Saturday, May 16, 2015

Great Idea, Too Bad it's Illegal

The secret to a successful pyramid scheme - taxpayer's money

My good friends in the Bureau of Overseas Buildings Operations got bad news yesterday when one of their coworkers was indicted on charges of fraud and conflict of interest and it was announced that a former coworker, recently retired, pleaded guilty last month to conflict of interest charges in the same scheme.

And what was the purpose of all this conspiring and defrauding and conflict of interest? It was to sell overpriced soy protein shakes to security guards and construction surveillance technicians working at OBO construction sites. Yes, really. The two OBO officials ran a multi-level marketing business on the side, and sold the products to employees of an OBO contractor who provides personnel to monitor construction sites while new embassies are being built. At some point, the two crossed the line into crime when they began to approve fake invoices that reimbursed OBO's site security program contractor for all those soy shake purchases.

From the Justice Department announcement:
Tony Chandler, 68, of Severn, Maryland, and Marvin Hulsey, 52, of Stafford, Virginia, were indicted by a federal grand jury today on charges of conspiracy to commit wire fraud and wire fraud. Chandler also faces charges for conflicts of interest in the same indictment.

According to the indictment, Chandler was employed by the U.S. Department of State with duties as a contracting officer’s representative in the Bureau of Overseas Buildings Operations. In that capacity, Chandler was responsible for oversight of the contractor that employed Hulsey as a program manager. Apart from his government employment, Chandler was an authorized distributor of nutritional supplements for a multi-level marketing company. From 2008 and continuing into 2010, Chandler earned a commission of sales for nutritional supplements that were sold to employees under Hulsey’s supervision. The employees were reimbursed by Hulsey’s employer for the cost of the nutritional supplements, after which Hulsey, through agreement with Chandler, caused fake invoices to be created and submitted to the U.S. Department of State. Knowing that the cost of nutritional supplements was not an allowable cost, Chandler approved many of the fake invoices in his official capacity, causing the U.S. Department of State to make fraudulent payments back to Hulsey’s employer. Chandler earned a commission from the multi-level marketing company for each sale of nutritional supplements.

In a related case, on April 23, 2015, Gene Goodsell, the former U.S. Department of State supervisor of Chandler, pleaded guilty to a conflict of interest. According to documents filed in that case, Goodsell, who sponsored Chandler as an authorized distributor of nutritional supplements and earned commissions on each sale made by Chandler, became aware that Chandler sold nutritional supplements that were billed to the U.S. Department of State, and despite then knowing of his own personal financial interest in the contract, Goodsell continued to make official decisions concerning the contract.

Not to condone anyone, but maybe an unindicted co-conspirator here is the multi-level marketing business model, with its constant monkey-on-the-back need for 'topline' distributors to recruit more 'downline' layers to the pyramid.

The guy at the top probably paid a license fee to become a distributor, and probably also had to sign a contract to buy a certain product volume each month or quarter. He certainly doesn't want to drink all those shakes himself, so he basically solicits everybody he knows to recruit 'downline' layers, who recruit everybody they know, and so on, until someone somewhere has to actually buy the products. The 'topline' distributor then, in theory, receives a percentage of sales made by each lower layer of the pyramid.

I doubt it really works out that well for most distributors. Making the U.S. taxpayer the unwitting bottom layer of the pyramid was a great solution to the multi-level marketing dilemna, but unfortunately for my friends in OBO, it's not legal. 


Anonymous said...

Ray, is that you?

Anonymous said...

That's awful.

TSB said...


It's pretty awful, I agree.

No, my name is not Ray. But, if you work in OBO/SM, then we probably have some acquaintances in common.


Anonymous said...

You sound like Ray; you write like he talks. That's no insult, Ray's a bright guy. I like him; but he does have the most pitiful looking dog. I digress.

Surprised there has not been more publicity that has come from this that would grab more folks attention.

Can I call you Mr. 6? (Looks like dr. Evil, with a really catchy tune).

Have a good day.

- 20

TSB said...

Mister 6, the dancing geezer guy from those old Six Flags commercials? Sure, why not?

Anonymous said...

You seem to have a lot of insight, Mr. 6...or should I say...JIM! "No. Not Really. I can't back that up."

Any gut feelings that this may be the tip of the iceberg? Do you think now that the top part of the pyramid is coming off if in fact they are found guilty, there are any lower levels that will fall?

If guilty, what do you expect their punishment/fine/incarceration may be?

TSB said...


No, not Jim, sorry. I really don't have all that much insight, either, since I didn't even know those two guys were running a marketing business on the side.

But, I don't think there are any more indictments coming. Goodsell abruptly retired and then pleaded guilt back in April, with no public notice of that until last Friday, which I take as a clue that he informed on Chandler as part of a plea deal. There probably isn't anyone else for for Chandler to inform on.

Their punishment will include fines for sure, and very likely some jail time. Goodsell probably saved his pension by cooperating against Chandler. Sad.

Anonymous said...

That was a dr. Evil line, btw.

Do you have access to PACER?
Do you plan on updating with whatever sentencing they all receive?

Thanks, TSB.

TSB said...

Dr. Evil! Riiiight. Thanks, that went over my head.

I wasn't able to get into PACER, but I think the Washington Post will cover the sentencing. Also, I wouldn't be surprised to see State put out some kind of post-sentencing press notice with a reminder to employees about ethical obligations, etc.

Anonymous said...

Unfortunately, those notifications are still necessary.

Take care, 6.

Anonymous said...

TSB: Best fact I got from Rand Paul's speech on the Patriot Act: It authorizes the FBI to collect phone metadata.. not the NSA. Too bad so few politicians want to debate when it comes to the constitution. gwb

TSB said...

GWB: I'm not opposed to somebody collecting telephone metadata, so long as it's sequestered until there is a search warrant. If it isn't collected, then there is nothing to search after a warrant is issued. There ought to be a constitutional solution for that somehow.

Anonymous said...

TSB: I agree. The Feds don't want to have to bother with a warrant. The Senators don't want a debate and it looks like Rand's speech spooked em enough to keep this thing blocked. Of course Obama will probably just give NSA what they want with a secret order but way to go Paul!! gwb

TSB said...

GWB: The latest for now is the Senate has refused to reauthorize bulk data collection. Personally, I'd like to see much of the Patriot Act reversed and the post-9/11 security state wound back down. However, I do think modern phone technology creates a legitimate need for bulk data collection. Otherwise, they'll be no haystack in which to search for those needles when a court authorizes it.

Thymespan said...

What was the sentence for Chandler and Curtis Wrenn?

TSB said...


Someone told me Chandler got both a fine and jail time, but I don't recall the specifics. Sorry. I couldn't find anything on line, which is odd. If I learn anything further, I'll update this post.