An Atlanta company has pleaded guilty to fraud for diverting 401k contributions from employees who worked at West Point Military Academy.
The head of the company, Khary Lewis, said it fell behind on making the deposits because the army fell behind on paying invoices. He said the army still owes $1 million on the contract.
The case was brought by Orange County District Attorney David Hoovler and was also investigated by West Point and the U.S. Department of Labor, on a complaint from Teamsters Local 445.
The army awarded a $6.8 million contract in 2015 to Infinite Services and Solutions Inc. of Atlanta to repair military vehicles and provide bus service.
The union complained to the district attorney that some of its members who had opted to deduct a portion of their wages for the 401k plan had learned that their contributions were not being made.
Kalobe Inc., an affiliate of Infinite Services, redirected more than $250,000 in 401k contributions to the corporation, from December 2015 to April 2016, according to the felony complaint and information. The company told employees that its payroll company had erred.
Kalobe in August pleaded guilty to fraud in the sale of securities. It agreed to pay restitution and not to accept work on any New York state public works project for five years. Orange County Court Judge Robert Freehill fined the company $2,500.
Lewis, chairman and CEO of Infinite Services and the principal behind Kalobe, did not dispute the essence of the charges during a telephone interview.
The contract began in April 2015. By August 2015, he said, he was asking for a meeting with West Point contracting officials to discuss late payments by the army. He said the army did not respond.
Weekly payroll for about 80 employees was $60,000 to $70,000. “From the beginning, they were slow paying our invoices,” Lewis said, “which generated cash flow problems.” Eventually, 401k contributions were not deposited in a timely manner, he said.
Lewis said he has repaid all of the money owed to employees.
The contract was for one year with an option for four more years. The army did not exercise the option, so in March Infinite Services was no longer working at West Point.
Lewis has submitted claims for about $1 million that he says the army still owes him. For example, Infinite Services spent $60,000 to $65,000 a month buying vehicle parts from local vendors. Some of those invoices have not been paid, he said, and in turn the contractor has not paid the vendors.
“Infinite, in my opinion, is being marched around like this awful contractor and no one else is at fault,” Lewis said. “No one is saying that for months I begged and begged for a meeting with West Point contract command on getting paid faster so we could meet all our obligations.”
Lewis’s 10-year-old company is federally certified as a small disadvantaged business. It has 80 to 90 employees and most of its contracts are with the Department of Defense.
“It is completely unacceptable for an employer to use monies which were rightfully earned by its employees as ‘working capital,’” Hoovler, the county district attorney, said in a press release announcing the plea agreement.
Lewis said his company’s record had been unblemished for nine years. “This is the only contract ever in the company’s history that has had any problems. Obviously, I didn’t realize how things work in New York.”