied a camera and special high-resolution film so Bell could make photographs of confidential and secret plans and schematics. He would later receive other concealment devices like a tie rack and a large wooden chess piece.

As Zacharski paid him a steady stream of cash and gold coins—ultimately totaling over $110,000 and possibly much more—Bell knew he had crossed a line from neighborly friendship to American turncoat. But Zacharski was skillful, keeping Bell in line with clever manipulation and possibly even threats to his family. The demands for information just continued to grow, including a series of trips overseas to deliver it.

Meanwhile, the FBI had become aware of Zacharski’s activities and had identified Bell as one of his sources. Agents began following both men, but not before Bell compromised another American radar system.

Coordinating counterespionage work here and overseas while building a case that can hold up in U.S. court is difficult, but the Bureau methodically gathered information and evidence. On June 24, 1981, agents from FBI Los Angeles confronted Bell. He soon confessed and allowed the FBI to use microphone surveillance at his next meeting with Zacharski. Four days later, both men were arrested and charged with espionage-related crimes.

Bell agreed to plead guilty and cooperate in the prosecution of Zacharski. By the end of the year, Zacharski was convicted and sentenced to life in prison. Bell was sentenced to eight years. In 1985, Zacharski and three other Soviet bloc agents were exchanged for 25 people held in Iron Curtain jails for dissenting against Eastern European communist regimes.

Bell’s betrayal of his country mirrors the story of many others ensnared by foreign spies both past and present. Over time, vulnerable Americans are drawn in with money, companionship, attention, and other “carrots” in exchange for information, which gradually increases in importance, classification level, and quantity.

The threat remains. Espionage agents are as skilled, dangerous, and active as ever. 

U.S. Navy Commander Pleads Guilty In International Bribery Scandal

The U.S. Justice Department released the below information:

A commander in the U.S. Navy pleaded guilty to federal bribery charges today, admitting that he provided a government contractor with classified ship schedules and other internal U.S. Navy information in exchange for cash, travel and entertainment expenses, as well as the services of prostitutes.  A second U.S. Navy officer was also indicted today on related bribery charges by a federal grand jury in the Southern District of California.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Laura E. Duffy of the Southern District of California, Director Andrew L. Traver of the Naval Criminal Investigative Service (NCIS) and Deputy Inspector General of Investigations James B. Burch of the Department of Defense, Defense Criminal Investigative Service (DCIS) made the announcement.

“Commander Sanchez sold out his command and country for cash bribes, luxury hotel rooms, and the services of prostitutes,” said Assistant Attorney General Caldwell.  “After today’s guilty plea, instead of free stays at the Shangri-La hotel, Sanchez is facing many nights in federal prison.  The Department of Justice’s Criminal Division is committed to prosecuting those who abuse positions of public trust for personal enrichment at the expense of national security and the American taxpayers.”

“During the course of the investigation into this criminal enterprise, investigators have compiled voluminous evidence identifying multiple persons of interest, generating numerous leads, and establishing and corroborating connections,” said Director Traver. “NCIS and our law enforcement partners are committed to seeing this massive fraud and bribery investigation through to its conclusion, so that those responsible are held accountable.”

“This outcome yet again sends the message that corruption will be vigorously investigated and prosecuted,” said Deputy Inspector General of Investigations Burch.  “This is an unfortunate example of dishonorable Naval officers who recklessly risked the safety of our troops by trading classified information for cash, extravagant gifts and prostitutes.  Cases such as these are not motivated by need or other difficult personal circumstances; they are the product of simple greed.  This investigation should serve as a warning that those who compromise the integrity of the United States will face their day of reckoning.  DCIS and our law enforcement partners will pursue these crimes relentlessly.”

Jose Luis Sanchez, 42, an active duty U.S. Navy Officer stationed in San Diego, California, is one of seven defendants charged – and the fifth to plead guilty – in the corruption probe involving Glenn Defense Marine Asia (GDMA), a defense contractor based in Singapore that serviced U.S. Navy ships and submarines throughout the Pacific.  Sanchez pleaded guilty to bribery and bribery conspiracy before U.S. Magistrate Judge David H. Bartick of the Southern District of California.  A sentencing hearing was scheduled for March 27, 2015, before U.S. District Judge Janis L. Sammartino.

