For additional details, beginning with the bankruptcy case, please see our previous coverage.
John Alexander pleaded guilty to one federal charge instead of facing trial on a 33-count indictment, becoming the sixth Adams Produce Co. executive to plead in the investigation into defrauding the government.
Alexander is free on bond pending a sentencing hearing set for Feb. 25, according to court documents. He was chief financial officer at the now bankrupt Birmingham, Ala., produce company from 2007 until it suddenly closed in April 2012.
U.S. District Court Judge Virginia Hopkins dismissed the 33-count indictment on Oct. 30. Alexander entered his guilty plea Oct. 29 to “misprision of a felony,” admitting he knew about the fraud scheme and failed to report it to authorities.
Alexander faces up to three years in prison and/or up to $250,000 in fines, or supervised release of no more than one year.
He must pay $481,000 in restitution jointly with four other former Adams Produce officials who have pleaded guilty. He also agreed to continue to help the government investigate the case and testify against other former Adams employees.
Other executives involved
Former CEO Scott Grinstead also negotiated a plea agreement in the case, but he is not among those who must jointly pay the restitution. Grinstead was sentenced to prison in the case.
Others who pleaded guilty are purchasing director David Kirkland, distribution center general manager Michael O’Brien, purchasing agent Stanley Butler and purchasing program specialist Christopher Pfahl.
Steve Finberg, former chief operating officer at Adams, faces 33 counts. The case, filed May 29, is still in the discovery phase.
In Alexander’s plea agreement, he admits that in October 2011 he “instructed” Kirkland and O’Brien “to gradually end the scheme to defraud — telling them to bring it in for a soft landing — rather than ending it immediately so as to avoid raising red flags and better avoid detection” by federal officials.
Alexander also admitted that on Oct. 31, 2011, he “prepared and released financial statements for the month of September 2011 knowing that the financial statements contained increased earnings based on fraudulent transactions.”
In addition to possible prison time, Alexander will be barred for at least five years from doing business with the federal government and his information will be entered in the Defense Procurement Fraud Debarment Clearinghouse database. Only a waiver from the U.S. secretary of state declaring national security interests can alter the debarment, according to the plea agreement.
Whistleblower says scheme was much larger
The scheme, according to the multiple plea agreements, lasted from at least July 2011 to December 2011. A whistleblower who filed a case in 2010 contends the fraud dated back to at least 2006 and cost the government $15 million to $20 million.
The whistleblower case was sealed, as required by federal law, and not made public until it was settled in late 2013.
Charles Hall, the whistleblower, was director of operations at the Adams Produce warehouse in Memphis, Tenn., from June through September in 2009. He claims company officials intentionally and illegally marked up fresh produce it was selling to the government’s Defense Supply Center by 30% to 40%.
The federal government, Hall and Adams Produce negotiated a settlement in the whistleblower case. Adams Produce agreed that the government did not have to pay $250,000 of the $293,000 it owed to the company at the point it went bankrupt. The government agreed to pay Hall almost $44,000 as is allowed by federal law.
Adams was buying the produce from the Tom Lange Co. distribution facility in Marietta, Ga., according to multiple court documents referring to the company as T.L.C.
“Officers and employees of Adams Produce would and did arrange and conduct transactions with T.L.C. designed to create fraudulent purchase orders reflecting a higher cost to Adams Produce of purchasing fruits and vegetables,” according to court documents.