St. Petersburg Times Online: Business

Weather | Sports | Forums | Comics | Classifieds | Calendar | Movies

Plea is a key to building fraud case

An ex-employee gets probation in a case involving Largo defense contractor EMS. His testimony likely will bring more indictments.

By JEFF TESTERMAN

© St. Petersburg Times, published March 10, 2001


TAMPA -- For eight years, and with the help of employees of a Largo defense contractor named Electromechanical Systems, Derry Lee Mount perpetuated a multimillion-dollar fraud against the U.S. government.

Mount, the company's former director of manufacturing, admitted his crime Friday to a federal judge and received probation in exchange for assisting an ongoing grand jury investigation.

Assistant U.S. Attorney Tony Peluso said Mount's assistance enabled prosecutors to secure a guilty plea from the company itself last year and will likely result in indictments against seven more EMS employees.

"It seems to me that when someone stands up and admits his criminal act, it's the first step to rehabilitation," Peluso told U.S. District Judge Steven D. Merryday. "Mr. Mount has certainly done that. He has helped to right what was wrong."

In a plea agreement he signed a year ago, Mount became the first EMS employee to plead to a crime in the cost-fixing conspiracy.

Mount, 61, now an executive with a West Virginia health care company, faced three years in prison and a $250,000 fine after pleading to concealing a felony. Merryday sentenced Mount to three years of probation and ordered him to pay a $2,000 fine and perform 100 hours of community service.

EMS is a 135-employee company located at 6200 118th Ave. in Largo that had defense contracts to repair and refurbish radar pedestals and dishes used on U.S. Navy warships.

Prosecutors say Mount and as many as 40 other employees systematically defrauded the government by falsifying hourly timecards and "cooking the books" to conceal the fraud. Employees working on other projects claimed they were repairing radar elements, and the phony timecards resulted in overbilling of $7-million to $9-million, Peluso said.

Mount not only participated in the timecard subterfuge but also attempted to mislead federal agents who interviewed him in 1999, court records show.

In November, EMS admitted to fraud, to falsifying records sought by government auditors and to destroying documents subpoenaed by a grand jury. A federal judge placed the defense contractor on five years of probation and ordered the company to pay restitution and fines totaling $8-million.

At the company's sentencing last year, an official who directs contract repairs for the Navy complained that EMS not only betrayed the country but continues to defraud the Navy by refusing to submit cost and pricing data on ongoing contracts.

"The company has not become a good corporate citizen," said Rear Adm. G.P. Nanos Jr., who heads the Naval Sea Systems Command in Washington, D.C. "We feel there is no reason to underwrite the results of fraud. We cannot continue to do business with this company."

EMS, which had estimated revenues of $20-million in 1997, was acquired by Comsat, a Bethesda, Md., company, in 1994. Comsat and EMS were acquired by Lockheed Martin.

Mount is one of four EMS employees indicted in the case so far. In November, EMS' former controller, George Quentin Voigt, was sentenced to three years of probation and ordered to pay a $2,000 fine after pleading guilty to obstruction of the proceedings of a federal agency.

© Copyright, St. Petersburg Times. All rights reserved.