According to his plea agreement, from April 2008 to April 2013, Sanchez held various logistical positions with the U.S. Navy’s Seventh Fleet in Asia.  Sanchez admitted that, beginning in September 2009, he entered into a bribery scheme with Leonard Glenn Francis, the CEO of GDMA, in which Sanchez provided classified U.S. Navy ship schedules and other sensitive U.S. Navy information to Francis and used his position and influence within the U.S. Navy to benefit GDMA.

In return, Francis gave him things of value such as cash, travel and entertainment expenses, and the services of prostitutes.  Sanchez admitted that this bribery scheme continued until September 2013.  Francis was charged in a complaint unsealed on Nov. 6, 2013, with conspiring to commit bribery; that charge remains pending.

In his plea agreement, Sanchez admitted to seven specific instances in which he provided Francis with classified U.S. Navy ship and submarine schedules.  He also admitted using his position and influence with the U.S. Navy to benefit GDMA and Francis on various occasions.  Further, Sanchez admitted that he tipped Francis off about investigations into GDMA overbillings and briefed Francis on internal U.S. Navy deliberations. 

Sanchez further admitted that, in exchange for this information, Francis provided him with cash, entertainment and stays at high-end hotels.  For example, in May 2012, Francis paid for Sanchez to stay five nights at the Shangri-La, a luxury hotel in Singapore, and, two months later, Francis paid for Sanchez’s travel from Asia to the United States, at a cost of over $7,500.  Additionally, Francis arranged and paid for the services of prostitutes for Sanchez while Sanchez was in Singapore and elsewhere in Asia.

In addition to Sanchez, two other U.S. Navy officials – former NCIS Special Agent John Beliveau and Petty Officer First Class Dan Layug – have pleaded guilty in connection with this investigation.Two former GDMA executives, Alex Wisidagama and Edmond Aruffo, have likewise pleaded guilty.

Also today, an indictment was returned against U.S. Navy Captain-Select Michael Vannak Khem Misiewicz, 47, of San Diego, California, charging him with a bribery conspiracy and seven counts of bribery.  According to allegations in the indictment, from at least as early as July 2011 until  September 2013, Misiewicz provided classified U.S. Navy ship schedules and other sensitive U.S. Navy information to Francis and used his position and influence within the U.S. Navy to benefit GDMA. 

In return Francis allegedly gave him things of value such as cash, travel and entertainment expenses, and the services of prostitutes.

The charges contained in a criminal complaint and indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

The ongoing investigation is being conducted by NCIS, DCIS and the Defense Contract Audit Agency. The case is being prosecuted by Director of Procurement Fraud Catherine Votaw and Trial Attorney Brian R. Young of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Mark W. Pletcher and Robert S. Huie of the Southern District of California.

Those with information relating to fraud, corruption or waste in government contracting should contact the NCIS anonymous tip line at www.ncis.navy.mil or the DOD Hotline at www.dodig.mil/hotline, or call (800) 424-9098.

Defense Contractor Agrees To Pay $13.7 Million To Settle Allegations of Overbilling

The U.S. Justice Department released the below information:

DRS Technical Services Inc. (DRS) has agreed to pay $13.7 million to settle allegations that it violated the False Claims Act by knowingly overbilling the government for work performed by DRS personnel who lacked the job qualifications required by the contract, the Justice Department announced today.  DRS is located in Herndon, Virginia, and is a subsidiary of DRS Defense Solutions LLC.

DRS designs, integrates, operates and maintains satellite and wireless network solutions and telecommunication services and security systems for government and private sector customers. 

