michael strayer and karen earle indictment

7/31/2019 Michael Strayer and Karen Earle Indictment

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v.

FILED ..

to } S D IS TR IC T C O U R I - 0 F M A R Y L A H D

IN THE UNITED STATES DISTRICT c r m J i tT I0FOR THE DISTRICT OF MARYLAND P \. r 3l\

Ifi\1 t 4 f \ Y \ b .

UNITED STATES OF AMERICA, -* A . w

0 '? rC R a 2 7 2

* c L E R i < :::itfit-AT r;HFDmEL1

CRIMINAL ~O. M :'T\1T'{

~ A K A: US A O 2 0l O R0 02 60

MICHAEL STRAYER, and

KAREN EARLE,

Defendants

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(Conspiracy, 18 U.S.c. ~ 371; Wire

Fraud, 18 U.S.c. ~ 1343; Conflict of

Interest, 18 U.S.c. ~ 208; Money

Laundering, 18 U.S.c. ~ 1957; False

Statements, 18 U.S.C. ~ 1001; Aiding

and Abetting, 18 U.S.c. ~ 2; Forfeiture,

18 U.S.C. ~ 981(a)(1)(C), 28 U.S.C.

~ 2461(c), 18 U.S.c. ~ 982(a)(1))

*******

COUNT ONE

(Conspiracy)

The Grand Jury for the District of Maryland charges:

Introduction

At all times relevant to the Indictment:

1. The United States Department of Energy ("DoE"), a department within the

executive branch of the United States government, operated a facility in Germantown, Maryland.

DoE's operations in Germantown included an Office of Science, which in turn included an

.: ,

Office of Advanced Scientific Computing Research' ("ASCR"). Scientific Discovery through

Advanced Computing ("SciDAC") was a program office within ASCR.

2. ASCR allocated funds through DoE research laboratories across the country to

accomplish ASCR's and SciDAC's program objectives. The laboratories, rather than ASCR and

SciDAC, entered directly into contracts with vendors.

Case 8:12-cr-00272-AW Document 1 Filed 05/16/12 Page 1 of 20


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3. Oak Ridge National Laboratory ("ORNL") in Oak Ridge, Tennessee; Argonne

National Laboratory ("ANL") in Argonne, Illinois; and Pacific Northwest National Laboratory

("PNNL") in Richland, Washington, were major DoE labs with active supercomputing programs

funded by ASCR al1:dSciDAC.

4. At various times, ASCR and SciDAC funded ORNL and ANL to contract with a

foreign scientific publishing company ("Corporation A"), which directly and through its United

States subsidiary produced a magazine named SciDA C Review.

5. Defendant MICHAEL STRAYER ("STRAYER") was an employee of the

executive branch of the United States government and a member of the Senior Executive

Service. STRAYER served as Director of the SciDAC program beginning in or about February

2004 and, after being appointed as Associate Director of ASCR on or about October 2, 2005, led

ASCR and the SciDAC program and determined the priorities and allocation of ACSR and

SciDAC program funds. Prior to filling these positions at DoE, STRAYER had been employed

at ORNL as a private sector employee for over 20 years.

6. STRA YER initiated the publication ofSciDAC Review in 2004, with a stated goal

of promoting awareness of SciDAC programs within the scientific community. SciDA C Review

was under STRAYER's control, and he had complete budget authority for contracts under

$20 million emanating from his division. STRAYER initiated a sole-source contract through

ORNL for Corporation A to publish the SciDAC Review. The project was managed by Individual

1, a former ORNL colleague of STRAYER's, then employed by Corporation A. After the pilot

issue, STRA YER contracted for SciDA C Review to be published twice a year. It was distributed

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in hard copy free of charge, primarily through the contracting laboratories, and was also made

available online through a website maintained by Corporation A.

7. STRAYER was engaged in a romantic relationship with KAREN EARLE

("EARLE") beginning no later than October 2006. EARLE previously had been married to a

scientist employed at ORNL, but had no scientific computing or publishing background.

