Crime Pays for Ex-Army Manager

Injustice in America takes many forms. Often it takes the form of when justice is not administered by the legal system.

"Don't be corrupt when administering justice. Never give special favors to poor people, and never show preference to important people. Judge your neighbor fairly." - The Bible

Sometimes crime pays handsome dividends due to ridiculously light court sentencing. This is the story of how Anthony (Tony) Shaw, an Army acquisition manager at the US Army Tank Automotive Life Cycle Management Command (TACOM LCMC) in Michigan, used kickbacks from an Army contractor to bail himself out of personal debt. Tony ends up being the winner, despite being ordered to pay restitution and serve almost 4 years in prison. In an episode that reminds us of the government bailout of AIG, Shaw personally benefited from taxpayer funds that bailed him out of over-leveraged real estate investments in the aftermath of the 2008 recession. Thanks to Tony's light court sentence, he will soon be retired at age 59 and very wealthy. Let's look at his case.

Summary:

Anthony Shaw, a former Deputy Project Manager once responsible for $65B in Army contracts, ensured that Army contracts were given to a Pennsylvania company named Ibis Tek that provided the US Army with materiel such as HMMWV windshields.

Shaw ran a side business investing in real estate rentals, at one point owning over 90 rental homes in the Detroit area. These over-leveraged homes got Shaw into financial trouble during the housing crash of 2008, causing him to accumulate over $400k in credit card debt.

Shaw knew that if he declared bankruptcy or couldn't pay his credit card obligations, he would lose his job. You see, Army acquisition professionals make decisions of how to spend millions of taxpayer $ to purchase Army equipment. When such people get over their heads in personal debt, their employment may be subject to termination. Army acquisition professionals must be impartial when spending taxpayer $ in the best interests of the nation. Personal debt creates too much of a vulnerability, as that person may be tempted to leverage their job to make some dough on the side through espionage or showing contractor favoritism in exchange for kickbacks.

Anthony Shaw shared his financial troubles with his Ibis Tek buddies, and they worked out a deal whereby Ibis Tek eventually paid Shaw $1,055,500 of illegal gratuities via the owner of a motorcycle shop in the Detroit area.

When caught, Shaw got 46 months in jail, and was ordered to pay back $100,000, plus $325,000 to the IRS. THAT'S IT. Do you see what happened here? Shaw got to keep over $600k of the $1.055M, and he got to keep his rental homes by paying off that $400k of credit card debt. One wonders if the judge received a kickback too?

Tony Shaw's Crime Payoff:

It is obvious that Shaw's sentence was hardly satisfactory. Let's do the math and see how his crime paid. Then we'll compare his resulting financial situation to my own.

Years in prison: 3.9
Illegal payments received from Ibis Tek: $1,055,500
Repayments ordered by judge: $100k penalty + $325k IRS back-payments
Tony Shaw's net cash profit: $630,500
Jail time: 46 months (3.83 years)
Free room/board and exercise facilities in prison paid by taxpayers for 46 months: ~$170k
Total net benefit: about $800k AFTER TAXES!
Additional benefit: Value of getting to keep his 90 rental homes instead of losing them to bankruptcy: between $1M and $4M. (Assuming he can sell them for $12k to $50k each).
Penalties to Tony's GS-15 executive-level salary received over his career: NONE
Penalties to Tony's Thrift Savings Plan (TSP)* fund balance: NONE
Penalties to Tony's government pension: NONE
Penalties to Tony's Social Security Benefits: NONE

Not a bad gig to earn $800k tax free in exchange for the easy life of sitting in jail for 46 months. That works out to getting paid a yearly salary of $208,700/yr tax free to go to jail, where he doesn't have to do a lick of work. There are people out there who would find that opportunity attractive, really. So essentially, Tony Shaw has a guaranteed job from Oct '17 thru Aug '21 where he gets paid $450 every day tax free to sit around eating free meals and watch tv and get an hour of exercise time. When he is released at age 59 1/2, he will be set for a wealthy retirement. WHAT WAS THE JUDGE THINKING???

Comparison:

Compare this to my situation. I worked 25 years in a "prison" of a civil service job I mostly hated. In a single year I saved the government over $5M on a spare parts contract, which essentially means I not only worked for free my entire career, but also "paid" the government millions extra to do so. (As an aside, ironically I received no performance award that year due to sequestration.) During those 25 years, I received a paycheck and saved for my retirement in the TSP. Now I have a small government pension, get to live off my TSP, and can look forward to Social Security Benefits in my 60's.

But Tony Shaw gets all this - the TSP, pension, and Social Security benefits - at much higher levels than myself considering he made a much greater salary than I did. And on top of all this, he gets to keep over $630k of tax-free cash from Ibis Tek that were ultimately paid for by taxpayer funds received from Army contracts.

Conclusion:

So in this instance, crime paid. At least in the short run. I wonder if the judge in this case is trying to send the message that you should consider going into crime yourself if you want a cushy retirement? Or maybe the message is "steal from the taxpayer, and be rewarded?" How does a restitution payment of $100k from $1M received even make the man's eyebrows slightly twinge? He just won the lotto!

"No one made me do this, I regret my actions." - Tony Shaw

Yes, Tony regrets his actions... all the way to the bank.

* Note: The TSP is the government's 401k equivalent for civil service workers and retirees, and now also for uniformed service members.

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