DRS C3 & Aviation Company, which is headquartered in Gaithersburg, Maryland, is an indirect subsidiary of DRS and provides services to government agencies, including aircraft maintenance, logistics and depot support, and engineering support.  Between March 2003 and Dec. 31, 2012, DRS and its predecessors were awarded time and materials contracts for services and supplies to be provided to the Army’s Communication and Electronics Command (CECOM) in Iraq and Afghanistan, and to the Coast Guard for aircraft maintenance.

“Contractors that fail to provide qualified labor as promised are not entitled to bill the government as though they had,” said Acting Assistant Attorney General Joyce R. Branda for the Justice Department’s Civil Division.  “The Department of Justice will pursue contractors that claim taxpayer funds to which they are not entitled.”

The alleged labor mischarging occurred on the Rapid Response or “R2” contract issued by the U.S. Army Communication and Electronics Command (CECOM) located at the Aberdeen Proving Ground in Maryland.  The U.S. Army used the R2 contract to purchase a variety of goods and services needed to support U.S. forces in Iraq, Afghanistan and elsewhere on a quick turnaround basis. 

The settlement also resolves labor mischarging on a similar U.S. Coast Guard contract.

The government contends that from Jan. 1, 2003, to Dec. 31, 2012, DRS billed CECOM for work performed by individuals whose job qualifications did not meet all the qualifications prescribed by the contracts for the labor categories under which their efforts were billed, thereby falsely increasing the amount of money DRS claimed and CECOM paid. 

Similarly, from Dec. 19, 2009, to Dec. 18, 2011, the government contends that DRS charged the Coast Guard’s Aviation Logistics Center for work performed by individuals whose job qualifications did not meet the qualifications prescribed by the contract, again, thereby inflating the cost of the services provided.    

“Companies that submit false bills to the government must be held accountable,” said U.S. Attorney Rod J. Rosenstein for the District of Maryland.

“This settlement is yet another example of the tenacity and hard work of our Army CID agents,” said Director Frank Robey of the U.S. Army Criminal Investigation Command's Major Procurement Fraud Unit (MPFU).  “It is a testament to MPFU's continued resolve to hold companies accountable for the work they do for the U.S. government.”

The settlement was the result of a coordinated effort by the U.S. Attorney’s Office for the District of Maryland, the Civil Division, the Defense Contract Audit Agency, the Army’s Criminal Investigative Command’s MPFU and the Department of Defense Office of Inspector General’s Defense Criminal Investigative Service.   

The claims resolved by the settlements are allegations only and there has been no determination of liability.

From The Factory Floor To The Front Line: New Mission Statement For The Defense Contract Management Agency

The Defense Contract Management Agency released the below information:

FORT LEE, Va. - Defense Contract Management Agency Director Air Force Lt. Gen. Wendy Masiello announced a new mission statement for the agency in an email to the workforce yesterday:

We are the independent eyes and ears of DoD and its partners, delivering actionable acquisition insight from the factory floor to the front line … around the world.

“Those words get to the heart of what DCMA is about,” said Masiello. “We are uniquely poised on the factory floor to front line continuum to provide insight to our program partners so they can make the best decisions about their contracts and the products and services that result.”

The announcement came as Masiello finishes her first 100 days as the agency’s director. She’s spent much of that time visiting contract management office’s around the world, talking with employees at all levels to get a full understanding of the organization’s work and the challenges it faces.

“These visits have solidified my belief that DCMA is a great organization with great people,” she said. “I’ve been inspired by the dedication, innovation and observations you’ve shared. I look forward to meeting more of you in the future.”

Masiello took the input from her visits into a two-day strategic offsite meeting with agency senior leaders. There they conducted a stakeholder analysis and discussed overarching DoD strategic guidance including the Quadrennial Defense Review; the DoD Strategic Management Plan; and the acquisition, technology and logistics Better Buying Power initiatives.

The meeting also produced a new vision to complement the new mission statement:

One team, one voice delivering global acquisition insight that matters.

Masiello said, “This vision means we will integrate our efforts, analyze our data, and provide one unified message that our customers can use to the benefit of today’s contracts and those in the future.”

In addition, the director announced four broad strategic goals that will be the foundation of a strategic plan for fiscal years 2015 to 2020.

