United States Brings Civil False Claims Act Suit Against Delaware-Based Textile Manufacturer for Bribery of an Amtrak Official and Conspiracy to Rig Bids

PHILADELPHIA— United States Attorney William M. McSwain announced that his Office filed suit against First State Manufacturing, Inc. (“FSM”), a Milford, Delaware corporation, for violating the False Claims Act. The United States alleges that FSM, through its executive management, bribed Timothy Miller, a former Amtrak procurement official, in order to receive lucrative contracts from Amtrak. More specifically, the United States alleges that FSM executives provided cash, kickbacks, and vacations to Miller and, in exchange, Miller provided FSM with bidding information that allowed FSM to win the contracts. Once FSM secured the contracts, it allegedly furnished substandard textile products and conspired with Miller to inflate prices, costing taxpayers even more. FSM allegedly attempted to conceal the bribery scheme by directing Miller to falsify records and establish a fake company through which FSM paid him as a “consultant.” The complaint alleges that as a result of this scheme, FSM secured six contracts from Amtrak between August 2015 and April 2018.

The United States and FSM have also entered into a Consent Judgment, subject to the Court’s approval, that would resolve the matter without litigation. If approved by the Court, the Judgment would require FSM to pay $393,250.07 to the United States. The settlement amount is based in part upon the company’s financial status.

Previously, Miller and two FSM executives were criminally prosecuted by the U.S. Attorney’s Office for the Eastern District of Pennsylvania. For his role in this scheme, Miller was sentenced to one year and one day in prison. Donald Scott Crothers, FSM’s Vice President for Marketing and Contract Administration, received a sentence of eighteen months in prison for his role in the scheme. John Gonzales, FSM’s Chief Executive Vice President and Chief Financial Officer, is awaiting sentencing.

“As alleged, FSM performed an end-run around an honest bidding process, illegally stacking the deck in its favor,” said U.S. Attorney McSwain. “The United States’ complaint lays out, in painstaking detail, FSM’s alleged bribery scheme, including kickbacks through a fake consulting company, cash payments made under the cover of night, and improper price adjustments directed by a corrupt organization. Let this be a warning to anyone who thinks they can perpetrate and hide a bribery or bid rigging scheme: my Office will bring to bear all of its resources, both civil and criminal, to make sure that all culpable parties are held accountable.”

“Today’s actions represent our commitment to seek justice and hold accountable those who violate the law,” said Kevin Winters, Amtrak’s Inspector General. “We appreciate the seamless collaboration with the U.S. Attorney's Office as well as the sustained professionalism exhibited by our investigative staff and partner agencies in moving the case to this next phase.”

“Today’s civil complaint against First State Manufacturing demonstrates our commitment to use all available legal remedies with respect to those who seek to enrich themselves through fraud, bribery, and bid-rigging at the expense of the Federal government and honest businesses,” said DOT OIG Regional Special Agent-In-Charge Douglas Shoemaker. “DOT OIG will continue to work with our law enforcement and prosecutorial partners to pursue financial justice on behalf of the American taxpayer.”

The complaint contains allegations only, and not findings of liability.

The investigation was conducted by the Amtrak Office of Inspector General and the Department of Transportation Office of Inspector General. The civil investigation, litigation, and resolution are being handled by Assistant United States Attorney Paul J. Koob.