Virginia Defense Contractor Facing Federal Indictment in Maryland for Selling Chinese-Made Body Armor and Related Goods to Federal Agencies

A federal grand jury in Maryland has returned an indictment charging Arthur Morgan, age 67, of Lorton, Virginia, with federal wire fraud charges, in connection with federal contracts to provide helmets, body armor, and other items to military and other federal entities. The indictment was returned on July 6, 2020.


Allegedly Falsely Certified that the Products Were Manufactured in Countries Approved Under Federal Regulations, When He Knew They Were From China, Which is Not Approved

A federal grand jury in Maryland has returned an indictment charging Arthur Morgan, age 67, of Lorton, Virginia, with federal wire fraud charges, in connection with federal contracts to provide helmets, body armor, and other items to military and other federal entities.

The indictment was returned on July 6, 2020.

The indictment was announced by United States Attorney for the District of Maryland Robert K. Hur; Special Agent in Charge Eric D. Radwick of the General Services Administration (GSA) Office of Inspector General; Special Agent in Charge Ashan Benedict of the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) Washington Field Division; Special Agent in Charge John A. Salazar, Naval Criminal Investigative Service; and Special Agent in Charge Marc A. Meyer of the U.S. Department of State Office of Inspector General.

According to the indictment, Morgan is the Chief Executive Officer of Surveillance Equipment Group Inc. (SEG) and its relevant division, SEG Armor, both of which Morgan managed from Lorton, Virginia .

The GSA enters into government-wide contracts with commercial firms to provide supplies and services that are available for use by federal agencies worldwide. All GSA contracts are subject to the Trade Agreements Act (TAA), which requires that all products listed on GSA contracts must be manufactured or “substantially transformed” in a “designated country.”

China is not a designated country under the TAA. Contractors were not allowed, under these contracts, to supply products that did not comply with the TAA. Any such products would have been disqualified from eligibility under the contract.

Further, a contractor’s failure to certify that its products complied with the TAA would have disqualified the contractor from eligibility for the contract. A contractor who falsely certified that a product was TAA compliant could not lawfully seek payment from the United States for that product.

The indictment alleges that Morgan falsely certified that the ballistic vests, helmets, riot gear, and other items he offered for sale were from designated countries, specifically, Hong Kong and the United States.

The indictment alleges that while representing that none of SEG’s products offered to federal agencies under the relevant contract were manufactured in China, Morgan knowingly provided products that Morgan knew had been manufactured in China, in violation of the TAA and the contract.

SEG received multiple federal government orders under the contract between 2003 and 2019. According to the indictment, between September 15, 2014 and August 29, 2019, approximately six federal government agencies placed at least 11 orders for ballistic and other law enforcement/security equipment from SEG—which SEG sourced from China in violation of the TAA, as part of the scheme to defraud— totaling approximately $658,866.92.

For example, the U.S. Navy placed an order with SEG for helmets, and Morgan had a series of e-mail communications with Navy contracting personnel in Indian Head, Maryland, including concerning SEG’s inability to meet the agreed-upon delivery schedule.

The indictment alleges that in his e-mails, Morgan falsely advised the Navy contracting personnel that SEG had a factory in southern Virginia, that the helmets for the order “were in production” there, and that the delays were due to a backorder of materials needed for the helmets.

The helmets that Morgan provided under the U.S. Navy order allegedly originated from China before Morgan sent them to the Navy, in violation of the TAA and the contract. Specifically, the indictment alleges that these products were manufactured by Chinese Company 1, from which Morgan knowingly ordered them.

On February 16, 2016, and March 10, 2016, the Defense Finance and Accounting Service paid SEG $127,069.60 and $191,990.28, respectively, for the U.S. Navy order. For all of the orders, federal government agencies paid SEG at least approximately $488,976.92.

If convicted, Morgan faces a maximum sentence of 20 years in federal prison for each of two counts of wire fraud. Actual sentences for federal crimes are typically less than the maximum penalties. A federal district court judge will determine any sentence after taking into account the U.S. Sentencing Guidelines and other statutory factors.

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.

United States Attorney Robert K. Hur commended the GSA OIG, the State Department OIG, the ATF, and the NCIS for their work in the investigation, and recognized the Army Major Procurement Fraud Unit, the Defense Criminal Investigative Service, Homeland Security Investigations, the FBI, the Air Force Office of Special Investigations, and the Coast Guard Investigative Service for their assistance.

Mr. Hur thanked Assistant U.S. Attorney Elizabeth Wright, who is prosecuting the case.

Blogs to Follow:

ATF.gov (July 2020) Virginia Defense Contractor Facing Federal Indictment in Maryland for Selling Chinese-Made Body Armor and Related Goods to Federal Agencies

Collegeville Man Indicted for Scheme to Sell Fraudulent Canine Cancer-Curing Drugs to Pet Owners

United States Attorney William M. McSwain announced that Jonathan Nyce, 70, of Collegeville, PA, was charged by Indictment with wire fraud and the interstate shipment of misbranded animal drugs.


The defendant promised to restore the health of terminally ill dogs and allegedly defrauded pet owners of hundreds of thousands of dollars

United States Attorney William M. McSwain announced that Jonathan Nyce, 70, of Collegeville, PA, was charged by Indictment with wire fraud and the interstate shipment of misbranded animal drugs. The charges arise from a years-long scheme to defraud pet owners of money by falsely claiming to sell canine cancer-curing drugs.

