On Monday, both men pleaded guilty in U.S. District Court in Abingdon for their roles in a conspiracy to defraud both BVU and the federal government by submitting fraudulent invoices and paying kickbacks to former BVU vice presidents Robert James Kelley Jr. and David Copeland. Their cases came less than two weeks after Kelley and Copeland pleaded guilty in the same public corruption investigation.
Edwards, 45, of Columbia, South Carolina, pleaded guilty to multi-object conspiracy to commit wire fraud, mail fraud, tax fraud and money laundering. As part of the agreement, Edwards is to serve a year in prison, pay BVU more than $460,000 in restitution and forfeit $550,000 to the U.S. government, including $275,000 by April 15 and the balance by his June 18 sentencing date.
Clark, 63, of Colbert, Georgia, pleaded guilty to one count of conspiracy to defraud the IRS. He agreed to pay BVU more than $110,000 in restitution and could face up to five years in prison and a $250,000 fine.
Kelley approved Clark’s false invoices in exchange for kickbacks and Kelley prepared false invoices that he sent to Clark that claimed he had done consulting work for Clark through Kelley’s company, RJK Consulting. Clark then wrote checks to Kelley totaling $106,025 and filed tax returns falsely claiming the payments to Kelley as business expenses. His fraudulent invoices and kickbacks allowed Clark to avoid paying the IRS $12,500 in income taxes, court documents show.
In their cases, Kelley pleaded guilty to defrauding the utilities provider of $330,500 and Copeland pleaded guilty to defrauding BVU out of $144,000. Both men have agreed to repay those amounts as part of their plea agreements.
In February 2004, Edwards and Kelley were the only signatures on a simple, two-page contract between ETI and BVU that said “company [BVU] makes no representation, express or implied, as to the minimum or maximum amount of work to be performed by the contractor under this agreement” and concluded with “contractor will be compensated according to pricing approved by bid proposals submitted to company.”
That nebulously worded contract was worth millions to ETI.
Current BVU CEO Don Bowman, who has been on the job about five months, explained Monday that BVU’s relationship with Edwards “began in 2004, when he became a direct contractor with BVU. They [Edwards Telecommunications Inc.] were providing labor and equipment and BVU would buy the material.”
“A lot of the projects were designed by Mike Clark, or in combination with our team. …The funds for the construction were a combination of economic development grants, NTIA [National Telecommunications and Information Administration] grants from the federal government and Virginia Tobacco Commission grants.”
Edwards then conspired individually with the former BVU vice presidents to submit fraudulent bills to BVU for work not performed, which they approved. Edwards then supplied financial kickbacks to both Copeland and Kelley, paying Kelley at least $160,000 and Copeland at least $40,000, court documents show.
“We had a contract with ETI that ended in March ,” Bowman said. “I had difficulty finding the contract. I eventually found the 2004 contract and the 2010 contract after Mr. Copeland was no longer employed, I found it in his office. There was another contract in 2010, and I was never able to get a complete copy of that.”
In both cases, ETI and Clark’s firm R&M Consulting, completed the work they were contracted to perform, Bowman said.
Bowman said his investigation revealed that Copeland approved a four-year extension of the ETI contract with no additional approval from BVU’s CEO or chief financial officer.
Edwards recently resigned as CEO of ETI and — as part of his plea agreement — no other ETI employee will be prosecuted in this case.
“Mr. Edwards has cooperated with this investigation and in the prosecution of Mr. Kelley and Mr. Copeland,” Assistant U.S. Attorney Zachary Lee said after the hearing.
Lee declined to say if others are facing prosecution, saying the investigation remains ongoing.
BVU employees reacted with disappointment and shock upon learning Monday’s news, Bowman said.
“Mike Clark was here in this building for seven or eight years and, by all accounts, he had a good reputation. It’s shocking someone was able to organize and steal these amounts of money,” Bowman said, adding that Clark was given an electronic door badge so he could come and go at will.
Under the terms of Clark’s most recent contract, signed in October 2014, BVU paid Clark $65 per hour plus expenses of 50 cents per mile for travel, $40 daily for meals, $88 per night for hotel lodging for three nights each week he was in Bristol.
“Most of the [fiber-optic] construction had ended, so I’m not sure why his contract was renewed for two years,” Bowman said. “He [Clark] was considered an essential part of our team. He had his own door badge and his general work hours were he would drive up Monday from Georgia, get here at 10 or 11 [a.m.] and stay through Thursday night.
“At some point, he [Clark] would say a second person was with him, for a second hotel room and a second set of meals. I asked some questions in December about what he did here and why can’t we do that in house? I was actively working on that process when the federal folks alerted us to the investigation,” Bowman said.
Securing the combined $1.04 million in restitution it is now owed by the four men means that BVU must document that its expenditures were included as part of the scheme.
“We’re looking at about 500 invoices from Mike Clark and 5,000 from ETI we have to go through and make an assessment,” Bowman said. “They’ve helped the feds identify a lot of these invoices through their cooperation so we’ll be able to go to that invoice and pull out of our database where the funds came from.”
If the fraudulent bills involve grant moneys from outside agencies, those will likely have to be repaid.
Bowman said BVU likely violated the state Procurement Act with the awarding of these contracts.
“I feel like with both these individuals we were outside the scope of the Virginia Procurement Act,” Bowman said. “Both these companies should have gone through the Virginia Procurement Act, which means both should have submitted a request for proposals or an invitation to bid depending on their services. It should have been a fixed term [agreement] with an option year, but it appears those processes were not followed.”
Bowman and the BVU board have taken a number of steps to address these kinds of issues. BVU has a new procurement manager — a position that wasn’t previously in place — and Bowman has abolished the vice president of field operations position formerly held by Kelley and later Copeland.
BVU is also developing a detailed accounting procedure manual and making its executives and board members sign disclosure forms.
“We’ve got lots of processes we need to strengthen. It starts with the accounting procedure manual,” Bowman said. “We’ve brought a team of auditors in to review everything we do with touching money, from signature authorities to cashiering to invoicing. That will be documented and tested each year by our annual audits. We will make improvements and the rigor of just making sure contracts and procurement acts are followed.”
Bowman, who began work last November, said the scheme was well organized and hard to catch.
“Both of these went hand in hand with having an insider involved in the conspiracy,” Bowman said. “So, to the extent you delegate or trust your employees and they’re dishonest, it makes it very difficult.”
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