Defense contractor sentenced

GREENEVILLE, TN — On Aug. 6, the former President and Chief Executive Officer of Wellco Enterprises, Inc. (Wellco), and Tactical Holdings Operations, Inc. (Tactical Holdings), Vincent Lee Ferguson, 66, of Knoxville, Tennessee, was sentenced by the Honorable J. Ronnie Greer, U.S. District Judge, to serve 41 months in federal prison for his role in a wire fraud conspiracy.

Wellco’s former Senior Vice President of Sales, Matthew Lee Ferguson, 41, of Geneva, Illinois, and former Director of Marketing and Communications, Kerry Joseph Ferguson, 36, of Houston, Texas, were previously sentenced in June to each serve six months in federal prison for the same crime. There is no parole in the federal system.

Wellco was a leading manufacturer and supplier of military footwear to the U.S. Department of Defense (DoD) and to civilian customers for over 70 years. From 2006 through 2012, DoD alone paid in excess of $138 million to Wellco for the supply of combat boots.

From December 2008 through August 2012, CEO Vincent Lee Ferguson conspired with his executive team to import military-style boots that were made in China into the U.S. and then deceptively market and sell those boots to DoD, government contractors, and the general public as “Made in the USA” and as compliant with the Berry Amendment and the Trade Agreements Act (TAA). The company sold over $8.1 million in fraudulent boots.

To conceal the fraud, the conspirators required the Chinese manufacturing facility to include “USA” on labels of boot uppers. After two shipments of these deceptively marked boots were seized by the U.S. Department of Homeland Security’s Customs and Border Protection, the conspirators ordered the Chinese facility to stitch tear-away “Made in China” labels in Wellco boot uppers. After importation, the conspirators instructed Wellco factory workers in Morristown, Tennessee, to tear out the “Made in China” tags prior to shipping the boots to government and commercial purchasers.

“The U.S. Attorney’s Office will prosecute aggressively dishonest companies and individuals who take advantage of the United States and potentially put our military men and women in danger by fraudulently selling them counterfeit equipment which does not meet the standards set by the Berry Amendment and the TAA,” said U.S. Attorney J. Douglas Overbey.

John F. Khin, Special Agent in Charge, Southeast Field Office, Defense Criminal Investigative Service (DCIS) said, “While the United States continues to combat enemies foreign and domestic, corrupt individuals attempt to take advantage of our service members and exploit our Defense Department’s supply chain. DCIS investigations relentlessly pursue allegations of fraud, waste and abuse. This sentencing is one of countless examples of the impact DCIS and its law enforcement partners have to aggressively investigate these crimes and prosecute those responsible to the fullest extent of the law.”

“Ensuring the authenticity of the products within the military’s supply chain is of paramount importance to Homeland Security Investigations (HSI),” said Assistant Special Agent in Charge Robert Hammer, who oversees HSI’s operations in Tennessee. “Falsely selling our military millions of dollars of combat boots by saying they were ‘Made in the USA’ when they are actually Chinese-knockoffs not only defrauds the government, but it also defrauds the American soldier. Our soldiers rely on their equipment from their guns to their boots to protect this country and counterfeit products could fail at a moment when they need them the most.”

“The General Services Administration (GSA) Office of Inspector General will continue to work with our law enforcement partners to aggressively investigate contractors who fraudulently circumvent the federal procurement process,” said Special Agent in Charge, Floyd Martinez.

This case was investigated by HSI, DCIS, Air Force Office of Special Investigations, GSA Office of Inspector General, and Defense Contract Audit Agency. Assistant U.S. Attorneys David L. Gunn and Timothy Harker represented the United States in court proceedings.