Masiello said in the coming weeks she’ll conduct both virtual and live all-hands sessions with the workforce to discuss the agency’s way ahead.

“I could not be more proud to be a part of this amazing team,” said the director. “I know that by working together we will overcome many obstacles while exceeding any goals we assign ourselves. I look forward to your partnership as together we provide acquisition insight that matters through global engagement."

NOTE:  After serving in the U.S. Navy as a young sailor during the Vietnam War I went on to serve as a Defense Department civilian employee for the Defense Contract Management Agency.

For the last 21 of my more than 37 years of combined U.S. Navy/DCMA service, I was the administrative officer of a DCMA command in Philadelphia. I oversaw security, safety, public affairs and other support services for the command.

I retired in 2007 and became a full-time writer.

You can learn more about DCMA (then called DCASR and DCASMA) and the old Philadelphia Quartermaster via the below link:

http://www.pauldavisoncrime.com/2010/06/philadelphia-quartermaster-revisited.html

Owner Of Defense Contracting Company Charged With Wire Fraud Conspiracy For Providing Nonconforming Parts To Government

The U.S. Attorney for the District of New Jersey released the below information:

TRENTON, N.J. – The former president of a Burlington, N.J.,-based defense contracting business was arrested and charged today with allegedly stealing $3 million through fraudulent contracts with the U.S. Department of Defense, U.S. Attorney Paul J. Fishman announced.

Richard Melton, 44, of Moorestown, N.J., was charged by complaint with one count of conspiracy to commit wire fraud for receiving $3 million from 2008 to 2009 as a result of allegedly fraudulent contracts with the U.S. Department of Defense (DoD). Melton is scheduled to make his initial court appearance this afternoon before U.S. Magistrate Judge Tonianne J. Bongiovanni in Trenton federal court.

According to documents filed in this case and statements made in court:

Melton was the founder, owner, and president of Partz Network LLC (Partz Network), a company located in Burlington. Melton owned and operated Partz Network from April 2003 to December 2009. Partz Network contracted with the government to supply the DoD with parts on small-dollar contracts. The majority of the contracts were for replacement parts for military rolling stock: trucks, trailers, and engineering equipment. The majority of Partz Network’s DoD contracts required that the items provided be manufactured by DoD-recognized qualified manufacturers. 

Melton and his conspirators allegedly lied on Partz Network’s bids for DoD contracts, stating that they would be providing the “exact product” sought by the DoD, meaning that the product was manufactured by a DoD-recognized qualified manufacturer. In fact, Partz Network was allegedly providing parts made by unapproved, and oftentimes unknown, sources.

In 2007, the Defense Logistics Agency (DLA), a DoD contracting agency, became aware of reports of nonconforming parts being received from Partz Network. As a result, DLA required Partz Network to provide “traceability documents” to confirm that the items it was supplying were actually being manufactured by DoD recognized qualified manufacturers. Partz Network provided traceability documents and invoices to DLA regarding items provided under the DoD contracts.  When DLA researched the traceability documents supplied by Partz Network, DLA learned that the documents were either altered or completely fictitious.

 For example, on Nov. 15, 2007, Partz Network submitted a bid electronically through the DoD’s internet bid system to supply the DoD with 1,400 oil pans for $53.85 per item. Partz Network represented that the company was providing the exact product manufactured by one of the two DoD-recognized qualified manufacturers. Partz Network was subsequently awarded the contract for 1,400 oil pans for a total contract price of $75,390. Both the request for quotation (RFQ) and the final contract included the language that the exact product was required. The items ultimately provided by Partz Network were not the exact products required under the contract because the items were not manufactured by a qualified manufacturer. In fact, on Nov. 10, 2007, five days prior to Partz Network submitting its bid for the contract, Melton sent an e-mail to a Partz Network employee with a link to the DoD RFQ that stated the following: “Bid these (1400) HMMWW oil pans at $53.85 and I will have them made overseas by [a company located in the People’s Republic of China] or another overseas firm, 200-day lead time.” Based on Partz Network documents related to that contract, Partz Network purchased the oil pans that were provided to the DoD from a company located in India in January 2008.

