Case 2:17-cr AWA-DEM Document 1 Filed 06/19/17 Page 1 of 8 PageID# 1 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF VIRGINIA.

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1 Case 2:17-cr AWA-DEM Document 1 Filed 06/19/17 Page 1 of 8 PageID# 1 F!LL:D UNITED STATES DISTRICT COURT EASTERN DISTRICT OF VIRGINIA Norfolk Division JUN CLERK, US DiyTRiCT COURT NORFOLK. VA UNITED STATES OF AMERICA CRIMINAL N0.2:I7cr AH V. PHILIP A. MEARING, 18U.S.C. 371 Conspiracy to Commit Wire Fraud Count One Defendant. 18U.S.C. 981(a)(lXC) Forfeiture Allegation CRIMINAL INFORMATION The United States Attorney charges that: INTRODUCTORY ALLEGATIONS 1. Global Services Corporation (Global), a Missouri corporation located in Fayetteville, NC, provides professional technical support services under subcontract to numerous Department ofdefense (DoD) entities. These entities include the U.S. Navy's Norfolk Ship Support Activity (NSSA) and the Naval Air Systems Command (NAVAIR), and the U.S. Army's Communications-Electronics Command (CECOM); among others. 2. PHILIP A. MEARING began employment at Global in 2002 and subsequently became the sole owner and president in MEARING is listed as the originating member and manager ofdeshas, a North Carolina Limited Liability Corporation, formed on August 15, Conspirator Kenneth J. Deines was formerly the Corporate Controller ofglobal. 5. Conspirator Kenneth D. Bricker is an accountant and the owner oftempo Consulting Services(Tempo) and Bricker Property Management (BPM). Tempo was established

2 Case 2:17-cr AWA-DEM Document 1 Filed 06/19/17 Page 2 of 8 PageID# 2 as a consultingcompany which could provide professional support services to the United States Government (Government) as a Service-Disabled Veteran-Owned Small Business (SDVOSB). BPM was established as a rental property management company. Tempo and BPM are located in Newport News, Virginia. COUNT ONE From in or around 2004, and continuing until in or around 2014, in the Eastern District of Virginia and elsewhere, defendant MEARING, and conspirators Bricker and Deines knowingly and willfiilly conspired and agreed together with each other and with other persons to commit the following offense against the United States, that is: To knowingly devise and intend to devise a scheme and artifice to defraud and for obtaining money and property by means ofmaterially false and fraudulent pretenses, representations, and promises and, for the purpose ofexecuting such scheme and artifice, transmitting and causing and caused to be transmitted by means ofwire communication in interstate commerce certain writings, signs, signals and sounds, in violationoftitle 18, United States Code, Section WAYS. MANNER AND MEANS OF THE CONSPIRACY The ways, manner and means by which the conspiracy was carried out included, but were not limited to, the following: 1. In or about September2004, Brickerformed Tempo, which was located in Newport News, Virginia. Tempo was established as a consulting company that could provide professional support services to the Government as a Service-Disabled Veteran-Owned Small Business (SDVOSB). Tempo never sought nor was it awarded any contracts with the Government.

3 Case 2:17-cr AWA-DEM Document 1 Filed 06/19/17 Page 3 of 8 PageID# 3 2. In or about November 2006, Bricker formed BPM, which was also located in Newport News, Virginia. BPM was established as a rental property management company. BPM never sought nor was it awarded any contracts with the Government. 3. In or about 2004, Deines became the corporatecontrollerfor Global. 4. In or about August 2005, DeShas was established with the stated purpose to own and/or operate commercial and residential property rentals. DeShas is an entity controlled by MEARING. DeShas was never awarded any contracts with the Government. 5. Neither Tempo nor BPM employed any persons and neither business performed any work or services in regard to hundreds ofinvoices submitted by said companies to Global for payment. These false invoices were subsequently entered into the accounting records ofglobal so that they appeared as legitimate, incurred expenses ofglobal. The conspirators allowed the amounts indicated on each ofthese false invoices to be recorded in the Global accounting system knowing that such invoices were, in fact, false and would eventually be billed or allocated to Government contracts either as direct or indirect costs. Direct Costs: Indirect Costs: and G&A Rates 6. A cost is identified as a direct cost when it relates to a specific contract, subcontract, or purchase order. For example, materials purchased to complete the requirements ofa contract are considered direct materials to that contract. The cost would be allocated/charged to the accounting code set up specifically for that contract in Global's accounting system. Direct costs are typically billed by a contractor to the Government on costreimbursable and Time and Material (T&M) contracts using invoices submitted directly to the Government, or in the case ofa subcontract, by the subcontractorto the prime contractorholding the contract with the Government. For example, on September 15, 2011, Global billed Prime Contractor B for $68, on Prime ContractorB's prime DoD contract N D-

