Marine Capt. from Murrieta to Serve Six Years for Skimming Govt. Contracts

A “multi-decorated'' 20-year Marine Corps veteran who skimmed nearly $1.7 million from federal contracts tied to shipments of first-aid kits and other equipment to Iraq was sentenced today to six years in federal prison.

Capt. Eric Schmidt, 40, a Murrieta resident, told U.S. District Judge Virginia Phillips that he could not explain why he defrauded the government and cheated his “brothers in arms'' of gear they needed in the field.

Schmidt pleaded guilty last May to conspiracy to commit wire fraud and filing a false income return. He could have received up to 20 years behind bars, but Phillips considered his military record and diagnosis as a vet suffering from post-traumatic stress disorder in handing down the sentence that was recommended by federal prosecutors.

The Camp Pendleton Marine, who remains free on bond, has a pending hearing before a military disciplinary panel and is slated to begin serving his sentence April 11.

According to federal prosecutors, the fraud occurred in 2008 while Schmidt was a military contracting representative working in the Iraqi First Program, the goal of which was to increase the participation of Iraqi companies in Pentagon contracts for the benefit of the country's post-Saddam economy.

Schmidt used his position to steer business to the Al-Methwad Co., with whose executives he had a relationship, according to the U.S. Attorney's Office.

The captain's wife, Janet Schmidt, was a co-conspirator in her husband's scheme. Her company, Jenna International Inc., located vendors to procure the goods the Al-Methwad Co. wanted to satisfy Pentagon contracts, according to Eric Schmidt's sentencing memorandum. The document states that Jenna purchased “fewer units than the contract called for, or goods of lesser quality than the contract called for.''

Phillips delineated two examples of the defendant's crimes that she found particularly offensive: arranging for a smaller number of first-aid kits to be delivered to units serving in Iraq, and a smaller number of explosives detection devices to be delivered.

On paper, the required number were shipped. But that wasn't the case, the judge noted.

“The net effect was that the troops in Iraq had fewer first aid kits and fewer detection devices than they needed and were supposed to get and the government paid for,'' Phillips said. “That really deserves focus here, that somebody who was deployed many times in Iraq and other war zones would participate in a scheme in which fellow troops don't receive their equipment.''

Janet Schmidt pleaded guilty last March to filing a false tax return. She's slated to be sentenced March 7 and could face three years in prison, though federal prosecutors are expected to recommend a much lower term.

The Schmidts, now separated, have a daughter.

Federal agents seized the Schmidts' two homes--one in Murrieta and another in Big Bear--and also impounded their Mercedes-Benz sedan and BMW M3 coupe. As part of her plea, Janet Schmidt forfeited all claims to the property.

The couple were charged about a year ago following a months-long investigation by the Naval Criminal Investigative Service, the Internal Revenue Service and the Special Inspector General for Iraq Reconstruction.

According to the U.S. Attorney's Office, the defendants siphoned away an estimated $1.69 million from contracts and falsely reported their joint 2008 earnings, shorting the government by about $458,000.

Eric Schmidt's attorney, Janet Sherman, argued for a prison term of five years or less, highlighting the defendant's virtually unblemished career until 2008 and his psychological problems stemming from PTSD.   

Schmidt, she said, had been a Marine sniper, diver and parachutist, serving in Operation Desert Storm, Somalia and several combat tours of duty in Iraq since the 2003 U.S.-led invasion. He left boot camp a private at age 19 and worked his way up through the ranks.

"This is a multi-decorated hero,'' Sherman said. "Until this happened, he was a perfect Marine.''  

She said he "snapped'' during his last deployment, which a doctor described in a letter to the court as "one too many.'' The defendant has been undergoing treatment for alcoholism, as well as therapy for psychological illness.

"It's extremely difficult for me to explain why it happened,'' Schmidt told Phillips. "I'm sorry for what I've done to my country and my brothers in arms.''   

Phillips said a six-year prison term was well below what the defendant could have received and ordered him to pay full restitution to the Department of Defense and the IRS.

--Paul Young for City News Service