Former waste executive guilty of contract fraud

February 03, 1994|By Marcia Myers | Marcia Myers,Sun Staff Writer

A former vice president of Eastern Waste Industries Inc. was convicted in U.S. District Court yesterday in connection with a scheme that defrauded more than $1 million from Montgomery County's minority set-aside program.

Edwin J. Johnson was convicted on six counts of mail fraud and could be sentenced to five years in prison and fined $250,000 for each count when he is sentenced by U.S. District Judge J. Frederick Motz on April 12.

During the five-day trial, prosecutors described how Johnson and others used shell companies that masqueraded as minority-owned firms in order to qualify for lucrative contracts with the county. Johnson headed operations for the Annapolis-based waste management firm, one of the largest in the nation.

Montgomery County requires that recipients of contracts worth $65,000 or more channel 20 percent of the work to minority-owned firms -- defined as a company owned by an African-American, woman or disabled person.

By using bogus firms, EWI officials won more than $5 million in contracts between January 1990 and May 1992.

The company pocketed nearly $1 million that should have gone to legitimate minority firms, prosecutors said.

For example, a female billing clerk for EWI and a sales secretary posed as operators of separate waste hauling firms when they successfully applied to Montgomery County for minority status. They were among four people who fronted for shell companies and were paid a small percentage of the contract in exchange.

"This should send a message that businesses cannot use sham companies in an attempt to comply with minority procurement laws," said Assistant U.S. Attorney Jane F. Barrett, who handled the case with co-prosecutor Ira Oring.

Johnson had testified that he believed such arrangements were legal as long as a minority benefited financially.

Paul Leaman, who managed EWI's Beltsville division, pleaded guilty last month to one count of mail fraud for his role in the scheme.

Johnson is among seven current and former EWI officials who will be tried in April on separate charges connected to an over-billing scheme.

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