An Associated Press story making the rounds today follows up on a stunning corruption case first reported by the Eugene Reigster-Guard. The story concerns an ongoing corruption case involving an Ashland-based defense contractor and a contracting official with the U.S. Army Corps of Engineers.
The contractor, Sky Research, Inc., is owned by Sky—that's his full legal name—and his wife, Anne Sky, pictured. Their attorney has denied the allegations in a statement, saying the case laid out in two recent federal search warrant applications by U.S. Army criminal investigators was based on "rumor and speculation."
The basics of the investigation—which has not yet produced criminal charges or a civil complaint—are laid out in the July 21 Register-Guard story:
[A] major fraud division of the U.S. Army is investigating allegations that the Ashland company bribed [USACE contracting officer Jerry] Hodgson with vacations, food, alcohol and attractive female office assistants during his frequent visits. In exchange, Hodgson allegedly helped Sky Research rig and win bids and signed off on the company’s fraudulent expense claims to the government, according to an investigator’s sworn statements to obtain the warrants.
In two 40-page affidavits, U.S. Army Special Agent Derek Lindbom reported that Hodgson acknowledged sexual relationships with three of the company’s office assistants and a close friendship with its owners. Lindbom also reported that multiple employees said Hodgson gave the company sneak peeks at contract scenarios and that he advised them how to beat competitor’s bids and exaggerate the size of a job in order to receive more government money than it cost to perform.
Sky Research has received some $160 million in federal contracts since 2004.
The most shocking allegation in the investigators' affidavits is that Hodgson favored Sky Research not only because of his close personal friendship with its owner, but because Sky repeatedly hired female employees for Hodgson and encouraged them to let Hodgson pursue them sexually.
In the affidavit, Hodgson admits to sexual relationships or encounters with three Sky employees: Tracie White, Meggan Pickner and Cindy McClaughlin. Several women confirmed those relationships in court documents.
The court files contain much more detail than the AP and Register-Guard stories. For example, the following excerpt from the affidavit of Special Agent Lindbom shows how just how close Hodgson was to Sky and the company's employees:
On May 3, 2012, I interviewed Meggan Pickner, a former project manager for SRI who worked for them from over nine years. Pickner said she began working for SRI when she was 21 years old and was not initially sure what was legal or illegal, but the longer she worked there the more she realized what was wrong with SRI. Pickner said once SRI began to hire industry experts…she started to learn that SRI's actions were unethical and illegal.
Pickner said SRI had a position that was designed to provide support to Hodgson, stating that SRI staff even worked on projects not affiliated with SRI. Pickner said the first person in this position was White, followed by [Karlie] Shaw, then [Nicole] Thorsky. Pickner said Hodgson attended the interview of Shaw, but was unsure if Hodgson traveled to Denver on a personal trip or on official business. …
Pickner said Hodgson had a "type," which she described as a young female, thin, and attractive. Pickner said Sky made it clear he wanted SRI to hire women who were Hodgson's "type." Pickner said most contracts had an extra task, "task 9," which was not for the project but was used to pay for Hodgson's personal assistant. …
Pickner said when she attended dinners with Sky and Hodgson, Sky always paid. Pickner said it was very common for Sky to pay for Hodgson's meals and alcohol when Hodgson visited Denver. Picker said it would cost about $40 or $60 per person. Pickner recalled one time when Sky rented a Limo for everybody, including Hodgson, in St. Louis, MO. Pickner said Hodgson never paid Sky back for any of the expenses. Picker said it was well known at SRI they were not supposed to pay for things for government employees, noting there is an annual limit of $20 for government employees. Pickner said SRI employees knew not to get things for other USACE employees, but stated Hodgson was the exception. …
Pickner said she had two separate sexual encounters with Hodgson, but related she did not have sexual intercourse with him. Pickner said the first occasion occurred at an SRI function in Vail, CO, in the early 2000s. Pickner said Hodgson tried to have sex with her, but he was apparently too drunk to get an erection. Pickner said earlier in the evening Sky had told her to dance with Hodgson. Pickner said the second occasion occurred in New Orleans, which also occurred early on in her career at SRI. Pickner said she did not feel she was pressured to have sex with Hodgson, but she did feel pressure from Sky to flirt with him. …
Picker said SRI "definitely" had an unfair advantage obtaining contracts from the USACE due to the relationship between Sky and Hodgson.
