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Court documents detail $54 million scheme to defraud U.S. military

An officer with the Department of Defense and representatives from the Hernando County Sheriff’s Office enter a home belonging to David Young in Hernando Beach last September.

WILL VRAGOVIC | Times

An officer with the Department of Defense and representatives from the Hernando County Sheriff’s Office enter a home belonging to David Young in Hernando Beach last September.

On a sunny morning in early September, nearly a dozen federal agents surrounded a three-story, gulffront home on a quiet street in northwest Hernando Beach.

They swarmed the house like a SWAT team, wearing bulletproof vests and gripping pistols still strapped to their sides. One held a pry bar.

For months, the cause of the raid remained a mystery. But newly obtained court records reveal that authorities are investigating a $54 million scheme to defraud the U.S. military.

Court documents allege that the home's resident, David Young, a 49-year-old former lieutenant colonel in the Army Reserve, used his position to steer military contracts to his friends then helped devise ways to charge the Department of Defense millions of dollars for work that was never done.

The scam went unnoticed for years as the conspirators became rich, the records say.

Young has not been charged with a crime. U.S. Attorneys have sued him and others to seize 20 properties and more than $15 million they say stem from the fraud.

Documents filed by federal prosecutors in the U.S. District Court of Utah detail the government's investigation. They indicate Young helped design the initial contract for the Army, arranged for one company to win the bid and recruited colleagues to hide the scam.

Young's lawyers fought to keep the record sealed, but a judge recently made it public.

His Utah-based attorney, Brett Tolman, denied the accusations on behalf of his client, saying the court documents contained multiple inaccuracies.

"He couldn't have orchestrated what they're alleging," Tolman said. "If there's fraud, it's fraud we're not part of."

Young moved to Hernando around early 2010 after returning from the Middle East and leaving the military. Before coming to Florida, he spent 30 years making a name for himself as a politician and a lawyer in New England.

At 21, Young became one of New Hampshire's youngest state legislators. He went on to become a Green Beret, a Bronze Star recipient and a Gulf War hero. For a time, Young told people he was close with a slew of politicians, including former Gov. John H. Sununu, who also served as White House chief of staff under President George H. W. Bush. Young helped lead two presidential campaigns in New Hampshire, including John McCain's. He attended both the George W. and George H. W. Bush inaugurations.

In the past six years, though, Young's professional life collapsed.

After multiple reprimands while practicing law in New Hampshire, he was disbarred in 2006 for misusing a client's money. Two years later, he was convicted in a military court-martial of taking two Navy Humvees in Afghanistan.

In Hernando, Young operated three businesses that authorities allege were used primarily to launder money.

One was a real-estate investment firm, Hernando County Holdings. Also, Young and his business partners launched a pair of firms that were supposed to recruit former military personnel to work as trainers for American International Security Corp., the Boston-based contractor at the center of the investigation. In court filings, U.S. Attorneys say those were shell companies Young helped create to conceal fraud.

In recent months, the Tampa Bay Times has interviewed dozens of Young's friends, clients and business associates. Five people listed as executives or key staff members of these firms say they did almost no work and made, at most, about $1,000.

Michael Gargac, a military veteran with 36 years of service, was listed as director of operations at one of the companies and, according to its website, led a team of about a dozen people. He told the Times he never led anyone, was paid less than $500 and had never even heard of the company at which he was listed as second-in-command.

"I've not done anything with any of those companies," he said. "I have never played any active role in any of that."

• • •

In June 2007, records say, the Army solicited bids for a relatively minor contract. The government needed four workers to mentor Afghan Army special forces members. The deal required two weapons maintenance trainers, an inventory management trainer and an interpreter.

At the time, documents say, Young was in Afghanistan working with Afghan security forces. He was instrumental, authorities say, in developing the contract.

He and a subordinate, Maj. Todd Cox, dramatically inflated the official cost estimate for the services, setting the price at $875,000, plus a bonus for working near combat, records say.

Cox then presented eight companies to an officer who would help make the selection. Cox, who would later tell investigators Young gave him the list of candidates, provided incorrect contact information for three of the companies. Three others were ineligible because they were foreign owned. A seventh couldn't bid because it didn't have a security license for Afghanistan.

That left one firm: American International Security Corp., a company owned and operated by Michael Taylor.

Young and Taylor, documents say, served in the Army together in the 1980s and had known each other for three decades.

American International bid $899,782 for the contract. Even after another company later bid about $500,000 less, Taylor's company won.

Young's attorney insisted his client had nothing to do with the selection process.

"The bottom line is David Young was not responsible nor did he have the authority to pick a contract," Tolman said.

As part of the contract, Army Sgt. Christopher Harris was designated as American International's "country manager." Harris and Young had been friends for years, even communicating soon before the contract was awarded, according to authorities.

Within weeks of the award, the Army expanded the contract and asked American International to supply more trainers. By January 2011, the Department of Defense had paid the company $54 million.

While the firm provided some trainers and services, authorities say it never came close to fulfilling its obligations.

Still, documents state, Young, Harris, Taylor and others continued to bill the government.

"This," records say, "resulted in a financial windfall for AISC."

For years, court documents indicate, federal officials failed to realize they were being defrauded, in large part, because Young had arranged for an insider to sign off on falsified invoices.

She was a captain in the New York Air National Guard named Tory Milos.

Milos, court records say, had also been Young's girlfriend.

• • •

The federal government alleges that millions of dollars went to a handful of officers running the military contract companies.

From 2007 to 2010, American International deposited more than $17 million into one of Harris' personal checking accounts, court records state. Investigators tracked that money and found it had been dispersed through more than 100 bank accounts under the control of Young, Harris and others.

Ultimately, millions of those dollars found their way to Tampa Bay. Court documents say Young and his colleagues used the money to buy 13 houses, including the one where Young still lives with his fiancee, 29-year-old Ashley Speck.

It's unclear when federal authorities intend to physically take the properties. Tolman said it seems investigators won't stop until his client is arrested.

"We don't think there's a basis to prosecute, but I think in some ways they've built a theory and they're trying to support it," he said. "If that's the case, I'm sure they will pursue charges."

Times photographer Will Vragovic contributed to this report. John Woodrow Cox can be reached at (352) 848-1432 or jcox@tampabay.com.

Court documents detail $54 million scheme to defraud U.S. military 03/14/12 [Last modified: Wednesday, March 14, 2012 11:09pm]
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