68-year-old Gary Thomas Meredith, of Leitchfield, pleaded guilty this week in Federal District Court in Louisville to violating conflict of interest laws.
After one day of trial, Meredith, a retired federal employee, admitted that while he was a federal employee, he was “personally and substantially involved in the creation of a contract in which he had a direct financial interest,” according to a press release from the United States Attorney’s Office for the Western District of Kentucky.
Meredith is scheduled for sentencing on March 9, 2016.
For more than 20 years, Meredith was Energy Manager at Fort Knox, a position that was responsible for developing and implementing energy savings measures at Fort Knox.
As part of those duties, Meredith had worked closely with Nolin Rural Electric Cooperative Corporation (Nolin RECC) on nearly 100 energy conservation projects, worth over $250 million, the release states.
Due to an increasing work load, in 2005, Fort Knox began to consider developing a contractor position, called a Resource Efficiency Manager (REM), to perform the same duties as the Energy Manager, and to work in tandem with the Energy Manager. The REM was going to be hired through Nolin RECC.
Meredith was interested in retiring and becoming the REM after his retirement, and, in April 2005, he sent emails to Nolin RECC and another company in which he discussed working for them as the REM at Fort Knox, the release states.
In one email, Meredith, discussing the REM position, wrote “have considered doing it myself…retire (and I can), and come back on Monday as a REM, IN THE SAME CHAIR, probably same office and be off the Government rolls.”
In a subsequent email, Meredith stated “It’s about money.”
While he was still a federal employee, Meredith reached an agreement with Nolin RECC that he would work for the company as a REM contractor when he retired.
Fort Knox officials, however, were unaware of Meredith’s arrangements with Nolin RECC and his interest in the REM position.
In October 2005, Meredith began drafting the documents necessary to create the REM position, and in September 2006, he secretly misappropriated over $582,000 to provide future funding for the REM position, according to the release.
In December 2006, while still a federal employee, Meredith completed all of the Fort Knox documents necessary to create the REM position, and he also created Nolin RECC’s proposal for the REM position.
Meredith also negotiated the pricing of the REM position with Nolin RECC on behalf of Fort Knox, even though he already had an arrangement with Nolin RECC that he was going to be the REM after he retired.
In July 2007, Meredith obtained an ethics opinion from a Fort Knox ethics advisor that stated Meredith could work for Nolin RECC as a REM contractor.
The ethics advisor, however, was unaware that Meredith had a personal financial interest in the REM position dating back to April 2005, that Meredith had misappropriated over $582,000 to fund the REM position, and that Meredith had prepared Nolin RECC’s proposal, according to the release.
Meredith retired from the Army on Aug. 31, 2007, and became Nolin RECC’s REM on Oct. 1, 2007. Meredith was earning over $80,000 per year when he retired but earned over $165,000 per year as the REM.
After Meredith became the REM, he instructed Nolin RECC to intentionally overbill Fort Knox for natural gas, even though the contract between Nolin RECC and Fort Knox set the contract price and did not permit any additional billings, the release states.
Nolin RECC billed Fort Knox as instructed, and Meredith approved Nolin RECC’s invoices for payment, resulting in over $900,000 in overbillings to Fort Knox.
Additionally, after Meredith became the REM, he also began invoicing in advance for his REM salary. For example, in October 2009, he invoiced Nolin for one year of salary in advance, over $177,000.
Nolin RECC paid Meredith’s salary in advance, even though Nolin employees were unaware of any other Nolin employee or contractor who was paid in advance.
Nolin RECC then immediately charged those costs to Fort Knox, and Meredith approved the invoices for payment, even though he knew the cooperative could not legally require Fort Knox to pay for services in advance.
As a result of these advance payments, Fort Knox lost thousands of dollars of interest.
Meredith’s guilty plea this week brought to a close a five-and-a-half-year criminal investigation of the Fort Knox Energy Program.
On Sept. 8, 2014, the Department of Defense, Office of the Inspector General (OIG), published the results of an audit of the Fort Knox Energy Program that Meredith oversaw prior to his retirement. In the audit, the OIG found that Fort Knox had improperly awarded and administered over $250 million in energy-savings projects with Nolin RECC.
The report also found that Fort Knox failed to establish internal controls, failed to determine whether the government paid fair and reasonable prices, and “spent millions on projects that may not have achieved sufficient energy savings.”
On Oct. 1, 2014, Matthew Bowman, a former Ft. Knox ethics attorney and procurement fraud advisor, pleaded guilty to providing a false document to Defense Criminal Investigations Service (DCIS) Special Agent Jared Camper in 2010 in a failed attempt to shut down the investigation into Meredith.
Bowman was sentenced to one year of probation and was subsequently debarred from working on any government contracts.
On April 9, 2015, Nolin RECC and the United States entered into a Non-Prosecution Agreement in which Nolin RECC agreed to pay over $7.6 million in civil penalties and forfeitures resulting from its business dealings with Meredith and Fort Knox.
The case was investigated by the Defense Criminal Investigative Service, Dayton Residence Agency. The Army Criminal Investigations Command, Columbus Resident Agency, the Defense Contract Audit Agency, also assisted with the investigation.
The case was prosecuted by Assistant United States Attorneys David Weiser and Marisa Ford.
Reach Matt Lasley at 270-259-9622, ext. 2015.