Former defense contractor sentenced to 10 years in prison for fraud, money laundering and identity theft | USAO-WDWI


MADISON, WIS. — Timothy M. O’Shea, United States Attorney for the Western District of Wisconsin, announced that Craig Klund, 58, Yankton, South Dakota, was sentenced today by U.S. District Judge James D. Peterson to 10 years in federal prison for wire fraud, money laundering and aggravated identity theft.

Klund, formerly of Chippewa Falls, Wisconsin, pleaded guilty to wire fraud against the U.S. Department of Defense, as well as money laundering by transferring the proceeds of his fraudulent scheme in installments of more than $10,000 to multiple bank accounts. . Judge Peterson imposed a sentence of 96 months for each of these counts to run concurrently. Klund also pleaded guilty to aggravated impersonation when he used another person’s identity as the named owner of one of Klund’s defense contracting entities. Judge Peterson imposed a 24-month sentence on the charge following concurrent wire fraud and money laundering sentences of 96 months. Klund’s total prison sentence is 120 months, which will be followed by three years of probation. Judge Peterson also ordered Klund to pay $435,822.71 in restitution.

According to the indictment, Klund was a military contractor who supplied electrical parts to various branches of the US military, including the US Army for the Patriot missile system and the US Air Force for the F jet fighter. -16. From 2011 to July 17, 2019, Klund executed a scheme to defraud the DoD by obtaining defense contracts under false pretences.

Klund’s fraud scheme included: (1) using 15 shell companies to hide his control over entities bidding on DoD contracts; (2) the use of multiple pseudonyms; (3) repeated impersonation; (4) collusive offers submitted by multiple Klund entities on the same contract; (5) knowingly ship non-conforming parts and demand payment for such parts; (6) sign Federal Acquisition Regulation certificates using false names; (7) lying to Defense Contract Management Agency (DCMA) inspectors by pretending to be someone other than himself; (8) moving his business from Wisconsin to South Dakota to evade DCMA inspectors who were questioning his operations in Wisconsin; (9) concealing receipt of DoD proceeds by not reporting such amounts on its federal tax returns; and (10) launder DoD proceeds by moving funds between accounts.

Using 15 different fictitious entities, Klund submitted 5,750 bids and won 1,928 contracts worth $7,468,638. These contracts were for parts for the US Army, Air Force, Navy and Marine Corps. He was paid $2,905,484 during the fraudulent scheme.

At today’s sentencing, after listening to Klund’s speech, Judge Peterson told Klund that he believed Klund was a liar, who lied to the Department of Defense for an extended period of time, as well than to the judge. The judge also noted that Klund was an unusual fraud defendant because Klund had previous federal felony convictions, including two for committing defense fraud, making his criminal history a very important factor in the analysis of the case. sentencing by the judge.

Judge Peterson explained that this case involved an extensive fraud scheme that caused significant harm to the government because it was tricked into contracting with a twice-convicted criminal defense and was receiving parts from someone with who he didn’t want to deal with. The Court noted that deserving entrepreneurs, who played by the rules, were also victims of Klund’s criminal conduct.

In issuing this heavy sentence, Judge Peterson underscored the need to protect the public and the US government from a repeated fraudster who dishonestly supplied the military with defective parts capable of harming military personnel and the public.

The charges against Klund were the result of an investigation by the U.S. Department of Defense – Office of Inspector General, Defense Criminal Investigative Service; General Services Administration – Office of the Inspector General; and IRS criminal investigation. Assistant United States Attorney Daniel Graber handled the prosecution.

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