Third Adams Produce Company Official Charged with Fraud
|U.S. Attorney’s Office February 06, 2013|
BIRMINGHAM—Federal prosecutors have charged a third Adams Produce Company official in connection with fraud at the bankrupt Birmingham distributor of fresh fruits and vegetables, announced U.S. Attorney Joyce White Vance and FBI Special Agent in Charge Richard D. Schwein, Jr.
The U.S. Attorney’s Office today charged David Andrew Kirkland, the company’s director of purchasing, with conspiracy to defraud the federal government of several hundred thousand dollars through a scheme to create false invoices and purchases orders. In a plea agreement also filed today in U.S. District Court, Kirkland agrees to plead guilty to the conspiracy charge.
“This defendant was an officer of Adams Produce Company who joined other employees in a fraud meant to cover the company’s deteriorating financial condition,” Vance said. “The fraud included cheating the government on contracts involving military bases and schools. The investigation of wrongdoing by former Adams officers and employees continues, and any who have committed crimes will be held accountable,” she said.
Kirkland, 44, formerly of Birmingham and now living in Texas, is charged in the same purchasing fraud scheme as Christopher Alan Pfahl, a purchasing program specialist for Adams Produce. Kirkland was Pfahl’s supervisor. Pfahl, 41, of Birmingham, was charged in December and pleaded guilty in January to conspiracy to defraud the government of $481,000 on produce contracts.
On January 29, the U.S. Attorney’s Office charged Adams Produce Chief Executive Officer Scott David Grinstead, 45, of Birmingham, with fraud against the company, failure to report a felony against the government, and failure to file federal income tax returns. The felony that Grinstead is charged with being aware of and not reporting is the purchasing scheme.
According to the charges and plea agreements in the three cases, Pfahl, Kirkland, and other employees of Adams Produce engaged in a scheme to create false records that reflected a higher purchasing cost for fruits and vegetables from a national distributor than Adams Produce actually paid. The inflated costs were then presented to the U.S. Government, which had agreed to pay a certain amount over Adams’ cost for produce.
The federal government, through the Defense Supply Center Philadelphia, was one of Adams’ customers. The supply center contracted with Adams Produce to provide fresh fruits and vegetables to military bases, public school systems, junior colleges, and universities. Adams Produce entered into contracts with the government worth millions of dollars, according to court records.
Grinstead is charged with knowing of the fraud against the government and allowing it to continue and end slowly, so as to avoid raising red flags with the government, rather than stopping the fraud and reporting it to authorities. Grinstead also is charged with wire fraud for wiring hundreds of thousands of dollars from an Adams Produce account to American Express to pay for clothing, jewelry, personal travel for himself and his family, lawn care at this home, and items for a house on Lake Martin.
Grinstead faces two counts of failure to file a federal income tax return, one for 2009 and one for 2010. According to the charges, Grinstead had gross income of about $748,801 in 2009 and about $1,878,700 in 2010 and willfully failed to file tax returns with the Internal Revenue Service for either year.
Grinstead has agreed to plead guilty to the charges against him. As part of his plea agreement with the government, he must pay $450,000 in restitution to the bankruptcy estate of Adams Produce for the benefit of the company’s employees who were not fully paid when Adams closed abruptly and filed for bankruptcy last year.
The FBI and the Internal Revenue Service investigated the cases, which Assistant U.S. Attorney George A. Martin, Jr. is prosecuting.