Promotional Products Distributor Indicted on Fraud Charges

A lieutenant colonel in the U.S. Army Reserve is facing federal charges for fraudulently supplying Chinese-produced baseball caps and backpacks that were contractually obligated to be “100 percent U.S. made.”

According to a Department of Justice press release, U.S. Attorney Joyce White Vance, along with John F. Khin, defense criminal investigative service special agent in charge, and James T. Wallis, U.S. Army Criminal Investigation Command special agent, investigated the actions of Lt. Col. Frederick Lamar Burnett, owner of Lamar International Inc., a Huntsville, Alabama-based distributorship. The three-count indictment alleges that Burnett schemed to defraud the Defense Department on three contracts, valued at $6.2 million, between 2005 and 2009. The promotional items were intended for Army recruits.

For all three contracts (two for baseball caps, one for backpacks), Burnett agreed to meet the requirements of the Buy American Act, the Berry Amendment and federal regulations that require the government to purchase domestic products and materials.

As reported in the indictment:

• Lamar International was awarded the first contract in 2005. Burnett supplied 209,706 baseball caps over a three-year period. The government paid him $1.4 million.
• Lamar International was awarded the second contract in 2007. This time, Burnett supplied 590,042 baseball caps. He received approximately $4 million.
• Lamar International was awarded the third—and final—contract also in 2007. Burnett supplied 146,375 Army Combat Uniform backpacks. He was given $1.1 million.

It also is important to note that both of the 2007 contracts included a statement, in all capital letters, that the “PRODUCT MUST BE 100% U.S. MADE.” The indictment alleges that Burnett instead worked with suppliers directly from China, and with American companies who knew he was obtaining products from China. Burnett hid this by hiring workers on a cash basis to remove all the Chinese labels and repackage the items he sent to the Army Recruiting Command, according to the indictment.

A competitor raised concerns after the second contract had been awarded to Burnett, claiming he could only bid so low if he were using foreign suppliers. But the government permitted Burnett to proceed after he submitted documentation that he was using only American-made products and complying with all legal requirements.

The indictment seeks to have Burnett forfeit all $6.2 million to the government as proceeds of illegal activity. If convicted of wire fraud, Burnett could face a maximum of 20 years in prison and a $250,000 fine.