8. As set up by Individual I, SciDAC Review budgeted funds to compensate article

contributors. In mid-2006, STRAYER enlarged the contract with Corporation A to publish four

issues of SciDAC Review each year. Later the same year, STRAYER also reorganized the

SciDAC Review's editorial board and tasked new board members with obtaining articles for

publication from DoE and DoE-contracted employees at no cost to the publication. STRAYER

also notified the board members that EARLE was assuming most ofIndividuall's SciDAC

Review duties.

9. In or about June 2007, STRAYER hired Individual 1 to work for him in ASCR.

10. On or about July 24, 2008, STRAYER and EARLE purchased a home in

Lovettsville, Virginia, using a jointly held mortgage to finance the majority of the $740,000

purchase price.

11. EARLE incorporated K.J.E. Science Consultants ("KJE") in Tennessee in 2009.

EARLE was the sole owner and principal of KJE.

12. STRAYER completed required annual DoE ethics training in 2006, 2007, 2008,

and 2009. On or about June 18,2009, STRAYER signed a document with DoE's Office of the

General Counsel recusing himself from participation in "any Departmental matter in which

Karen Jean Earle or KJE Consultants is a party." STRAYER and EARLE married on August 8,

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2009, in Loudoun County, Virginia.

The Conspiracy

13. Between in or about May 2006 and in or about August 2010, in the District of

Maryland and elsewhere, the defendants,


KAREN EARLE,

knowingly and willfully conspired and agreed (a) to defraud the United States and the DoE, an

agency thereof, and (b) to commit certain offenses against the United States, namely:

(1) Transmitting and causing to be transmitted by means of wire

communications in interstate commerce, certain signs, signals, and sounds,

in furtherance of a scheme and artifice to defraud the United States and

DoE and to obtain and attempt to obtain money and property by means of

material false and fraudulent pretenses, representations, promises, and

omissions ("the scheme to defraud"), in violation of 18 U.S.c. ~~ 1343

and 2;

(2) Being and aiding and abetting an officer and employee of the executive

branch of the United States Government, to willfully participate personally

and substantially as a government officer and employee, through decision,

approval, recommendation, and otherwise, in a determination and contract,

in which, to defendants' knowledge, they had a financial interest, in

violation of 18 U.S.C. ~~ 208 and 2; and

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(3) Knowingly engaging in monetary transactions in criminally derived

property of a value greater than $10,000, those funds being derived from a

specified unlawful activity, to wit, wire fraud in violation of 18 U.S.C.

~ 1343, in violation of 18 U.S.C. ~~ 1957 and 2.

Manner and Means of the Conspiracy and Scheme to Defraud

14. It was part of the conspiracy and scheme to defraud that STRAYER would cause

existing DoE contracts with Corporation A, under which it produced the SciDAC Review, to be

enlarged on condition that Corporation A employ EARLE as an editorial consultant and

subcontractor despite EARLE's lack of relevant qualifications, and later to suggest to

Corporation A that a continuation of its business relationship with DoE was contingent on its

continued employment and subcontracting with EARLE and KlE.

15. It was further part of the conspiracy and scheme to defraud that STRAYER

caused Corporation A to compensate EARLE for obtaining articles to publish in SciDAC Review

without informing Corporation A that he was causing DoE employees and contractors to write

such articles without compensation.

16. It was further part of the conspiracy and scheme to defraud that STRAYER failed

to inform contracting officials at ORNL, his supervisors at DoE, or DoE ethics attorneys with

whom he consulted that he had a romantic or financial relationship with EARLE after she was

contracted by Corporation A.

17. It was further part of the conspiracy and scheme to defraud that STRA YER led

officials at Corporation A to believe that contracting officials at DoE and ORNL were aware of

his relationship with EARLE and, knowing this, had approved Corporation A's subcontracting

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arrangement with KJE.