On Aug. 27, 2009, Partz Network was awarded a contract to supply the DoD with 887 bearing half sets for a total contract price of $16,010.35. Partz Network certified that the items would be the exact product required under the contract. The items ultimately provided by Partz Network under the contract were not the exact products required because the items were not manufactured by the qualified manufacturer. DoD ultimately inspected the items and determined that the items were manufactured by an unapproved source. 

The wire fraud conspiracy count with which Melton is charged carries a maximum potential penalty of 20 years in prison and a fine of $250,000, or twice the gain or loss from the offense. 
 
U.S. Attorney Fishman credited special agents of the U.S. Department of Defense, Criminal Investigative Service, under the direction of Director James Burch; special agents of Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HIS), under the direction of Special Agent in Charge Andrew M. McLees, with the investigation leading to today’s arrest.

The government is represented by Assistant U.S. Attorneys Fabiana Pierre-Louis of the U.S. Attorney’s Office Criminal Division in Trenton and Evan Weitz of the Office’s Asset Forfeiture Unit in Newark.

The charge and allegations contained in the complaint are merely accusations, and the defendant is considered innocent unless and until proven guilty.

Former Vice President of Government Contracting Company Pleads Guilty to Conspiracy to Commit Bribery

The U.S. Justice Department released the below information yesterday:

A former vice president of a Chesapeake, Va., government contracting company pleaded guilty today to conspiracy to pay bribes to public officials in exchange for favorable treatment in connection with U.S. government contract work.

Acting Assistant Attorney General David A. O’Neil of the Justice Department’s Criminal Division, Acting U.S. Attorney Dana J. Boente of the Eastern District of Virginia, Special Agent in Charge Robert Craig of the Defense Criminal Investigative Service (DCIS) Mid-Atlantic Field Office, Acting Executive Assistant Director Charles T. May Jr. of the Naval Criminal Investigative Service (NCIS) Atlantic Operations and Special Agent in Charge Royce E. Curtin of the FBI’s Norfolk Field Office made the announcement after the plea was accepted by U.S. Magistrate Judge Douglas E. Miller in the Eastern District of Virginia.

 Adam C. White, 40, was charged by criminal information on March 28, 2014, with one count of conspiracy to bribe public officials.   White faces a maximum penalty of five years when he is sentenced on July 11, 2014.

According to a statement of facts filed with the plea agreement, White worked for a government contracting company that was created to support the U.S. Navy’s Military Sealift Command (MSC) on various telecommunication projects.   For several years, White and his business partners paid bribes to MSC public officials in exchange for favorable treatment in awarding MSC-related government contract work.

White admitted that he contributed a portion of his paycheck to the bribe payments by regularly withdrawing approximately $1,000 in cash from his personal bank account after receiving his bi-weekly paycheck and providing it to his business partners.   Together, White and his business partners paid approximately $3,000 to $4,000 a month in cash bribes to two MSC public officials.   In his statement of facts, White also admits that he was aware his business partners provided other things of value, including flat-screen televisions, to influence the official actions of a MSC public official.

As a condition of the plea agreement, White has agreed to forfeit $57,000 as the proceeds of the offense.

In December 2013, White resigned from his position as vice president of the government contracting company.

Prior to entry of this guilty plea, four other individuals pleaded guilty in connection with the same bribery scheme.   On Feb. 12, 2014, Kenny E. Toy, the former afloat programs manager for the MSC N6 Command, Control, Communication and Computer Systems Directorate, pleaded guilty to bribery and admitted receiving more than $100,000 in cash bribes.   On Feb. 18, 2014, Dwayne A. Hardman, one of White’s business partners, pleaded guilty to bribery and admitted to providing more than $140,000 in cash bribes to Toy and another MSC public official.   On Feb. 19, 2014, Michael P. McPhail pleaded guilty to conspiracy to commit bribery and agreed to forfeit $57,000.   On March 5, 2014, Roderic J. Smith, another of White’s business partners, pleaded guilty to conspiracy and agreed to forfeit $175,000.

