Senior Executive Service Employee Allegedly Arranged for Government Contracts to Pay His Then-Girlfriend for Bogus Services

A federal grand jury has indicted former government employee Michael Strayer, age 69, and his wife, Karen Earle, age 48, both of Lovettsville, Virginia, late yesterday on charges arising from a conspiracy to defraud the government of $1,263,330 by causing government contracts to be awarded which secretly benefitted the defendants personally.

The indictment was announced by United States Attorney for the District of Maryland Rod J. Rosenstein and Inspector General for the Department of Energy Gregory H. Friedman. The indictment is the culmination of a more than two year investigation by the Department of Justice and the Department of Energy’s Office of Inspector General.

“This case illustrates the harm that may result when a government official’s judgment about how to spend taxpayer money is influenced by his personal financial interest,” said U.S. Attorney Rod J. Rosenstein.

According to the 13 count indictment, Strayer was member of the Senior Executive Service at DoE who used program funds he controlled to start a magazine called the SciDAC Review in 2004 to promote his division’s advanced supercomputing work within the DoE and academic communities. Strayer used a foreign publishing company to put issues of the Review together on a no-bid, non-competitive contract, whereby the publisher was reimbursed for all its costs in producing the Review by the DoE. In mid-2006, Strayer directed the Review’s publisher to hire Earle as a consultant for $60,000 per year, despite the fact that she had no supercomputing or publishing background and lived in Tennessee, ostensibly to obtain articles for the SciDAC Review to publish. Shortly thereafter, Strayer began a romantic relationship with her, and directed that the publisher later increase her consulting fees.

In late 2006, Strayer reorganized the publication’s editorial board and notified the board members that Earle was assuming charge of the SciDAC Review’s editorial duties. Unbeknownst to the publisher, Strayer allegedly imposed a new requirement that board members, supercomputing directors at DoE’s national laboratories who received substantial funding from Strayer’s office, provide Earle articles for publication in the SciDAC Review at no cost to the publication. In the summer of 2007, Strayer directed the publisher to contract with Earle’s company, KJE Science Consultants, to pay her nearly $100,000 for each quarterly issue to obtain articles for the magazine and to gain his approval for each issue, knowing that he had arranged that she be provided those articles at no cost by laboratory employees he exercised funding authority over. The indictment alleges that in September 2008, Strayer threatened to terminate Corporation A’s contract to publish SciDAC Review if it did not renew Earle’s contract for a second full year.

In July 2008, Strayer and Earle purchased a $740,000 home together in Lovettsville, Virginia, on which Earle made the entire $120,000 downpayment, in part from funds she obtained on the SciDAC Review contract. Earle also paid over $57,000 in renovations expenses and several mortgage payments on the home while Strayer lived there alone and Earle remained in Tennessee until the couple married in August 2009.

In June 2009, shortly before their marriage, Strayer signed a document with DoE’s Office of the General Counsel recusing himself from participating in “any Departmental matter in which Karen Jean Earle or KJE Consultants is a party.” The indictment alleges that despite this recusal, Strayer continued his involvement with Earle and KJE and concealed this fact from relevant DoE officials who contracted with the publishing company, while falsely leading officials at the publishing company to believe that DoE officials knew of his relationship with Earle and nevertheless had approved the subcontracting arrangement with KJE. It also alleges that despite his formal recusal, Strayer met personally with Earle and officials from the Review’s publisher in August 2009 to plan a significant expansion of SciDAC Review and KJE’s role. As a result of those discussions, Earle and the publisher executed three contracts on September 1, 2009 that would have provided for payments to KJE of over $950,000 over the following 15 months.

On July 20, 2010, DoE investigators met with Strayer and told him that they were investigating allegations of impropriety surrounding the publication of SciDAC Review. The indictment alleges that Strayer stated that he had no part in drafting the subcontract between the publisher and Earle, whereas in fact employees of the publisher and Earle had repeatedly sent draft subcontracts to him for his review and approval. Additionally, Strayer is alleged to have maintained a file folder on his DoE computer named “KJE” that contained multiple draft subcontracts between the publishing company and Earle. Strayer also allegedly told investigators that although he and Earle jointly owned their Virginia home, he alone paid the mortgage. In fact, however, Earle had made at least $23,516.60 in mortgage payments by that date, in addition to the $120,000 down payment on the home and $57,443 in home renovations expenses, primarily paid for from funds derived from her SciDAC Review subcontract.

As a result of the scheme, Strayer caused the publisher to pay Earle consulting fees and subcontract payments totaling more than $1,263,330 from DoE program funds that paid for the SciDAC Review. The indictment seeks forfeiture of this amount, as well as the couple’s home in Lovettsville, Virginia.

Strayer and Earle face a maximum sentence of five years in prison for conspiring to defraud the United States and the DoE; 20 years in prison on each of six counts for wire fraud; 10 years in prison on each of the four counts for money laundering; and five years in prison for conflict of interest. Strayer also faces a maximum sentence of five years in prison for making false statements.

An indictment is not a finding of guilt. An individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceedings.

The National Procurement Fraud Task Force was formed in October 2006 to promote the early detection, identification, prevention and prosecution of procurement fraud associated with the increase in government contracting activity for national security and other government programs. The Procurement Fraud Task Force - chaired by Assistant Attorney General for the Criminal Division Lanny A. Breuer - includes the United States Attorneys’ Offices, the FBI, the U.S. Inspectors General community and a number of other federal law enforcement agencies. This case, as well as other cases brought by members of the Task Force, demonstrate the Department of Justice’s commitment to helping ensure the integrity of the government procurement process.

United States Attorney Rod J. Rosenstein thanked the Department of Energy for its work in the investigation and praised Assistant U.S. Attorney Adam Ake, who is prosecuting the case.