Ex-GSA contracting officer also charged in connection with the scheme, for allegedly accepting more than $100,000 in bribes.
The former owner of a Maryland security firm pleaded guilty Wednesday to lavishing an ex-General Services Administration contracting officer with shopping bags filled with cash and an expensive Caribbean cruise in exchange for federal contracts worth more than $130 million.
Michael Holiday, 50, of Silver Spring, Md., admitted in U.S. District Court to bribing a federal official and then failing to pay more than $400,000 in federal taxes on his ill-gotten earnings. Holiday also pleaded guilty to an unrelated charge of transporting child pornography by computer.
Dessie Nelson, 65, a former GSA contracting officer, and Richard Hudec, 44, a former top official with the security firm, then known as Holiday International Security, were charged Wednesday in connection with the scheme. The company was sold in 2003 to Hudec's wife, Lisa, and renamed USProtect Corp. Lisa Hudec has not been charged with any criminal wrongdoing.
The case is the largest corruption case ever prosecuted in Maryland, in terms of the size of the contracts involved, according to U.S. attorney Rod Rosenstein.
"Government employees are given broad discretion about how to spend taxpayer money," Rosenstein said. "Their decisions must be based on which contractor provides the best service to the public at the lowest price, not on which contractor offers the best bribe to the employee at the highest price."
According to prosecutors, the plot traces back to May 2000 when Nelson awarded Holiday International Security a $50 million, five-year contract to provide armed security guards at GSA buildings in Southern California. The company's proposal was $10 million higher than that of the lowest bidder.
The following February, Nelson awarded the firm a five-year, $30.5 million contract -- again not the lowest offer -- to protect GSA buildings in Northern California.
Prosecutors said the company's poor performance on the contract attracted the attention of GSA officials. In a May 2002 "cure letter," GSA cited the company's unqualified employees, its lack of required training, the absence of medical and drug test forms and missing firearms licenses. Despite threats to cancel the contract, GSA exercised all four option years.
Nelson also allegedly helped Holiday International earn a $50 million contract to protect a Social Security Administration facility in Baltimore by providing an overly favorable review of the company's work on the West Coast. In her recommendation, Nelson made no mention of GSA's complaints about the firm's work.
In exchange for the advantageous treatment, Holiday said he plied Nelson with more than $100,000 in bribes and gifts. On one occasion, he reportedly gave Nelson a shopping bag filled with $35,000; another time it was an envelope stuffed with $10,000. An April 2002 deposit, Holiday said, included a $7,000 cruise.
The arrangement came to light when SSA's Office of Inspector General received an anonymous letter alleging improprieties with the agency's contract with Holiday International. Michael Robison, special agent in charge of the investigation for the SSA IG's Philadelphia office, said the letter sparked a far-reaching and surprisingly complex investigation.
Neither SSA nor the U.S. Attorney's Office would elaborate on the contents of the letter.
"It is our hope that today's announcement will serve as a clear warning to those who would attempt to defraud Social Security that neither we, nor any of the agencies represented here today, will allow such crimes to go unpunished," Robinson said at a press conference Wednesday.
Holiday is scheduled to be sentenced on Jan. 23, 2008. He faces a combined 20 years in prison on the bribery and tax evasion charges and another 20 years for the child pornography charge. Prosecutors said Holiday agreed to trade sexual videos of underage children with an undercover FBI agent in an Internet chat room.
Nelson is charged with accepting bribes and later evading taxes on the payments. She faces 20 years in prison and a $250,000 fine if convicted of both charges. Nelson began working for the federal government in October 1979 and retired last November from the Public Buildings Service, according to a GSA spokesman.
Hudec, the company's former chief financial officer and chief operating officer, is charged with scheming to conceal information from federal contracting officials -- including four prior felony convictions that would have hindered the contract awards -- and tax evasion. Hudec, who left USProtect in January 2005, faces 10 years in prison if convicted.
Attorneys representing Holiday, Nelson and Hudec did not return calls requesting comment.
USProtect has provided both armed and unarmed security guards for at least 18 federal agencies, including for the FBI Academy in Quantico, Va., and for the Air Force at more than a dozen bases. Many of the contracts cited in the indictments have since been re-competed and won by USProtect.
NEXT STORY: Army to consolidate environmental contracts