18. It was further part of the conspiracy and scheme to defraud that EARLE, using, in

part, funds derived from her subcontract with Corporation A, provided the $120,000 down

payment on the $740,000 home she and STRAYER purchased in Lovettsville, Virginia, and

subsequently provided various $5,880 monthly mortgage payments and at least $57,443 in home

renovations expenses from those funds.

19. It was further part of the conspiracy and scheme to defraud that STRAYER

solicited other business opportunities for EARLE and KJE from DoE contractors and used DoE

funds he controlled to encourage and fund such contracts.

20. It was further part of the conspiracy and scheme to defraud that, even after

formally recusing himself from dealing with any matter concerning EARLE or KJE, that

STRAYER met with EARLE and officials from Corporation A to discuss enlarging the SciDAC

Review contract and, with it, EARLE's role, and reviewing and approving EARLE's renewed

subcontracts with Corporation A.

21. It was further part of the conspiracy and scheme to defraud that defendant

STRAYER caused Corporation A to pay EARLE consulting fees and subcontract payments

totaling more than $1,263,330.

Overt Acts

22. In furtherance of the conspiracy and to achieve the objectives thereof, at least one

of the coconspirators performed or caused to be performed at least one of the following overt

acts, among others, in the District of Maryland and elsewhere:

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A. In or about August 2006, STRAYER caused Corporation A to hire

EARLE as a consultant for SciDAC Review with monthly compensation of$5,000 for obtaining

articles for publication in the magazine.

B. In or about November 2006, STRAYER informed the SciDAC Review

editorial board, comprised of computing heads at various national laboratories, that they would

be responsible for providing articles to EARLE for the SciDAC Review at no cost to the

publication. STRAYER did not notify Corporation A of the change to the article procurement

process.

C. In or about May 2007 , STRAYER, without disclosing to any officers of

Corporation A that he and EARLE were dating, caused Corporation A to increase EARLE's

compensation and caused Individual 1, an employee of Corporation A who was in the process of

becoming a federal employee in STRAYER's office, to believe that Individual l's federal

employment was contingent on the execution of a lucrative subcontract providing for payment to

EARLE of nearly $100,000 per issue to procure articles for the publication.

D. On or about May 23, 2007, STRAYER caused Corporation A to provide

him proposed terms of EARLE's subcontract that STRAYER directed Corporation A to

produce and justify for DoE contracting officials.

E. On or about June 5, 2007, STRAYER caused Corporation A to provide a

draft subcontract template for use by KJE and forwarded the document to EARLE.

F. On or about June 5, 2007, STRAYER sent an email to Corporation A

confirming that proposed rates of pay for EARLE and KJE set forth in a draft subcontract were

satisfactory .

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G. On o~about June 6, 2007, STRAYER forwarded EARLE an email

containing copies of a draft 2007 subcontract between KJE and Corporation A.

H. On or about July 1, 2007, STRAYER caused Corporation A to award KJE

a subcontract providing payment of $97,266 for the period from July 1, 2007 through October 31,

2007, knowing this business was operated by EARLE.

I. On or about November 1,2007, STRAYER caused Corporation A to

award KJE a subcontract for $389,064 for the period from November 1,2007 through

December 31,2008.

J. On or about June 11,2008, EARLE wired $69,000 in funds from the

account into which her payments from Corporation A were deposited into a separate checking

account.

K. From that separate checking account, on July 24, 2008, EARLE wired a

total of$120,000 to an escrow company as a down payment on the Virginia home that EARLE

and STRAYER jointly purchased.

L. Between August 2008 and August 2010, EARLE made at least four

monthly mortgage payments of $5,880 from funds obtained through her contract with

Corporation A on the home she owned jointly with STRAYER, although STRAYER lived

alone in the home during the majority of that time. STRAYER did not contribute to the

mortgage payments before March 2009.