The case was investigated by the FBI, DCIS and NCIS.   The case is being prosecuted by Trial Attorney Emily Rae Woods of the Criminal Division’s Public Integrity Section and Assistant United States Attorney Stephen W. Haynie of the U.S. Attorney’s Office for the Eastern District of Virginia.

Former Connecticut Resident Indicted For Attempting To Ship Sensitive Military Documents To Iran

The U.S. Justice Department released the below information:

Deirdre M. Daly, United States Attorney for the District of Connecticut, announced that a federal grand jury sitting in Bridgeport returned an indictment today charging Mozaffar Khazaee, also known as “Arash Khazaie,” 59, formerly of Manchester, Connecticut, with two counts of interstate transportation of stolen property.

The indictment stems from Khazaee’s alleged attempt to ship to Iran proprietary material relating to military jet engines and the U.S. Air Force’s F35 Joint Strike Fighter program that he had illegally retained from defense contractors where he had been employed.

As alleged in court documents, federal law enforcement agents began investigating Khazaee in November 2013 when officers with U.S. Customs and Border Protection Service (CBP), assisted by Homeland Security Investigations (HSI) special agents, inspected a shipment that Khazaee sent by truck from Connecticut to a freight forwarder located in Long Beach, California, which was intended for shipment from the U.S. to Iran. The documentation for Khazaee’s shipment indicated that it contained household goods. Upon inspecting the shipment, however, CBP officers and HSI personnel discovered that the content of the shipment primarily contained numerous boxes of documents consisting of sensitive technical manuals, specification sheets, and other proprietary material relating to the U.S. Air Force’s F35 Joint Strike Fighter program and military jet engines.

Upon further investigation, law enforcement learned that Khazaee holds Iranian and U.S. citizenship and, as recently as August 2013, worked as an engineer for defense contractors, including firms that are the actual owners of the technical and proprietary documents and materials in Khazaee’s shipment.

Khazaee, who became a naturalized U.S. citizen in 1991 and holds a valid U.S. passport, recently moved from Connecticut to Indianapolis.

On January 9, 2014, Khazaee was arrested by HSI and FBI agents at Newark Liberty International Airport in New Jersey after flying from Indianapolis to Newark, before he was able to board a connecting flight to Frankfurt, Germany. Khazaee’s ticketed destination was Tehran, Iran.
Khazaee is detained pending his transport to Connecticut. His arraignment is not yet scheduled.
The indictment charges Khazaee with two counts of transporting, transmitting, and transferring in interstate commerce goods obtained by theft, conversion, or fraud. Each charge carries a maximum term of imprisonment of 10 years and a fine of up to $250,000.

U.S. Attorney Daly stressed that an indictment is only a charge and is not evidence of guilt. Charges are only allegations and a defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt.

U.S. Attorney Daly stated that there is an ongoing investigation in this matter and encouraged anyone with information that may be relevant to that investigation to call HSI at 203-773-2155 or the FBI at 203-503-5000.

This matter is being investigated by Homeland Security Investigations in New Haven and Los Angeles, the New Haven Division of the Federal Bureau of Investigation, the Defense Criminal Investigative Service in New Haven, the U.S. Customs and Border Protection Service in Los Angeles, the U.S. Air Force’s Office of Special Investigations in Los Angeles and Boston, and the Department of Commerce’s Boston Office of Export Enforcement.

U.S. Attorney Daly also commended the efforts of the many other agencies and offices that have been involved in this investigation, including the U.S. Attorney’s Offices for the Central District of California, the Southern District of Indiana, and the District of New Jersey, as well as HSI, CBP, and FBI in New Jersey and HSI, FBI and DCIS in Indianapolis.

This case is being prosecuted by Assistant U.S. Attorney Stephen Reynolds of the District of Connecticut and Trial Attorney Brian Fleming of the Justice Department’s Counterespionage Section (CES).