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Defendant admits he lied to FBI
Published April 20, 2012
By Sean Flynn/Daily News staff
PROVIDENCE - A Portsmouth man involved in a kickback scheme that bilked the Navy of up to $20 million was involved in an extramarital affair with a housekeeper of the Navy-employed civilian accused of masterminding the conspiracy, according a federal prosecutor.
Russell E. Spencer, 57, pleaded guilty Thursday morning in U.S. District Court to lying to the FBI about his relationship with the housekeeper on three separate occasions.
Spencer met the woman on trips to Virginia when he visited Ralph Mariano, 53, of Arlington, the civilian program manager and senior systems engineer with the Naval Sea Systems Command who is accused of being the main beneficiary of the kickback scheme, according to Assistant U.S. Attorney Lee H. Vilker. Vilker presented the case against Spencer to Chief Judge Mary M. Lisi.
Spencer gave the woman, who was identified by the initials "S.W.," cash and gifts that came from the Navy funds that were being stolen, Vilker said.
"The amount of cash and gifts is very small compared to the millions stolen from the U.S. Navy, but the U.S. government is documenting the total flow of money," he said.
When Spencer pleaded guilty in U.S. District Court on June 17, 2011, to a charge of conspiring to commit bribery, he pledged to "meet with government representatives as often as necessary and provide complete and truthful information to them" and to appear in federal court and to "testify completely and truthfully." In return for his cooperation, the U.S. attorney's office would recommend a reduced sentence under the agreement.
"Mr. Spencer said he did not have an extramarital affair with the woman and provided her with no cash and no gifts" when he met with FBI agents in the offices of U.S. Attorney Peter Neronha in Providence on Sept. 6, 2011, Vilker said.
When Spencer met again with FBI agents on Dec. 7 at the same location, he again denied the extramarital affair and giving the woman cash and gifts, Vilker said. At a third meeting on Jan. 6 of this year, he made the same denials before finally admitting to a two-year extramarital affair with the woman, Vilker said. He told the FBI the money and gifts came from money paid by Advanced Solutions for Tomorrow, a Navy contractor that had its main office in Middletown and corporate headquarters in Roswell, Ga.
Mariano worked out the kickback scheme with Anjan Dutta-Gupta, 59, the founder and president of AFST, according to federal prosecutors.
ASFT acquired AMTECH, a Newport company, in 1996 and grew exponentially, first winning a $24 million contract providing logistics engineering services to the Naval Undersea Warfare Center in Middletown. ASFT had about $128 million in Navy contracts when it abruptly closed after Dutta-Gupta's arrest in February 2011, leaving more than 100 people without jobs.
Initially, Mariano increased the hourly rate paid to an ASFT employee, who in turn used the salary increase to make the payments demanded by Mariano. He demanded increasing payments from ASFT and Dutta-Gupta in the following years, according to court documents.
Beginning in 1999, Dutta-Gupta agreed to make the payments to Mariano through companies owned by Spencer that were to serve as subcontractors to ASFT. Spencer incorporated the first company, ADQ Associates Inc., on July 19, 1999. The company, which had a principal office at 25 Enterprise Center, Suite 104, Middletown, was dissolved on Sept. 30, 2003.
On Sept. 22, 2003, Spencer, then of 40 Ferry Landing Circle, Portsmouth, incorporated C&S Technology Inc, with a principal office at that address. Spencer incorporated S.I. Technology Inc., on Nov. 17, 2009, with its principal office listed at 11 King Charles Drive, Unit A3B, Portsmouth.
Under the scheme that evolved, the subcontractor firms under Spencer's control "would submit inflated invoices to ASFT for work that largely had not been performed," according to court documents. "Dutta-Gupta and ASFT would then pay the subcontractor the amount billed on the invoices.
"Spencer then distributed the funds received from ASFT to Mariano, individuals associated with Mariano (including his father, brother and girlfriend) or entities controlled by Mariano's associates," the court documents say. Spencer also paid at least $1.2 million of the inflated invoices to Strategic International Concepts, a technical services company owned by Dutta-Gupta, according to the court documents. Spencer also received an undisclosed amount of money, but agreed to pay $330,000 to the government as part of his plea agreement last year.
Spencer faces up to five years in federal prison, up to three years of supervised release and a fine of up to $250,000 when he is sentenced on Dec. 6 for lying to the FBI. He is scheduled to be sentenced on the same day on his previous guilty plea to a charge of conspiracy to commit bribery.
"The bottom line is there is absolutely no guarantee that your sentence will be reduced," Lisi told Spencer on Thursday. While the U.S. attorney may recommend a reduction, it is at the judge's discretion whether or not to adopt the recommendation, she said.
Dutta-Gupta pleaded guilty in April 2011 to paying bribes to Mariano to ensure payment and additional funding to existing naval contracts and work orders for work purportedly to be performed at ASFT. He is scheduled to be sentenced on June 21.
Patrick Nagle, 51, of Marietta, Ga., a former senior vice president and director of contracts for ASFT, pleaded guilty in August 2011 to a charge of conspiracy to commit bribery. He is scheduled to be sentenced on July 9.
The U.S. attorney's office is continuing its investigation against Mariano, who pleaded not guilty to charges of receiving bribes as a public official after his arrest in February 2011.
In addition to Vilker, the cases are being prosecuted by assistant U.S. attorneys Andrew J. Reich and Terrence P. Donnelly.
Agents from the FBI, Defense Criminal Services, Naval Criminal Investigative Service and Internal Revenue Service/Criminal Investigations investigated the kickback scheme.

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