M. On or about September 5, 2008, STRAYER sent an email to

Corporation A noting that EARLE's subcontract was set to expire soon and threatened to end the

SciDAC Review contract with Corporation A unless EARLE's contract was renewed, stating

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"that [Corporation A should] straighten this out as soon as possible. If [Corporation A] is no

longer interested in this work I would appreciate [management] calling me as soon as possible."

N. On or about September 7,2008, STRAYER sent EARLE two emails

containing separate draft subcontracts between KJE and Corporation A. EARLE responded to

the message with the characters ":-$".

O. On or about October 1,2008, STRAYER caused Corporation A to award

KJE a subcontract for $408,517 for the period from October 1, 2008 through December 31, 2009,

knowing this business was operated by EARLE.

P. On or about February 27,2009, without disclosing his relationship with

EARLE or KJE to the relevant DoE contractors or his subordinates at ASCR, STRAYER

caused $1,000,000 in ASCR funds to be transferred to PNNL in an attempt to cause PNNL to

contract for services with KJE.

Q. On or about April 2, 2009, EARLE, using funds derived from the scheme

to defraud, transferred $21,187.20 to a contracting company performing renovations work on the

home she jointly owned with STRAYER.

R. On or about May 12,2009, after contracting officials at PNNL refused to

let out a contract with KJE for the project STRAYER had sent them $1,000,000 in ASCR funds

because EARLE could not justify her company's prices, STRAYER caused the $1,000,000 to

be withdrawn from PNNL accounts and returned to ASCR.

S. On or about May 15,2009, EARLE, using funds derived from the scheme

to defraud, transferred $17,150.40 to a contracting company performing renovation work on the

home she jointly owned with STRAYER.

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T. On or about June 18, 2009, STRAYER met with DoE ethics officials, at

which meeting he disclosed that he was in a relationship with EARLE but failed to disclose that

the two owned a home together or that EARLE's company worked exclusively on a project

wholly funded by ASCR, even after the ethics official made clear in a confirmatory email that her

determination that there was no current conflict of interest was based in part on the fact that

STRAYER and EARLE "do not live in the same household."

U. In or around August, 2009, STRAYER and EARLE met together with

officials from Corporation A at its office in Washington, D.C., to discuss expansion of the

SciDAC Review by adding a second issue, or "Supplement," to each regular issue that contained a

larger number of smaller articles. In the "Supplement" contract, EARLE, through KJE, would

continue her role of procuring articles for publication. N either STRAYER nor EARLE

disclosed to Corporation A officials that article writers would not be compensated for their

contributions to the "Supplement."

V. On or about August 20,2009, EARLE, using funds derived from the

scheme to defraud, transferred $13,808.90 to a contracting company performing renovation work

on the home she jointly owned with STRAYER.

W. On or about August 21, 2009 , STRAYER sent EARLE an email

containing a final copy of a 2009 subcontract between KJE and Corporation A, as well as a draft

copy of a 2010 subcontract between KJE and Corporation A.

X. On or about August 27,2009, EARLE sent STRAYER an email

containing a draft of a 2010 subcontract between KJE and Corporation A, and a "supplemental

contract draft." The email message read, "~ook ok?"

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Y. On or about September 1,2009, STRAYER caused Corporation A to

award KJE a subcontract for $461,824 for the period from September 1, 2009 through

December 31, 2010, knowing this business was operated by EARLE.

z. On or about September 1,2009, STRAYER caused Corporation A to


December 31, 2010, knowing this business was operated by EARLE.

AA. On or about September 1,2009, STRAYER caused Corporation A to


February 28,2010, knowing this business was operated by EARLE.

BB. On or about October 22,2009, EARLE sent STRAYER an email

containing copies of 20 10 draft subcontracts between KJE and Corporation A. STRAYER

responded to the message, "These are fine."

Cc. On January 20,2010, STRAYER sent EARLE an email containing

copies of several draft subcontract documents from 2007 between KJE and Corporation A.