Lindbom also interviewed a Sky Research employee who believes she was fired because she didn't sleep with Hodgson:
On May 3, 2012, I interviewed Suzanne Kaufman, a former project manager for SRI. Kaufman said she had been involved in numerous conversations where Hodgson would talk about how much money he had in his budgets and where SRI needed to come in at on different projects. …
Kaufman said she recalled a "Jerry" task, which she said was built into every contract. Kaufman said the task was more for Hodgson to bill against. Kaufman said [Sky Research cost project manager Kurt] Wells handled this task, and she felt like this task was the "party fund."
Kaufman said she would describe her relationship with Hodgson as initially professional then turned to be more casual. She said Sky encouraged her to have more of a relationship with Hodgson. Kaufman said Hodgson made two sexual advances towards her and she rejected him both times. Kaufman said shortly after Hodgson made a second sexual advance towards her which she rejected, she was terminated. Kaufman believes this could have been the trigger for her termination.
Kaufman said the only reason SRI got the Port of Seattle project was because of Hodgson, stating SRI was not qualified to perform the work required. Kaufman said SRI falsified who was going to be on the project in order to meet the requirements, and Hodgson was aware of this fact.
Sky Research may not have been the only company Hodgson approached in this way.
Indeed, the affidavit cites a series of emails between Hodgson and Cynthia Liu, president of Engineering Remediation Resources Group, Inc., another Corps of Engineers contractor based in California and with an office in Portland.
Liu emailed the following to Hodgson on Feb. 19, 2011, the affidavit says:
"Hi, Well it's another dreary Saturday in the Bay Area, but I'll soon be on another plane hurling toward Honolulu - was thinking about you. Just saw this pre-solicitation notice…and was hoping to get your opinion on whether we would have a snowball's chance in Hawaii ... After all this salivating over the MEGA strategy, then this. Hope you're doing well, I've got my flashlight ready.
Hodgson replied on Feb. 20:
"Hmmmmm ... hawaii sound really good right now ... I'll bring extra batteries :-)
Liu's reply, Feb. 20:
"Hey, what do I need to do to convince you that you need to check up on your contactor in Hawaii? I think we need to strategize ... Or maybe some bad behavior would get us some attention ;)"
Hodgson's reply, Feb. 22:
"No convincing needed, I know what I'm missing :-(. - just need to help me figure out how to have more than 7 days in a week .... I think you should throw your hat in the ring on this and use me as a reference ... .I work pretty close with this group sometimes and if they ask me I can make a difference …
Bottom line is you (errg) have convinced me that you could do well on a contract like this and I wouldn't be [shy] telling anyone that ..... Man ... missing the beach and a warm night, cold beer, and a warm hand"
Liu's reply, Feb. 22:
"Thanks for the support and encouragement. You and your team have made it easy for us and we really appreciate it. Your emails keep us all highly motivated, which makes work so much more bearable ... Speaking of bearable, having you here right now would make the long flight, muggy weather, and warm nights much more so. I'd like to squish my toes in the sand with you, counting the stars ... "
The investigator's affidavit says Liu equivocated on the question about the nature of her relationship with Hodgson:
On June 27, 2012, I interviewed Cynthia Liu… When asked if she had a romantic relationship with Hodgson, Liu initially said she did not feel comfortable answering the question, but later denied having had a romantic relationship with Hodgson. After having read [the emails], Liu described the content of the email as "flirting," but said it was not an indication of a romantic relationship.No charges and complaints have been filed against ERRG, either.