PHOTO ILLUSTRATION BY THE DAILY BEAST
“THE DAILY BEAST”
“Whyte’s fraud is symptomatic of rushed, desperate weapons-purchases that were common during the Pentagon’s invasion and occupation of Iraq.
Years after the Iraq occupation morphed into a wider U.S. intervention targeting Islamic State militants, the Pentagon still doesn’t know exactly what it’s spending its money on.”
“Sometime in the summer of 2006, John Ventimiglia, a plant foreman for Canada-based Armet Armored Vehicles, visited the company’s Ontario factory to inspect several Kestrel armored trucks that Armet was assembling for the U.S. military in Iraq.
Ventimiglia was horrified by what he saw, according to court documents. The vehicles lacked the floor armor that the military had specified. Instead of special, blast-resistant mineplate, workers had installed fragile plywood planks. It was also apparent that workers were using sandbox-style play sand in the vehicles’ construction—although Ventimiglia wasn’t sure why.
Ventimiglia emailed his coworker Frank Skinner, who then approached the FBI. Nearly 12 years later, this past week, a U.S. district court sentencedArmet CEO William Whyte to five years in prison for supplying fake armored vehicles to the U.S. military during the height of the American-led occupation of Iraq. Seventy-two-year-old Whyte, of Ontario, must also pay back the U.S. government for the trucks.
“Evidence at trial demonstrated that Whyte executed a scheme to defraud the United States by providing armored gun trucks that were deliberately under-armored,” the Justice Department stated.
But the military’s contracting problems aren’t unique to Iraq.
In 2011, the congressionally mandated Commission on Wartime Contracting in Iraq and Afghanistan reported that contractors had cheated the Pentagon out of $31 billion since 2001 (PDF). In one 2007 case, two South Carolina sisters—co-owners of a small parts-supplier—were found guilty of billing the Pentagon $20 million for hardware that was worth a fraction of that.
“Unfortunately, there are unscrupulous individuals out there who will take advantage of a wartime emergency, even one involving the lives and safety of our troops, to pad their own pockets,” Dan Grazier, a former Marine who is currently an analyst with the Project on Government Oversight in Washington, D.C., told The Daily Beast.
In Iraq, an escalating insurgency motivated many of the most flawed purchases. From mid-2005 to mid-2006, roadside bombs and other improvised explosive devices killed around 40 Americans per month in Iraq. Starting in 2006, the Defense Department spent $50 billion buying no fewer than 24,000 up-armored vehicles.
So-called Mine-Resistant Ambush-Protected trucks, or MRAPs—built by major defense contractors—accounted for most of the new vehicles. But the crash effort drew in small companies too, some of which assembled less-complex armored trucks for hauling Iraqi and coalition officials around Baghdad and other Iraqi cities.
Armet Armored Vehicles was one of those smaller companies. The Ontario-based company, which also operated a factory in Danville, Virginia, specialized in adding armor to SUVs and building ambulances and police vehicles. The company provided vehicles for Fast Five, the 2011 installment in the Fast and Furious film franchise.
In March 2006 the Defense Department hired Armet to build Kestrel armored trucks based on the chassis of a Ford F550 pickup. The price: around $200,000 per truck, including shipping. All told, Armet stood to earn $4 million.
The first four Kestrels were due in Baghdad 45 days after Whyte signed the contract in mid-March 2006. The rest, by the end of July. “Here we go, the first 20 Kestrels for Baghdad,” Whyte emailed his staff, according to court documents. “The only problems that I see is the chassis and FINANCE!”
Whyte was correct that it would be problematic to finance what was, for Armet, a substantial boost in production. The company fell behind. Unable to build the trucks on time and to spec, Whyte essentially faked them—replacing some government-mandated floor armor with plywood and leaving gaps in the protection on other parts of the vehicles.
“He knew he couldn’t meet the deadline,” Frank Skinner, who in 2006 oversaw Armet’s Danville factory said of Whyte during the latter’s two-month trial in in the U.S. District Court for the western district of Virginia beginning in June 2015. The first two Kestrels arrived in Baghdad at least two months late. Around the same time, Skinner secretly contacted the FBI about Whyte’s fraud.
While building faulty trucks and delivering them late, Whyte hounded military officials to pay Armet in advance for future vehicles. The military refused most of the requests. “You need to stop using progress payments for an excuse for your inability to deliver these vehicles against any type of credible timeline,” Cmdr. Tommy Neville, a contracting officer in Baghdad, wrote to Whyte.
“We miscalculated and were deluded when we believed that money was forthcoming,” Whyte wrote to another military official in October 2006. Years later, federal prosecutors would allege that Whyte repainted some of the Kestrels he had built for, but not yet shipped to, the U.S. military and instead sold them to the Nigerian government—because the Nigerians offered a higher price. A judge threw out that complaint for a lack of evidence.
In March 2008, the Pentagon rejected the seventh gun truck that Armet had shipped to Iraq and canceled the contract. By then the military had paid Armet around $2 million for six trucks it could not use. The Justice Department indicted Whyte in July 2012 and issued a warrant for his arrest the same day.
“None of the armored gun trucks delivered by Armet and Whyte met the ballistic and blast protection requirements of the contracts, despite the defendant’s claims that the vehicles met the standards,” the FBI stated. “Armet and Whyte knew that each of the six armored gun trucks failed to meet the required standards, that they were defective, and that they would not protect the officials they were intended to protect.”
Whyte fled to Canada to avoid prosecution. Armet shut its doors. Canadian authorities extradited the former CEO after a three-year legal battle. On Oct. 9, a jury unanimously found Whyte guilty on three counts of major fraud against the United States, three counts of wire fraud and three counts of criminal false claims.
Five months later on Feb. 20, Judge Jackson Kiser sentenced Whyte to spend 70 months in prison—and to pay back the $2 million his company received for the fake armored vehicles.
For the Pentagon, the underlying problem likely persists. In January 2017, the Government Accountability Office estimated that, as recently as 2016, as much as 5 percent of all federal payments to individuals and contractors were “improper” and resulted in $144 billion in waste in that year alone (PDF).
But that calculation didn’t take into account military contracts, owing to “serious financial management problems at the Department of Defense that have prevented its financial statements from being auditable,” the GAOexplained. In late 2017 Congress finally passed a law requiring the Defense Department to conduct a full audit starting in 2018.
In the meantime, it’s unclear how many other William Whytes are out there, cheating American servicemembers and taxpayers. “This is just one of the many reasons why we need to have effective oversight of the DoD acquisition process,” Grazier said.”