4 Case 2:17-cr AWA-DEM Document 1 Filed 06/19/17 Page 4 of 8 PageID# /M804, knowing that it purported to contain $17, ofdirect material costs from BPM. At MEARING's direction, Deines created and submitted this invoice to Prime Contractor B, knowing it included BPM's costs, which were, in fact, false because no work had ever been done by BPM and knowing BPM's costs would ultimately be presented to the Government. 7. Indirect costs are costs that are not directly traceable to a contract, but benefit the operation ofthe company as a whole. Examples include company security, the human resources department, and facility costs such as electricity and maintenance. Indirect costs are estimated during the year and allocated to all contracts using various indirect rates such as Overhead, Fringe, or General and Administrative (G&A) rates. These estimated, orprovisional indirect rates, are billed to the Government on cost-reimbursable contracts using invoices submitted by a contractor directly to the Government, or in the case ofa subcontract, by the subcontractor to the prime contractor holding the contract with the Government. For example. Tempo's September 15,2011, invoice to Prime Contractor B for $68, on DoD prime contract NOOl D- 4018/M804, included Global's G«feAcosts. 8. In order to establish the final year-end indirect rates to be applied to Government contracts. Global is required, in accordance with the FAR clause "Allowable Cost and Payment", to submit an Incurred Cost Submission (ICS) within six months after the end ofthe fiscal year. The ICS required Global to identify all indirect costs incurred that they claim are allocable to Government contracts. Deines prepared and submitted Global's ICS, which were certified by MEARING, to the Defense Contract Audit Agency (DCAA), an agency within the Department ofdefense, certifying that the Global costs claimed in the ICS were allowable in accordance with the cost principles ofthe Federal Acquisition Regulations (FAR), when in fact, MEARING and Deines knew the ICS contained Tempo and BPM costs which were false and fictitious. MEARING and Deines knew that those false costs would be allocated to all contracts.

5 Case 2:17-cr AWA-DEM Document 1 Filed 06/19/17 Page 5 of 8 PageID# 5 includinggovernment contracts. For example, in their 2010 ICS, Global claimed $1,205,179 in Tempo costs and $258,064 in BPM costs as legitimate/allowable G&A costs, knowing that such costs were, in fact, false because no work had ever been done. Global knew by including these costs in their ICS they would be allocated to every contract/subcontractglobal engaged in during G&A rates are also used in developing proposed prices for new contracts, including Firm Fixed Price (FFP) contracts, and in determining T&M contract labor rates. MEARING and Deines knew Global would ultimately bill the Government or a Government prime contractor for costs on flexibly-priced contracts. 10. All or essentially all ofglobal's business was from the Government, and primarily from the Department ofdefense. The fraudulent payments Global made to Tempo and BPM were made from funds Global received from a Government prime contractor. 11. In or about 2004, MEARING, in his position at that time as an officer ofglobal, entered into an agreement with others, including Deines and Bricker, whereby fraudulent payments were made by Global to Tempo and BPM for work and services on behalfofglobal that were never performed by Tempo and BPM or DeShas. These false invoices were next entered into the accounting records ofglobal so that they appeared as legitimate expenses of Global relating to Government contracts. The conspirators allowed the amounts indicated on each ofthese false invoices to be recorded in the Global accountingsystem knowing that hundreds ofsuch invoices were, in fact, false and would eventually be billed or allocated to Government contracts. 12. Tempo and BPM invoices were created by Deines at Global and were ed to Bricker. In return for his role in this scheme, Bricker normally retained 5% ofthe fraudulent payments made by Global to Tempo and BPM. Shortly thereafter, Bricker transferred the

6 Case 2:17-cr AWA-DEM Document 1 Filed 06/19/17 Page 6 of 8 PageID# 6 remaining 95% ofthese fraudulent payments to DeShas, an entity controlled by MEARING, or to MEARING and others personally. Neither Tempo nor BPM employed any person and neither company performed any work or services in regard to hundreds of invoices addressed to Global. 13. Between in or around 2004, and continuing until in or around 2014, on at least 37 occasions, Bricker received fraudulent interstate wire-transfer payments from Global into the business banking accounts oftempo and BPM, based upon amounts listed on the herein described fictitious invoices. In total, during this time period, Bricker received approximately $13,614, in fraudulent payments from Global, retained approximately $558, for his personal use, and subsequently issued checks totaling $13,056, to DeShas or to MEARING or others. 14. From in or around 2004, and continuing until in or around 2014, Deines knowingly and willfully conspired with Bricker, the owner oftempo and BPM, and MEARING, the manager ofdeshas, and with other persons, to submit false claims to the Government via fictitious invoices which were later billed/allocated to DoD contracts. In total, between in or around 2004 and 2014, fraudulently-obtained payments issued by Global to Tempo and BPM were approximately $13,614, OVERT ACTS In furtherance ofthe conspiracy and to affect the objects ofthe conspiracy, the following overt acts, among others, were committed in the Eastern District ofvirginia and elsewhere: 1. On or about April 6,2010, Global wire transferred $38, in interstate Tempo's account at SunTrust Bank, account no. #####8447, in Newport News, Virginia, in payment oftempo invoices numbered , , and

