Defense contractor, four employees sentenced in $7 million procurement fraud scheme

NEWPORT NEWS, Va. (WAVY) — Officials announced on Thursday that a Hampton-based U.S. defense contractor and four of its employees were sentenced for engaging in an extensive procurement fraud scheme.

Officials say the scheme involved more than $7 million in government contracts that targeted the U.S. Department of Defense and other federal government agencies.

“The defendants’ egregious scheme caused the U.S. government to spend over $7 million on fraudulently imported goods. These funds were intended for deserving beneficiaries, including American workers, service-disabled veterans, and authorized trading partners,” said Acting U.S. Attorney Raj Parekh for the Eastern District of Virginia. “This prosecution demonstrates our firm commitment to holding accountable those who defraud our military and brazenly disregard laws that are designed to protect the strength of our country’s infrastructure and manufacturing base.”

Court documents show that from 2011 to 2018, Iris Kim, Inc., (aka “I-Tek”) owner Beyung S. Kim, 62, of Newport News, and employees Seung Kim, 31, of Newport News; Dongjin Park, 54, of Yorktown; Chang You, 62, of Yorktown; Pyongkon Pak, 53, of Toano; and Li-Ling Tu, 58, of China, were involved in the scheme.

They were sentenced to a combined 151 months in prison.

According to officials, the five defendants obtained government contracts that had certain set-aside preferences and source-of-good requirements. They were found to have then fraudulently imported goods into the U.S. that were made in China in violation of the terms of their contracts.

After the goods were imported, they would falsely relabel them and pretend that they were made in the US. In addition, they acted through a separate nominee company to conceal the importing of goods from China and installed a nominee officer of I-Tek in order to be able to fraudulently qualify for contracts set aside for service-disabled veterans.

“The defendants deserve to be held fully accountable for this reprehensible scheme to knowingly and deceptively source illicit Chinese goods to fulfill Department of Defense contracts,” said Eric Maddox, Special Agent in Charge of the NCIS Economic Crimes Field Office. “This scheme threatened the readiness and safety of our nation’s warfighters, defrauded the American taxpayer, damaged the integrity of the Department of the Navy procurement process, and squandered valuable investigative resources that could have been directed elsewhere. NCIS will continue to work with our law enforcement partners to aggressively root out those who seek to defraud the Navy and Marine Corps.”

They were also able to avoid higher duties and taxes by submitting false documents and further falsely classified the value of goods.