Kennewick Industrial and Electrical Supply has agreed to pay the Department of Justice $515,000 in a settlement agreement stemming from federal credit card fraud at Hanford, the company announced.
A former salesman for KIE was sentenced in June to a year's probation for participating in a scheme to fill some Hanford orders placed at KIE through a home business owned by the wife of a Hanford materials coordinator. The orders were paid for with a federal purchase card, called a P-card at Hanford.
The federal government contended that KIE violated false claims or anti-kickback acts.
"Once the government brought to our attention that certain employees might be involved in improper activities, KIE cooperated fully in the investigation," said Gus Kittson, KIE president, in a statement. "Ultimately, a settlement was structured that will allow the continued viability of the business."
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The costs of defense, plus the potential exposure to the claims made a settlement the company's only viable option, he said.
"These improper actions are contrary to the principles and policies that all KIE employees operate under," he said.
In the scheme, Gregory Detloff, a materials coordinator at Hanford from November 2001 through November 2005, arranged to have more than 280 Hanford orders he placed at KIE filled through Detloff Industrial, a small wholesale supplier owned by his wife.
Detloff pleaded guilty to conspiracy to commit wire fraud and was ordered to pay $150,000 in restitution and serve 90 days of home confinement.
Former KIE salesman Martin Perez, who filled the orders through Detloff Industrial, was ordered to pay back $8,821 in commissions he made on goods bought by Detloff for use at Hanford. Perez also was sentenced to a year of probation.
Perez said in court documents that he spoke numerous times to two people in KIE upper management about his concerns in filling orders for Detloff through his wife's company when KIE had the items available.
KIE said one person in addition to Perez was involved, and that both no longer work for KIE.
Hanford received the items ordered and at the prices stated on the purchase orders, KIE said in its statement. The transactions accounted for less that a tenth of 1 percent of KIE's transactions during the period in question, the company said.
Under the settlement terms, the company will pay the government $75,000 immediately and will make 20 payments of $22,000 over five years.
KIE was founded by Kittson's father in 1955 and is a major supplier of irrigation, plumbing and electrical fixtures and equipment in the Tri-City area. It has branches in Walla Walla, Sunnyside, Hermiston and La Grande, Ore., and employs about 75 people.
Last spring, seven people were indicted in different schemes that allegedly used Hanford P-cards to defraud DOE. One is to go to trial, but six have pleaded guilty and have been sentenced to up to 20 months in prison and ordered to pay restitution totaling more than $1 million.
In addition, Fluor Hanford, one of the Department of Energy contractors who employed some of the people involved, reached a settlement agreement of $4 million with the Department of Justice.