18 U.S.C. S 371

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COUNTS TWO THROUGH SEVEN

(Wire Fraud)

The Grand Jury for the District of Maryland further charges:

1. Paragraphs 1 through 12 and 14 through 21 and Overt Acts A through CC of

Count One are incorporated here and constitute a scheme and artifice to defraud as described in

paragraph 12(1) of Count One.

2. On or about the dates set forth in the table below, in the District of Maryland and

elsewhere, the defendants,


KAREN J. EARLE,

for the purpose of executing and attempting to execute the scheme to defraud, did cause to be

transmitted in interstate commerce, by means of wire communication, certain signs, signals, and

sounds, described below for each count, each transmission constituting a separate count:

Count

2 May 23,2007 An email from CorporationAinWashington, D.C., to

STRAYER in Germantown, Maryland, in which

Corporation A provided STRAYER proposed terms of

EARLE's subcontract that STRA YER had directed

Corporation A to produce and justify for DoE contracting

officials.

3 June 5, 2007 An email from STRAYER in Germantown, Maryland, to

Corporation A in Washington, D.C., wherein STRAYER

approved Corporation A's suggestion to justify an increase

in the terms of EARLE's subcontract with Corporation A to

DoE contracting officials.

4 February 27,2009 A wire transfer of$I,OOO,OOOin funds from ASCR accounts

in Germantown, Maryland, to PNNL accounts in Richland,

Washington, for the purpose of inducing PNNL to contract

with KJE.

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5

6

7

August 21, 2009

August 27,2009

October 22, 2009

An email from EARLE in Tennessee to STRAYER in

Germantown, Maryland, to which EARLE attached a copy

of her current subcontract with Corporation A for

STRAYER to review.



of a proposed subcontract with Corporation A for

STRAYER to review and approve.



of her subcontract with Corporation A for STRAYER to

review.

18 U.S.C. 9 1343

18 U.S.C. 92

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COUNTS EIGHT THROUGH ELEVEN

(Money Laundering)

The Grand Jury for the District of Maryland further charges that:


Count One are incorporated here.

2. On or about the dates set forth below, in the District of Maryland and elsewhere,

the defendants,


KAREN J. EARLE,

knowingly engaged and attempted to engage in the following monetary transactions by, through,

or to the listed financial institutions, in and affecting interstate commerce, in criminally derived

property of a value greater than $10,000, that is, the transfer of funds derived from a specified

unlawful activity, to wit, wire fraud in violation of Title 18, United States Code, Section 1343, as

described in Counts One through Seven of the Indictment:

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9

10

July 24, 2009

April 2, 2009

May 15,2009

$90,000 and $30,000 wire transfers from EARLE's ING

Checking Account ****2594 to a title and escrow company

participating in defendants' purchase of their home in

Lovettsville, Virginia.

$21,187.20 wire transfer from EARLE's ING Checking

Account ****2594 to a contractor renovating the

defendants' home in Lovettsville, Virginia.

$21,187.20 wire transfer from EARLE's ING Checking

Account ****2594 to a contractor renovating thedefendants' home in Lovettsville, Virginia.

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Count

11 August 20,2009 $13,808.90 wire transfer from EARLE's ING Checking

Account ****2594 to a contractor renovating the

defendants' home in Lovettsville, Virginia.

18 U.S.c. S 1957(a)

18 U.S.c. S 2

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COUNT TWELVE

(Conflict of Interest)




2. On or about September 1,2009, in the District of Maryland and elsewhere, the

defendants,


KAREN J. EARLE,

being and aiding and abetting a United States government executive branch officer and

employee, did knowingly and willfully participate personally and substantially through decision,

approval, recommendation, and otherwise, in a determination and contract, in which he and his

spouse had a financial interest, specifically in the award of the three subcontracts listed below

involving money payments to KJE, a business operated by EARLE.

