A former US Air Force master sergeant who adopted the nickname "Al Capone" has pleaded guilty to orchestrating a sophisticated fraud scheme that defrauded the military out of $37 million. Alan Hayward James, 51, from Texas, admitted to conspiracy to commit wire fraud, bribery, and bid-rigging for IT contracts with the US Department of Defense, specifically targeting the US Pacific Air Forces based in Hawaii.
Nine-Year Scam Uncovered
The fraudulent activities spanned nine years, beginning in April 2016. James manipulated the bidding process for IT contracts by conspiring with multiple competitors to artificially inflate costs. He instructed some companies to submit excessively high bids while others were told to bid "low and stupid," ensuring that co-conspirator companies won contracts at inflated rates. This scheme not only diverted taxpayer funds but also compromised essential military services by misallocating resources.
Distribution of Illicit Funds
Money from the fraud was funneled through shell companies and used to pay false salaries, including to family members of co-conspirators. A ledger obtained by the Justice Department revealed payments to an individual referred to as "Godfather," evoking imagery from mob movies. James also listed his parents in the ledgers as "Capone M" and "Capone D," while he named himself after the notorious real-life mobster Al Capone.
In one instance, James used government funds to finance an all-expenses-paid luxury resort stay on Oahu, Hawaii, for his co-conspirators. The getaway included golf outings, horseback rides, and massages, highlighting the extravagant misuse of public money.
Legal Consequences and Restitution
As part of his plea agreement, James has agreed to pay restitution of at least $1,451,656.80 to the Defense Department. While he could face up to 45 years in prison, defendants who plead guilty before trial typically receive reduced sentences. US Attorney for Hawaii, Ken Sorenson, emphasized that such bid-rigging and anti-competitive behavior erodes trust in institutions and harms taxpayers, vowing continued prosecution of similar crimes.
The case underscores ongoing issues with fraud and corruption in government contracting, particularly within defense sectors, and serves as a warning against market manipulation.
