How a promising procurement career ended in felony.
On a winter evening in early 1997, Francis D. Jones Jr., a deputy director for the General Services Administration's Federal Acquisition Services for Technology program, met Tony Fannin, a contractor, at the Channel Inn, a tucked-away hotel with a restaurant overlooking a channel of the Potomac River in Washington. Fannin, a principal in an Atlanta company and its main marketer, was eager to boost sales for the small, minority-owned technology systems integration firm. Jones' job was to help small and disadvantaged businesses win government contracts.
Jones was good at what he did. After seven years at GSA, he knew most of the players in the small business world. He believed he was saving the government significant sums by negotiating good deals with vendors. At 45, he had come a long way since his days as a lanky kid with cinnamon skin, living with his mother in subsidized housing in Northeast Washington. Back then, he decided he wanted to make lots of money. He started out working in electronics on computers and televisions, but soon decided he could make more money as a manager. He enrolled in management courses at American University in Washington and Prince George's Community College in Maryland. In 1989, at 37, he joined GSA, where he assisted in contract administration as a GS-7. His supervisors quickly recognized his procurement expertise and willingness to take risks with innovative techniques that helped small businesses win more government contracts. Within nine years, he was promoted to a senior contracting position verging on a six-figure salary.
In June 1996, President Clinton appointed Robert L. Neal Jr., a GSA colleague and friend of Jones, to direct the Pentagon's Office of Small and Disadvantaged Business Utilization. That fall, Neal introduced Jones to Fannin. CI Squared Inc., Fannin's company, was pulling in less than $2 million a year, but he dreamed it would be the next Lockheed Martin or Northrop Grumman. To get there, Fannin knew he needed connections at GSA and the Pentagon. Senior contracting officials Neal and Jones could recommend CI Squared for contracts and shepherd the firm through the bidding process. Later, Fannin would call his efforts to wine and dine Jones and Neal "normal marketing."
"You try to visit with the potential customers, like during office hours, and since office hours were so busy, you try to meet them after hours at a bar or at meals or things of that nature," he testified at Jones' and Neal's 2003 trial on charges of conspiracy, extortion and money laundering. Fannin invited the men to upscale Washington restaurants, such as the Channel Inn, Mr. K's and Prime Rib. Soon, they were getting together four or five times a week.
Over those dinners, Fannin told Jones and Neal that he was especially interested in winning a blanket purchase agreement, a contract issued by GSA that would enable many agencies to buy technology services from CI Squared.
Jones and Neal often asked, "If we would help you, would you help us?" Fannin later would tell the jury.
Fannin said yes.
On March 14, 1997, Jones signed a blanket purchase agreement with CI Squared-later, Fannin would call it a "gift." The deal would bring the company $67 million in sales over the next five years.
Fannin also wanted CI Squared to enter the mentor-protégé program run through Neal's office. Neal hired Jones away from GSA to serve as his special assistant in February 1998. The program helps small businesses win Defense contracts and subcontracts by connecting them with larger companies already doing business with the government. Fannin estimated a mentor-protégé agreement could bring his company $1 million a year. While Fannin's application was pending, Jones and Neal again asked if he would help them if they brokered the mentor-protégé deal. Fannin asked what kind of help they wanted. Ten thousand dollars, according to Fannin's later testimony.
Soon afterward, Jones picked up Fannin for dinner at the Channel Inn. The two men had started meeting for dinner several times a week. When Jones stepped out of the car, Fannin slipped a bank envelope stuffed with $10,000 in cash into the glove compartment, according to his testimony. It was the first of many gifts. Fannin, along with other contracting friends, eventually would give Jones more than $2 million in cash, luxury watches and other gifts, according to Defense inspector general investigators. Within five years of Fannin's first cash deposit, the trail of gifts would prove Jones' undoing.
Why Take the Risk?
In the late 1990s, Francis Jones was living the American Dream. After growing up in a Washington neighborhood where the median income was $27,300 and 90 percent of kids qualified for free school lunches, Jones was a Senior Executive Service member making $90,000. He drove a Jaguar XJ8, collected Rolex and Omega watches and lived with his wife and two daughters in the Maryland suburbs 30 minutes south of downtown Washington. His three-story house sports a brick exterior with peach-colored siding. It rests on the corner of a quiet cul-de-sac in Prince George's County, where two-thirds of residents are black and the median household income is $60,000, making it the most affluent majority black county in the country. Still, Jones likely felt pressures that even a salary well above the American average of $42,000 per household didn't necessarily relieve. His daughters were nearing college age. There were weddings to save for. And there were houses up the street much bigger than his.
