U.S. v. Lessner

• Decision Date: 08 August 2007
• Docket Number: No. 06-1030.,06-1030.
• Citation: 498 F.3d 185
• Parties: UNITED STATES of America v. Barbara LESSNER, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

498 F.3d 185

UNITED STATES of America v. Barbara LESSNER, Appellant.

No. 06-1030.

United States Court of Appeals, Third Circuit.

Argued: May 21, 2007.

Opinion Filed: August 8, 2007.

Ian M. Comisky, Esq. (Argued), Matthew D. Lee, Esq., Blank Rome, Philadelphia, PA, Counsel for Appellant.

Nancy B. Winter, Esq. (Argued), Office of the United States Attorney, Philadelphia, PA, Counsel for Appellee.

Before: BARRY, CHAGARES, and TASHIMA,^* Circuit Judges.

OPINION OF THE COURT

BARRY, Circuit Judge.

This appeal arises from a 51-month sentence and a $938,965.59 order of restitution imposed on appellant Barbara Lessner following her pleas of guilty to 21 counts of wire fraud, defense procurement fraud, and obstruction of justice. For the reasons that follow, we will affirm.

I. Factual and Procedural Background

From 1995 until 2002, Lessner was a Procurement Contracting Officer, Team Leader, at the Defense Supply Center in Philadelphia ("DSCP"). The DSCP is one of several field offices of the Defense Logistics Agency ("DLA"), a federal agency whose mission is to procure supplies for the military. As a "warranted" contracting officer with authority to sign contracts on behalf of the DLA, Lessner oversaw a team of nine buyers in a group responsible for awarding contracts of less than $100,000 for the purchase of biomedical and hospital equipment.

The DSCP's competitive bid process is highly regulated. Upon receiving a request for supplies, DSCP personnel solicit quotes from contractors and compare those quotes against pre-established prices in Federal Supply Schedule Price Lists and on the Medical Electronic Catalog system ("ECAT").¹ If the DSCP cannot obtain a quote lower than the price listed in the Federal Supply Schedule, it must use the Federal Supply Schedule contract. Similarly, if all quotes exceed the price listed on ECAT, the DSCP must obtain the product from the ECAT distributor. When the lowest bid has been identified, the warranted contracting officer will sign a contract and fax it to the winning distributor.

Authority to award DLA contracts is limited to warranted contracting officers, such as Lessner. "Buyers" lack authority to sign contracts that commit government funds, but are otherwise fully engaged in the procurement process. As the supervisor of nine buyers, Lessner personally received all requests for supplies and distributed them among her buyers. The buyers then solicited bids by telephone, documented the quotes, and reported their findings to Lessner. Lessner completed the process by reviewing the buyers' research and signing contracts.

In August 2001, at a bar in King of Prussia, Pennsylvania, Lessner met and struck up a conversation with another patron named Scott Watanyar. Lessner told Watanyar about her job at the DSCP, and Watanyar told her that he worked for a small distributor of electronics equipment, Pamir Electronics Corporation ("Pamir"), which was owned by his mother. Pamir did not manufacture any of the products it sold, and Watanyar had no previous experience with federal government contracts. Nonetheless, he told Lessner, he would like the opportunity to do contract work for the Department of Defense.

That same month, Lessner told her team of buyers about Pamir. She identified Watanyar as Pamir's point of contact and urged her buyers to use him. None of the buyers had previously heard of Pamir. They quickly noticed, however, that Lessner was engaging in whispered conversations with someone from Pamir, perhaps Watanyar, and observed that she was unusually involved in and knowledgeable about the details of Pamir's transactions.

In September 2001, one of Lessner's buyers, "K.T.," noticed that Lessner had awarded contracts to Pamir even though it had not tendered the lowest bid and despite the fact that the products could have been obtained at a lower price if purchased directly from the manufacturers. K.T. reported the Pamir contracts to DSCP supervisors and began to question Lessner as to why Pamir was being awarded the contracts. Lessner, in response, stopped distributing work to K.T. for a period of time. Meanwhile, she continued to award contracts to Pamir, forging K.T.'s signature on contract folders when, in fact, K.T. had done no work on those contracts.

On May 11, 2002, Special Agents from the Defense Criminal Investigative Service ("DCIS") obtained copies of all Pamir contracts from DSCP files. Between August 2001 and April 17, 2002, Pamir was awarded 163 contracts having a total value of approximately $3.3 million. DCIS investigators confirmed that contracts were consistently awarded to Pamir when it was not offering the lowest price. A cost-impact analysis performed on 119 of the 163 contracts revealed that Pamir, with Lessner's approval, overcharged the government by $938,965.59.