The Indictment alleges that the defendant created several companies beginning in 2012, including “Canine Care,” “ACGT,” and “CAGT,” through which he purported to develop drugs intended to treat cancer in dogs. Using various websites for these companies, the defendant marketed these “cancer-curing” medications to desperate pet owners, using the drug names “Tumexal” and “Naturasone.”

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The websites made numerous allegedly false and fraudulent claims regarding the safety and efficacy of these supposed drugs, including that “Tumexal is effective against a wide variety of cancers,” and, “[i]n fact, Tumexal will almost always restore a cancer-stricken dog’s appetite, spirit and energy!” As alleged, these drugs were nothing more than a collection of bulk ingredients from various sources, which the defendant blended together himself at a facility on Arcola Road in Collegeville.

Further, through email and telephone conversations, Nyce allegedly induced the owners of terminally ill dogs to pay him hundreds or thousands of dollars for these drugs by touting the effectiveness of his products in treating a host of canine cancers. He also told prospective customers that their pets could become part of clinical trials, but in order to do so, they had to pay him large sums of money.

The defendant’s marketing, sale, and shipment of these drugs in interstate commerce is alleged to have violated the Food and Drug Administration’s Federal Food, Drug, and Cosmetic Act because the drugs were not approved by the FDA. The defendant even falsely claimed in promotional materials that his company’s research was “funded in part by the U.S. Food and Drug Administration.”

“The defendant’s alleged conduct here is shameful,” said U.S. Attorney McSwain. “As any dog owner will tell you – myself included – pets quickly become part of the family. And when they become sick, caring owners look for hope, often doing everything they can to keep their beloved pets alive and well. The defendant is charged with taking advantage of that nurturing instinct in the worst way possible by defrauding pet owners and giving them false hope that they might be able to save their dying pet. That is both cruel and illegal, and now the defendant will face the consequences.”

“American pet owners rely on the FDA to ensure their pets’ drugs are safe and effective,” said Special Agent in Charge Mark McCormack, FDA Office of Criminal Investigations’ Metro Washington Field Office.  “We will continue to investigate and bring to justice those who ignore or attempt to circumvent the law.”

If convicted, the defendant faces a maximum possible sentence of 32 years imprisonment and a fine of up to $1,250,000.

The case was investigated by the Food and Drug Administration’s Office of Criminal Investigation, and is being prosecuted by Assistant United States Attorney Christopher E. Parisi.

An indictment, information, or criminal complaint is an accusation. A defendant is presumed innocent unless and until proven guilty.

FDA.gov (February, 2020)  Collegeville Man Indicted for Scheme to Sell Fraudulent Canine Cancer-Curing Drugs to Pet Owners

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Former Employee of Walter Reed National Military Medical Center Facing Federal Indictment in Maryland

A federal grand jury has indicted David Laufer, age 63, of Pittsburgh, Pennsylvania, formerly of Bethesda, Maryland, on five counts of the federal charge of making false statements.


Allegedly Failed to Report Financial Benefits He Received from Individuals and Companies Doing Business with Walter Reed

A federal grand jury has indicted David Laufer, age 63, of Pittsburgh, Pennsylvania, formerly of Bethesda, Maryland, on five counts of the federal charge of making false statements.

The indictment was returned on December 16, 2019, and was unsealed upon his arrest on January 28, 2020. Laufer had his initial appearance yesterday in U.S. District Court in Greenbelt and was released pending trial.

The indictment was announced by United States Attorney for the District of Maryland Robert K. Hur; Special Agent in Charge Robert E. Craig, Jr. of the Defense Criminal Investigative Service -Mid-Atlantic Field Office; and Special Agent in Charge Maureen Dixon, Office of Investigations, and Office of Inspector General of the Department of Health and Human Services.

According to the indictment, until May 2019, Laufer worked as the Chief of the Prosthetics and Orthotics Department at Walter Reed National Military Medical Center, the largest joint military medical center in the United States.

Walter Reed is located in Bethesda and provides medical services, including orthotic and prosthetic services to U.S. service members and their dependents, including wounded soldiers.

Laufer’s job required him to complete annual Confidential Financial Disclosure forms which required him to report: all sources of outside income greater than $200; any business outside the U.S. Government in which Laufer or his spouse was an employee or consultant, whether or not compensated; any agreements or arrangements concerning past, current, and future employment; and travel-related reimbursement or other gifts totaling more than $350 from any one source during the reporting period.

The indictment alleges that Laufer failed to report financial benefits he received from Person B and Company B, located in Germantown, Maryland and owned, operated, and controlled by Person B. Company B provided prosthetics and orthotics materials to Walter Reed in return for payments from the government.

According to the indictment, Person B regularly interacted with Laufer about Company B’s business with Walter Reed.

Furthermore, the indictment alleges that Laufer falsely told federal agents that he had never received money, gifts, or sporting event tickets from any vendor doing business before the Prosthetics and Orthotics Department when in fact Laufer had received financial benefits, including travel and sporting event tickets, from Person Band Company B.

DODIG.mil (February, 2020) Former Employee of Walter Reed National Military Medical Center Facing Federal Indictment in Maryland

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