One of the most common reasons people commit white-collar crimes is a desire to "keep up with the Joneses," says psychotherapist Robi Ludwig, co-author of Till Death Do Us Part: Love, Marriage, and the Mind of the Killer Spouse (Atria, 2006). "We're a society that says people are valued based on how much they make," she says. "One thing that contributes to white-collar crime is this competitive desire to succeed." And how well you think you're doing depends on who you're comparing yourself with.
Criminologists rely on a theory based on the 1960s research of the late sociologist Donald R. Cressey, who suggested that white-collar crimes almost always involve three factors: financial pressure, access to funds and rationalization of the criminal behavior, such as believing one is underpaid or will pay back the "borrowed" money. "Unlike the person who robs a 7-Eleven, people don't wake up in the morning and say, 'I'm going to commit a white-collar crime today.' They cut corners and start taking greater and greater risks," says Peter Henning, professor of law at Wayne State University Law School and author of a blog about white-collar crime. "They convince themselves they're not doing anything wrong." Government contracting officials might have an easy time rationalizing their behavior because they constantly interact with contractors who make much more money. "It comes out of a sense of entitlement," says Henning.
Still, risking long prison sentences and public embarrassment for a few hundred thousand dollars, or even several million, might appear irrational. With a secure, well-paying job, why take the risk? "The most likely answer as to why people commit these white-collar crimes is that the probability of getting caught is vanishingly small," says Steven D. Levitt, economics professor at the University of Chicago and co-author of Freakonomics: A Rogue Economist Explores the Hidden Side of Everything (William Morrow, 2005).
What Happens in Vegas
In June 1997, shortly after CI Squared's mentor-protégé agreement was approved, Fannin invited Jones and Neal to meet him in Las Vegas. Mike Tyson and Evander Holyfield were fighting for the heavyweight world championship title, and Jones and Neal had mentioned that they'd like to go. Fannin bought tickets.
On Friday, June 27, the day before the fight, Fannin met Neal and Jones in the lobby of New York-New York, a four-star hotel on Las Vegas' south strip with a Statute of Liberty replica towering over its entrance. Fannin checked his friends into rooms on his credit card. A weekend of good food and gambling lay ahead.
On Saturday night, the group met at the MGM Grand Garden Arena. Fannin gave Jones and Neal two of the best seats he had. In the third round, Tyson clipped Holyfield on the side of the head and then moved in to wrap his arms around him. He bit down hard on Holyfield's right ear. The referee called time out. Tyson hit a bleeding Holyfield in the back as he walked away. The crowd roared. Tyson was disqualified and later fined several million dollars. Jones, Neal and Fannin made their way through throngs of pumped up fans to return to the New York-New York. They hung out in the lobby before catching a Chris Rock comedy show. After Fannin settled into his room for the night, he got a call. Jones and Neal were still gambling in the hotel's casino, but their luck was down, they told him. Fannin testified that he met them in a bathroom and forked over about $2,500 in cash. He later said that Jones might have reimbursed him for the fight tickets and airfare. Jones maintains he repaid Fannin the entire cost of the weekend. Fannin might have given him an occasional gift, Jones says, but "at the same time, I was giving him stuff, so it was more like a friendship kind of thing."
Within a few months of the Vegas trip, the three friends met for late afternoon drinks at the Grand Hyatt Hotel in downtown Washington. The men lounged near the hotel's glistening atrium lagoon where guests toss in coins for good luck. Fannin summoned a girlfriend and told her to invite other young women, in their mid-20s, who were open to having sex, Fannin told the court. When the women arrived, Neal and Jones introduced themselves as Tom and Jerry. The group decided to go upstairs. Fannin testified he paid the women $500, and Jones had sex with one of them.
By the next summer, Fannin was falling behind on his payments. Jones and Neal told him he owed them a total of $250,000, $125,000 for each year of the mentor-protégé agreement now entering its second year, he testified. He said Jones told him that if he didn't pay, Neal might blackball him, making it impossible for him to do business with the government. "If Robert [Neal] said you were a bad guy, that's when you turned to shit," Fannin said.