7 Case 2:17-cr AWA-DEM Document 1 Filed 06/19/17 Page 7 of 8 PageID# 7 2. On or about November 22,2010, Global wire transferred $84, in interstate Tempo's account at SunTrust Bank, account no. #####8447, in Newport News, Virginia, in payment oftempo invoices numbered , , , , and On or about April 22, 2011, Global wire transferred $231, in interstate BPM's account at Wachovia Bank, account no. #####5023, in Newport News, Virginia, in payment ofbpm invoices numbered , IM, , IF, and IM. 4. On or about December 5,2011, Global wire transferred $ 125, in interstate BPM's account at Wells Fargo, account no. #####5023, in Newport News, Virginia, in payment ofbpm invoices numbered , IF, and IM. 5. On or about March 22,2013, Global wire transferred $102, in interstate Tempo's account at SunTrust Bank, account no. #####7463, in Newport News, Virginia, in payment oftempo invoices numbered , and , , and On or about June 10,2013, Global wire transferred $47, in interstate BPM's account at Wells Fargo, account no. #####5023, in Newport News, Virginia, in payment ofbpm invoices numbered , M, and

8 Case 2:17-cr AWA-DEM Document 1 Filed 06/19/17 Page 8 of 8 PageID# 8 FORFEITURE ALLEGATION 1. The defendant, ifconvicted ofthe violation alleged in this Criminal Information, shall forfeit to the United States, as part ofthe sentencing pursuant to Federal Rule of Criminal Procedure 32.2, any property, real or personal, which constitutes or is derived from proceeds traceable to the violation. 2. Ifany property that is subject to forfeiture above, as a result ofany act or omission ofthe defendant, (a) cannot be located upon the exercise of due diligence, (b) has been transferred to, sold to, or deposited with a third party, (c) has been placed beyond the jurisdiction of the Court, (d) has been substantially diminished in value, or (e) has been commingled with other property that cannot be divided without difficulty, it is the intention ofthe United States to seek forfeiture ofany other property ofthe defendant, as subject to forfeiture under Title 21, United States Code, Section 853(p). (In accordancewith Title 18, United States Code, Section 981 (a)(1)(c) and Title 28, United States Code, Section 2461(c)). Dana J. Boente United States Attorney Stepherl W. Haynie / Alan M. Salsbury v Assistant United States Attorneys U.S. Attorney's Office 101 W. Main Street, Ste Norfolk, Virginia Office Number Facsimile Number steve.haynie@usdoj.gov alan. salsbury@usdoj.gov

9 Case 2:17-cr AWA-DEM Document REDACTED 1-1 Filed 06/19/17 Page 1 of 1 PageID# 9 JS 45(11/2002) Place of Offense: UnderSeal: Yes No IHI Judge Assigned: City: EDVA Superseding Indictment; Criminal Number: 2:17cr County/Parish: Same Defendant: New Defendant: Philip A. Mearing Magistrate Judge Case Number: Arraignment Date: Search Warrant Case Number: Defendant Information; R 20/R 40 from District of Juvenile: Yes No El FBI# Defendant Name: Philip A. Mearing Alias NameCs): Address: Fayetteville, NC Birth Date: ^^1969 SS#:^H3079Sex:M Race: White Nationality: U.S. Place of Birth: U.S. Height: 6'2" Weight: Hair: Brown Eyes: Green Scars/Tattoos: Interpreter: Yes No 13 List Language and/or dialect: Location Status; Arrest Date: Already in Federal Custody as of: in: Already in State Custody On Pretrial Release Not in Custody Arrest Warrant Requested Fugitive Summons Requested Arrest Warrant Pending DetentionSought G Bond Defense Counsel Information: Name: CharlesE. James, Jr., Esq. and Kerri L. Ruttcnberg, Esq. Court Appointed Address; Williams Mullen, 200 South 10"* Street, Suite 1600, Richmond, VA (James) and Jones Day, 51 Louisiana Avenue, N.W., Washington, D.C (Ruttenberg) IE Retained Telephone: (804) (James) and(202) (Ruttenberg) Public Defender cjames@williamsmullen.com and kruttcnberg@jonesday.com U.S. Attorney Information: Office of Federal Public Defender should not be appointed dueto conflict of interest CJA attomey: should notbe appointed due to conflict of interest AUSA: Alan M. Salsbury, Stephen W. Haynie Telephone No Bar#: Complainant Agency. Address & Phone Number or Person & Title: Federal Bureauof Investigation, 509 Resource Row,Chesapeake.VA , , Agent Moughan, Naval Criminal Investigative Service, Agent Larson, and U.S. Department ofdefense, Agent Lanter U.S.C. Citations; Code/Section Description of Offense Charged Count(s) Capital/Felony/Misd/Petty Set 1 18 U.S.C. 371 Conspiracy to Commit Wire Fraud I Felony Set 2 Set 3 Set 4 Set 5 18 U.S.C. 981(a)(1)(C), 28 U.S.C. 2461(c) Forfeiture Allegation