United States v. Boutte
| Decision Date | 21 August 2018 |
| Docket Number | No. 17-CR-03338-JMC,17-CR-03338-JMC |
| Parties | UNITED STATES OF AMERICA, Plaintiff, v. MILTON BOUTTE, JOE DIAZ, ARTURO VARGAS, and GEORGE LOWE, Defendants. |
| Court | U.S. District Court — District of New Mexico |
On November 28, 2017, a grand jury charged Defendants Milton Boutte, Joe Diaz, Arturo Vargas, and George Lowe with multiple counts of fraud and conspiracy against the United States. Since that time, myriad motions—including motions to dismiss the indictment, motions for bills of particulars, and discovery disputes—have piled up on the docket. Today the Court considers four of those motions: Defendant Milton Boutte's Motion for Bill of Particulars [Doc. 32], Defendant Milton Boutte's Motion to Dismiss the Indictment [Doc. 34], Defendant George Lowe's Motion to Dismiss Untimely Indictment [Doc. 61], and Defendant Arturo Vargas's Motion for Bill of Particulars [Doc. 69]. For the reasons below, the Court issues this combined order denying all four motions.
The following synopsis summarizes the relevant allegations in the indictment that the government eventually must prove beyond a reasonable doubt.
As an overarching matter, Defendants were all generally affiliated with the Big Crow Program Office ("BCPO") at Kirtland Air Force Base in Albuquerque, New Mexico, and allegedly committed their crimes in conjunction with their ties to that office. BCPO functioned as the airborne component of the United States Army's electronic warfare assessment program beginning in 1971. The Army principally funded BCPO in its early years. In the late 1990s, however, the Army's funding for and need of BCPO started to dwindle. BCPO's ever-diminishing assets, money, and utility eventually led it to shut down for good in 2009.
Near the end of BCPO's run—"not later than 2004," claims the indictment—Defendant Milton Boutte, the then-Director of BCPO, allegedly began to engage in illegal activities with others "to obtain money for [BCPO]." Specifically, the indictment alleges that Boutte "conspired and schemed" with Defendant George Lowe and "other lobbyists, consultants, and contractors" to lobby Congress and other government agencies for money for the benefit of BCPO. The lobbyists, however—especially Lowe—charged hundreds of thousands of dollars for their work. How were Boutte and BCPO to pay for these services?
From a legal perspective, Boutte could not use funds appropriated to BCPO by Congress to pay for Lowe's lobbying activities. For one thing, Congress did not authorize or appropriate funds to BCPO to expend money for lobbying. See U.S. Const. art. I, § 9, cl. 7; 31 U.S.C. § 1341(a)(1)(B) (). And in the absence of that express congressional authorization,18 U.S.C. § 1913—a criminal statute—forbids federal officers and employees from using any appropriated money to engage in activities that could be broadly characterized as lobbying. Thus, unless Boutte or somebody else was willing to use his or her private funds to pay Lowe, the options were limited.
According to the government, Boutte and Lowe chose to take the illegal route. In so doing, the two men turned to the 1953 Small Business Act—specifically, § 8(a) of that Act, wherein Congress established the Business Development Program. The § 8(a) Business Development Program authorizes the government to help eligible small businesses get off the ground. As is relevant here, one way the government does that is by awarding eligible small businesses "sole-source contracts"—contracts entered into without engaging in open competition or a competitive process. As a practical matter, this means that on any given project the government will select a § 8(a) small business as its contractor without first making that small business compete with other potential contractors for its services.
The indictment alleges that Boutte and Lowe realized they could misappropriate funds from § 8(a) sole-source contracts to pay for Lowe's lobbying efforts and other unauthorized expenses. But to do so, they needed small businesses. Thus, the two men allegedly further "conspired and schemed" with Defendants Joe Diaz and Arturo Vargas, two small business owners, to "fraudulently obtain and exploit" § 8(a) sole-source contracts for that illegal purpose.
The indictment alleges that Diaz was the first small business owner to lend illegal support by misappropriating a § 8(a) sole-source contract. He owned a controlling interest in a small business known as Miratek Corporation ("Miratek"), and in due time he enrolled Miratek in the § 8(a) Business Development Program. The United States, in turn, eventually awarded a sole-source contract under § 8(a) to Miratek in 2004 to provide various "technical services" to BCPO("Miratek Contract"). Diaz then allegedly conspired with Boutte and Lowe to fraudulently divert money from the Miratek Contract to pay Lowe's lobbying fees and other unauthorized expenses. According to the indictment, for instance, Diaz falsely represented that Lowe was an employee of Miratek, and the men would then submit invoices claiming false and fictional hours of work for supposed services that Lowe provided. The total amount unlawfully diverted added up to more than $529,000.
The Miratek Contract, however, could not indefinitely support the confederates' supposedly fraudulent scheme. Funding under that contract slowly had been exhausted, and under the terms of § 8(a), Miratek could no longer participate in the Business Development Program after utilizing it for so many years. Thus, to keep the lobbying and allegedly fraudulent payments moving along, Boutte and Diaz sought another small business that could seamlessly fill Miratek's role in the scheme.
Enter Arturo Vargas. Vargas was a Certified Public Accountant doing business as Vargas P.C. He and his company had served as Diaz's and Miratek's accountant for nearly sixteen years. Yet in early 2005, Vargas and Diaz teamed up before the Small Business Administration to take Vargas P.C. in an entirely new direction. Among other things, the two men informed the Small Business Administration that Vargas P.C. was expanding and diversifying into the information technology field. They further informed the administration that as it did so, they hoped to have Miratek—and, by extension, Diaz—serve as Vargas P.C.'s small business mentor. Under the terms of § 8(a), the Small Business Administration allows protégé/mentor relationships. The Small Business Administration agreed to their request.
Leveraging their new protégé/mentor relationship, Vargas and Diaz eventually asked the Small Business Administration in late 2005 for permission to combine their services under a jointventure called Vartek, LLC ("Vartek") so that they could work together to provide "technical and analytical expertise" to BCPO. Section 8(a) expressly allows such joint ventures in certain circumstances, and Vartek seemingly satisfied the requisite conditions. The Small Business Administration thus approved the joint venture. The government eventually awarded two § 8(a) sole-source contracts to Vartek ("Vartek Contract 1" and "Vartek Contract 2," respectively).
Among other allegations in the indictment, Diaz and Vargas then proceeded to falsely represent that Vartek employed Lowe, and the men then submitted fraudulent invoices claiming fictional hours of work for services Lowe supposedly provided. All in all, Diaz and Vargas allegedly misappropriated at least $506,000 in funds from the two contracts to pay Lowe for his lobbying activities and more than $5,800,000 in funds to pay other lobbyists, consultants, and contractors.
Notably, the indictment also outlines at least one instance where Lowe's lobbying efforts on behalf of BCPO over the years actually succeeded. In early 2005, while the Miratek Contract was still in play, Lowe allegedly informed Boutte, Diaz, and their agents that the Alaska Army National Guard agreed to transfer $1,185,000 to BCPO. That large sum eventually came through and was added to the funding under the Miratek Contract. The indictment alleges that Lowe demanded and eventually received most of that transferred money (or equivalent sums) as payment for his services, which effectively rendered BCPO's initial receipt of the funds from the Alaska Army National Guard useless.
After a years-long investigation by federal authorities, a grand jury charged Defendants on November 28, 2017, with 46 separate counts:
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