The DCIS investigation revealed a pattern of contracts awarded to Pamir for products that Lessner knew or should have known were available at lower prices from the manufacturers. Among those contracts were 33 contracts for products manufactured by Telectro-Mek, Inc., a regular distributor to the DSCP whose prices were significantly lower than those offered by Pamir; 35 contracts for a product manufactured by Brenner Metal Products Corporation that the DSCP could have obtained for less than half of Pamir's price; 16 contracts for products manufactured by Nonin Metal, Inc. that the DSCP could have obtained at a lower price from Government Marketing International, Inc., Nonin's authorized distributor, who advertised its lower price on the Federal Supply Schedule Price List; 17 contracts for products manufactured by Allied Healthcare Products, Inc., whose lower price for eight of those contracts was featured on the Federal Supply Schedule Price List; and two contracts for products manufactured by Kendro Laboratory Products, Inc., a company historically willing to quote directly to the government at established, lower government prices. As a Procurement Contracting Officer, Lessner was knowledgeable about the Federal Supply Schedule Price List and was responsible for identifying a distributor's past pricing history. In at least one instance, when Brenner Metal's president phoned Lessner to point out that the DSCP could realize significant savings by ordering directly from Brenner Metal, Lessner reportedly stated, "You receive enough Government contracts, don't look over my shoulder."

In July 2002, Lessner's supervisor reviewed the Pamir files and confirmed that Lessner had awarded contracts to Pamir for products that she could have purchased at lower prices on ECAT. One such award came just days after that same supervisor had advised Lessner that the product in question was available through ECAT.

On August 16, 2002, agents from the DCIS and the FBI executed a warrant authorizing the seizure from Pamir's offices of documents and computer files relating to Department of Defense contracts. The search revealed that Lessner had, on several occasions, faxed documents to Watanyar describing the prices that Pamir's competitors were bidding for certain products. Some of the documents bore handwritten notes from Lessner to Watanyar specifying the price he should bid to receive a particular contract, or advising him to submit a lower bid. Lessner also sent Watanyar copies of the Federal Supply Schedule Price List, which showed the prices of competing suppliers.

Lessner's buyers subsequently reviewed DSCP files for Pamir contracts. They discovered that, while each of the Pamir files appeared to bear the signature of the buyer who purportedly worked on the contract, Lessner had in fact forged the buyers' signatures on 64 of the 163 files. For several of the remaining 99 files, Lessner had simply presented the file to the buyer with Pamir's quote and instructed the buyer to designate Pamir as the winning bidder.

For each of the 163 Pamir contracts, funds were wired from a United States government account in Columbus, Ohio, to Pamir's bank account in Exton, Pennsylvania, via the Federal Reserve Bank's Federal Automated Clearing House in Atlanta, Georgia. Lessner was able to circumvent the more stringent procedures governing the award of contracts worth more than $100,000 by improperly awarding multiple contracts to Pamir on the same day for the same item. She also placed fraudulent justifications in some of the files to conceal the fact that the items in question could be obtained elsewhere at lower cost.

On August 16, 2002, the same day that agents conducted their search of Pamir's offices, DCIS Special Agents interviewed Lessner at work. They escorted her to her workstation, advised her that they were about to conduct a lawful and authorized search, and instructed her to remove only personal items from her work space. As she was gathering her personal effects, agents saw Lessner throw a current 2002 United States Government Appointment Book in the trash can. She also removed a stack of files from a locked file cabinet and placed them on her desk. The agents then escorted her off the DSCP compound.

As she was leaving, the agents saw Lessner place a call on her cell phone. When they returned to her workstation to conduct their search, they found two of Lessner's buyers at her desk. Although both buyers denied having received a call from Lessner asking them to remove items from her desk, one of the buyers, Cynthia Verderame, was not truthful. As it turned out, Lessner had in fact called Verderame and instructed her to remove a folder from Lessner's desk and destroy it, adding that "they are accusing me of doing something wrong." Verderame retrieved the folder as requested, handed it to a fellow employee, and instructed that employee to place it in the trunk of Verderame's car. Later that evening, Verderame reviewed the folder, which contained copies of Lessner's emails, faxes, handwritten notes, and customer letters, and tore the contents into pieces. Verderame subsequently pled guilty to...