Still, he hesitated. If he wrote the men a $250,000 check, it could easily be traced back to him. He suggested setting up a blind trust in Liechtenstein, the Western European principality known for its lax financial regulation. Jones and Neal suggested he instead write a check to a company, Marsh Communications, owned by friends of Jones and Neal. Fannin wrote a $100,000 check to Marsh in September 1998, enough to stave off retaliation from Neal and Jones for the moment.
None of the three realized that their check-writing ruse was a waste. Someone was watching.
Almost half of fraud investigations in federal agencies are instigated by a tip from someone who notices something isn't quite right, according to the Association of Certified Fraud Examiners, an Austin, Texas-based professional organization. A 2006 survey by the Defense Contract Management Agency's Contract Integrity Center found that 80 percent of DCMA's employees who encountered suspicious activity reported it. The center recently started a confidential online reporting system to encourage more people to report their suspicions.
Russell Geoffrey, director of the center, says as the jobs of contractors and federal employees have become more closely intertwined in the past decade or so, people have become more hesitant to report fraud, perhaps because it would feel like tattling on a friend. Geoffrey says awareness that senior leaders support fighting fraud and public recognition of those who do so can encourage a culture of reporting suspicions, which helps catch improprieties before they blossom into full-blown scandals.
"When something goes wrong in an organization, it's because employees are getting the wrong signals from upper management. . . . People do what they think the boss really wants them to do," says Richard Bednar, senior counsel at international law firm Crowell & Moring, based in Washington, and coordinator of the Defense Industry Initiative on Business Ethics and Conduct.
The federal contracting world got a loud wake-up call about the potential for fraud in the 1980s, when investigators participating in Operation Ill Wind uncovered a widespread network of kickbacks and dirty deals. More than 90 companies and people were implicated in a complex web of bribes and ill-gotten Defense contracts. The investigation was launched after a defense contractor told the investigative arm of the Navy that a consultant offered to sell him secret details about an upcoming contract. The case led to enactment of the 1988 Procurement Integrity Act, which prohibits companies with contracts worth more than $10 million from directly hiring the federal employees overseeing them.
The Tipping Point
In 1998, an anonymous tipster had alerted the Defense Department Inspector General's Office to possible wrongdoing by a federal employee and a contractor that Jones and Neal had traveled with. That complaint sparked a four-year investigation. By the time Jones heard about it in 2000, he had started spending time with a new contractor friend, Ronnie Lewis, owner of R. Lewis & Company Inc., a minority-owned program management company based in Arlington, Va.
According to Lewis' testimony, he, like Fannin before him, gave Jones and Neal payoffs of $10,000 as well as Rolex watches and other gifts in return for assistance in winning no-bid contracts reserved for small and disadvantaged businesses. Fannin's relationship with Jones and Neal had deteriorated after Fannin stopped giving them money, and his company lost its mentor-protégé agreement when it was up for approval in its third year.
After learning of the investigation, Jones met Lewis at a McDonald's just south of the Capitol and showed him a document listing 14 companies and people the government was planning to subpoena. Lewis scanned the names and saw his own. He hadn't yet decided how to account in his company's books for checks he had written Jones and Neal. He sought Jones' guidance on whether they should be classified as an investment, loan or expenditure. Jones recommended loans or investments.
Jones wasn't overly concerned about the ongoing investigation. He saw it as an inevitable fact of life for a black man, especially a senior one who worked so closely with another black man, Neal. "It was just, 'OK, it's something else, another investigation. It'll blow over,'" he recalls thinking at the time.
On the morning of Oct. 18, 2002, investigators knocked on the door of Jones' house. The agents arrested him, searched his house and seized computer files, financial and travel records and engraved Rolex watches allegedly given to him by Lewis, all of which would later be used against him in court.
Even after hearing witnesses describe giving him cash payments and watching prosecutors produce records of contractors' checks written to him, Jones maintained his innocence throughout his July 2003 trial in Alexandria, Va. His lawyer, David Barger, argued that even if Jones had accepted cash payments, he did not have the power to award contracts to his friends. Barger also pointed out that the key witnesses, Fannin and Lewis, were admitted drug users. Fannin was addicted to crack cocaine, using as often as every two days during his relationship with Jones, and Lewis was an admitted heroin addict who also suffered from an anxiety disorder.
