He 's going to be sentenced on December 14, 2007, in Rock Island, Illinois, and faces ;
1. Maximum statutory penalty for violating the Anti-Kickback Act - 10 years in prison, and a fine of up to $250,000.
2. Making a false statement, up to 5 years in prison and a fine of up to $250,000.
Well Kevin was the Managing Director of EGL Houston office , a freight forwarding company. (Eagle USA Airfreight opened their first freight terminal in Houston in 1984)
The US Army has a program and it has an acronym LOGCAP (Logistics Civil Augmentation Program) whwreby civialian services augment the military and in December 2001 1 LOGCAP III was awarded to KBR (which was Kellogg, Brown Root a subsidiary of Halliburton).
EGL had a contract with KBR to ship military cargo to Iraq. (EGL (a FORTUNE Most Admired Company 2006and 2007) were taken over in May 2007 by CEVA Group Plc (formerly TNT Logistics) which is in turn CEVA is owned by affiliates of Apollo Management VI, L.P., one of the leading private equity investors in the world. )
Whilst administering this contract Smoot accepts providing gratuities / bribes / kickback to a total of US $25,337 to KBR workers on 90 separate occasions between early 2002 and the spring of 2005 (say 3 years = US7-8,000 a year). he also authorizeed a subordinate at EGL to provide an additional $8,500 in perks.
The other charges realte to , Christopher Cahill, who was higher up than Smoot in EGL and served as regional vice president for the Middle East and India for EGL who was stationed at its regional office in Dubai. In August last year he pleaded guilty to inflating invoices for military shipments to Baghdad through EGL’s s subcontract with Kellogg, Brown and Root (KBR) under the LOGCAP III prime contract - he got 30 months in jail.
Cahill’s scheme was to inflate invoices by adding a risk surcharge of $.50 for each kilogram of freight transported to Baghdad. Cahill added the surcharge after learning that an EGL competitor was seeking war risk insurance to resume air cargo flights into Baghdad subsequent to cargo plane of a competitor had been shot down in Iraq in November 2003. At the time, however, Cahill knew that the air charter company EGL had contracted with to perform the air cargo flights had not instituted such a fee.
From November 22, 2003, through July 20, 2004, EGL performed approximately 379 air cargo shipments of military goods from Dubai to Baghdad under EGL’s subcontract with KBR. The total amount of the EGL invoices was approximately $13.26 million including $1.14 million in fraudulent war risk surcharges.
The increased profits from the war risk surcharge were initially credited to EGL regional office but were later credited to EGL' s Houston headquarters ultimately resulting in an increase in the incentive bonus paid to Smoot for fiscal year 2004.
So Smoot has been glad handing some of the KBR guys in the loose change that lubricates business throughout the USA and the free world and he rode with a scheme by a superior to inflate bills for the military - which helped pay his annual bonus.