September 1, 2009

September 1, 2009

September 1, 2009

18 U.S.c. S S 208 and 216(a)(2)

18 U.S,C. S 2

December 3 1, 2010

December 31, 2010

February 28,2010

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$461,824

$418,768

$104,692



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COUNT THIRTEEN

(False Statements)




2. On or about July 20,2010, DoE investigators interviewed STRAYER.

Investigators told STRAYER they were investigating allegations of impropriety on his part with

regards to the SciDAC Review and EARLE's role with respect to both the publication and

Corporation A. It was material to the DoE investigation whether STRAYER had participated in

the negotiation or drafting of any contracts between KJE and Corporation A and whether

EARLE had ever made mortgage payments on the home that STRAYER and EARLE had

purchased.

3. On or about July 20, 2010, in the District of Maryland, the defendant,

MICHAEL STRAYER,

in a matter within the jurisdiction of the executive branch of the Government of the United States,

knowingly and willfully made materially false, fictitious and fraudulent statements and

representations, in that:

(a) STRAYER stated that he had no part in drafting, nor did he maintain, any

subcontract between Corporation A and EARLE, whereas in truth and in fact

employees of Corporation A and EARLE had repeatedly sent draft

subcontracts to him for his review and approval, and he maintained a file

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folder on his DoE computer named "KJE" that contained multiple draft

subcontracts between Corporation A and EARLE; and

(b) STRAYER stated although he and EARLE jointly owned a home they had

purchased together in July 2008 but that he paid the mortgage for the house

"exclusively," whereas in truth and in fact EARLE had made a $120,000

down payment, paid for $57,000 in home renovation, and made at least

$23,516.60 in mortgage payments on the property by that date.

18 U.S.C. S 1001(a)(2)

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FORFEITURE ALLEGATION

The Grand Jury for the District of Maryland further charges that:

1. Pursuant to Federal Rule of Criminal Procedure 32.2, notice is hereby given to the

defendant that the United States will seek forfeiture as part of any sentence in accordance with

Title 18, United States Code, Section 98l(a)(l)(C), and Title 28, United States Code, Section

2461 (c), as a result of the defendants' conviction Counts One through Seven under the Indictment,

and in accordance with Title 18, United States Code, Section 982( a)(l), in the event of the

defendants' conviction under Counts Eight through Eleven of this Indictment.

Wire Fraud Forfeiture

2. As a result of the offenses alleged in Counts One through Seven of the Indictment,

defendants MICHAEL STRAYER and KAREN EARLE shall forfeit to the United States all

property, real and personal, which constitutes or is derived from proceeds traceable to the

offenses and all property traceable to such property, including but not limited to $1,263,330 in

United States currency, in that such sum in aggregate was the proceeds of the aforementioned

offenses.

Money Laundering Forfeiture

3. As a result of the offenses alleged in Counts Eight through Eleven of the

Indictment, defendants MICHAEL STRAYER and KAREN EARLE shall forfeit to the United

States all property, real and personal, involved in such offense, or any property traceable to such

property.

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Substitute Assets

4. If any of the property described in the Indictment as being subject to forfeiture, as a

result of any act or omission of any defendant --

a. cannot be located upon the exercise of due diligence;

b. has been transferred or sold to, or deposited with, a third person;

c. has been placed beyond the jurisdiction of the Court;

d. has been substantially diminished in value; or,

e. has been commingled with other property which cannot be subdivided

without difficulty;

it is the intent of the United States, pursuant to Title 21, United States Code Section 853(p), to seek

forfeiture of any other property of said defendant up to the value of the forfeitable property, that is,

$1,263,330, including but not limited to the property at 12364 Moon Lake Lane, Lovettsville,

Virginia, held in the name of defendants MICHAEL STRAYER and KAREN EARLE.

18 U.S.c. S 981(a)(I)(C)

18 U.S.C. S 982(a)(l)

28 U.S.C. S 2461(c)

.%J1 ~/1ttARod J. Robtein

United States Attorney

A TRUE BILL:

S I G N A T U R E R E D A C T E D/dAt5t/02tJIXDate

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michael strayer and karen earle indictment

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