After a week of testimony from witnesses and government officials, the jury found Neal and Jones guilty of extortion, accepting bribes and fraud, among other charges. Matthew Friedrich, the assistant U.S. attorney who prosecuted the case, called it the most serious case of public corruption in defense procurement since Ill Wind. Neal and Jones each received prison sentences of 24 years and were ordered to pay $1.7 million, the approximate amount of money the government said the men gained from their illegal activity.
In the spring of 2006, after Jones and Neal had served almost three years in prison, their lawyers negotiated a deal that mitigated their punishment without a costly appeal. Jones' sentence was reduced to eight years, Neal's to nine years, and their fines were cut in half. If Jones' original sentence had held, Barger says he would have been unlikely to make it out of jail alive. Now 54, Jones had had a heart attack in his 40s.
Jones is serving his time at the Federal Correctional Institution in Cumberland, Md. The steel and concrete buildings, built within sight of the Allegheny Mountains, are surrounded by shiny barbed wire and circling armed guards in white trucks. About 1,200 male inmates are locked inside.
In April 2006, a prison manager walks Jones out from behind a metal door into the visitors' area. A sign near the entrance reminds inmates and their guests that embracing is prohibited, except at the beginning and end of each visit. Wearing a brown work uniform and bright white Nike sneakers, Jones walks with a slight swagger and offers a firm handshake with a warm smile. He sits in an orange plastic chair, sets his lightly tinted sunglasses on the chair beside him and crosses his hands primly. Even when occasionally dabbing his lightly perspiring forehead with a tan hand towel, he maintains steady, relaxed eye contact.
Jones blames his situation on a combination of racism and misunderstanding of the federal contracting system. "It's not like GSA or DoD had a lot of blacks in procurement situations," he says in his soft voice. "So once that happens, you're going to always be investigated for something." After all, he asks, why would Darleen Druyun, a white woman who pleaded guilty to giving Boeing Co. preferential treatment for a multibillion-dollar contract in exchange for a job, get a nine-month prison term while he got 24 years? "I should have cried at my trial like [Druyun] did," he says, chuckling.
As for the Rolex watches, he says he's been collecting luxury watches all his life and it was insulting for the investigators to say they were bribes. "I've got a six-figure salary, and you're telling me I shouldn't own a Rolex watch. . . . It's really weird," he says. Jones also says Fannin never put $10,000 in his car. The Pentagon's Inspector General's Office says checks, receipts, testimony and engravings on the watches show they were bribes.
Jones maintains that the jury didn't understand that contracts for small and disadvantaged businesses routinely are awarded without competition. He also believes Fannin and Lewis were coached by federal prosecutors and testified as they did to protect themselves. He says any help he gave Fannin and Lewis was legal. "It was doing your job and helping your friends. They called me and they said, 'Well, I have a solicitation, how do I fill this out, how do I fill that out.' And you just tell them. There's nothing wrong with that," he says. As for the occasional gift exchanged, that was just part of their friendship, he says, adding that he gave them things, too.
He has a lot of time to think about it. Jones gets up around 6 a.m. and works in the prison's pipe-fitting operation. He then spends the rest of the day exercising and reading best sellers like Dan Brown's The Da Vinci Code. He watches movies with other inmates at night. He shares a cell with two prisoners.
As a convicted felon, Jones never can vote again. He is prohibited from owning firearms and holding public office. He still owes the government $1 million as part of his sentence. Every time he applies for a job or a mortgage, Jones will have to disclose his conviction if he is asked.
Joseph McMillan, special agent in charge at the Defense Criminal Investigative Service, which worked with the Pentagon's Inspector General's Office on the case, angrily dismisses Jones' charge that the investigation was racially motivated. "That's crazy. He was investigated because he was corrupt. . . . There was nothing racial about that investigation at all," says McMillan, who is black.
An investigator of Pentagon corruption for more than 20 years, McMillan says the behavior of Neal and Jones struck him as particularly egregious because they demanded bribes from the small and disadvantaged companies that their office was designed to protect. "It's amazing that they would maintain that they'd done nothing wrong. This was a slam dunk," says McMillan. "They were prostituting the very function [they] were supposed to be protecting."