German Citizen, Katrin Verclas Sentenced in Maryland to Nearly Two Years in Federal Prison for Charges Related to a Scheme to Defraud the U.S. State Department
In a Related Action, Corporation Controlled by the Defendant Will Pay $500,000 to Settle a Related Civil Complaint
Greenbelt, MD (STL.News) U.S. District Judge George J. Hazel sentenced Katrin Verclas, age 52, a native and citizen of Germany residing in Washington, D.C., today to 728 days in federal prison for obstruction of a federal audit and for causing a financial institution to fail to file a suspicious activity report (SAR). Verclas previously pleaded guilty to those charges, which were related to more than $1.2 million in U.S. State Department grant funds awarded to MobileActive, a corporation that Verclas controlled. To settle a related civil complaint filed against MobileActive, the corporation will pay $500,000 to the United States within five days of the Court accepting the consent judgment, or today’s sentencing, whichever is later.
The sentence was announced by Acting United States Attorney for the District of Maryland Jonathan F. Lenzner and Special Agent in Charge Mike Speckhardt of the U.S. Department of State Office of Inspector General, Office of Investigations.
According to the plea agreement, on December 17, 2009, the U.S. State Department’s Bureau of Democracy, Human Rights, and Labor (“DRL”) publicized a Request for Proposal (“RFP”) that solicited grant proposals under the title “Promoting Freedom of Expression and the Free Flow of Information through Technology and Access.” The submission deadline for grant proposals was January 22, 2010.
As detailed in the plea agreement, Verclas, who was residing in Amherst, Massachusetts at the time, had worked for non-profit organizations in the field of social activism through the use of technology since about 1996. In preparation for a response to the DRL RFP, on January 15, 2010, Verclas converted a project known as MobileActive into a Delaware corporation, and on January 22, 2010, electronically submitted a grant proposal to DRL on behalf of MobileActive. On September 20, 2010, MobileActive was awarded a grant from the U.S. Department of State in the amount of approximately $1,411,000, to develop and promote: a Mobile Security Toolkit of needed and missing software applications for secure mobile communication; and tactical resources that would allow human rights organizations and activists in specific geographic regions to easily assess and mitigate risks associated with their mobile communications. The performance period of the grant was September 20, 2010 through about September 30, 2012.
In order to request the grant funds, MobileActive, through Verclas, established an account with Payment Management System (“PMS”), a federal grants management database located in Bethesda, Maryland. Between October 26, 2010 and July 26, 2012, Verclas submitted 11 payment requests on behalf of MobileActive, causing the U.S. Department of State to release $1.222 million to MobileActive’s business bank account, which Verclas controlled.
MobileActive, through Verclas, failed to comply with a number of requirements under the grant. In November 2012, the State Department began performing an audit and quality assurance inspection with regard to the grant award. From November 2012 to February 2014, the State Department made several requests, including through letters mailed and hand-delivered to Verclas, to provide documents and information, including a final financial report and inventory report, among other things. Verclas admitted that she intentionally ignored the State Department’s repeated requests because she knew that she did not have the requisite reports, documents, and other items.
In addition, Verclas admitted that from November 2010 to October 2012, she failed to disclose to the bank that many of the transactions involving the MobileActive business account were for Verclas’ own personal gain rather than legitimate business purposes. Verclas knew that, had the bank been aware of the true nature of these transactions, it would have been required to file a SAR. Through her deception, Verclas willfully caused the bank to fail to file a SAR.
Acting United States Attorney Jonathan F. Lenzner commended the U.S. Department of State, Office of Inspector General, for its work in the investigation. Mr. Lenzner thanked Assistant U.S. Attorney David I. Salem, who prosecuted the case, and thanked Assistant U.S. Attorney Katharine A. Wagner of the Massachusetts U.S. Attorney’s Office, who provided substantial assistance.