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FTC Employee Embezzled $218,636.21

July 14, 2011

Harold Hughes, a former supply clerk at the Federal Trade Commission, will spend 18 months in prison after pleading guilty to embezzling over $200,000 from the agency. According to the Justice Department, Hughes purchased goods from government vendors, resold most of the items at below-retail prices, and pocketed the money. Hughes eluded detection for nearly two years before he was discovered and fired.

Court papers detailed the extent of Hughes’s unauthorized purchases, which began in April 2009 and continued until December 2010. Hughes ordered items from government vendors — primarily Frank Parsons and Modern Imaging Solutions — which ranged from a $1.62 flashlight to dozens of netbook computers. No individual item cost more than $500, which was presumably the limit of Hughes’s unilateral spending authority. Altogether, Hughes purchased $217,372.11 in goods from the vendors, and he spent an additional $1,264.10 in shipping charges. Hughes agreed to repay the government in full as part of his plea bargain.

Bryan Seeley, an assistant US Attorney who filed the government’s sentencing memorandum, said Hughes “mostly worked alone in the basement” of the FTC’s Pennsylvania Avenue headquarters and operated “with little oversight.” Seeley added, “The other employees in the basement were contract employees who worked in the mailroom, photocopying center, or security guard post.” At least one mailroom employee, whom Seeley did not identify, purchased nine computers from Hughes that were illegally obtained with FTC funds. Ironically, given the FTC’s self-styled mission of protecting consumers from higher prices, Hughes resold the goods “at a price far below the retail price,” according Seeley.

Hughes admitted in court that his motive was “truly greed, pure and simple,” and that he accepted his prison sentence. Prosecutor Seeley said that Hughes’s offense warranted a sentence of 18–24 months, and the DOJ recommended a low end sentence despite the breadth and scope of his theft:

The defendant’s theft from the government was not the act of a desperate man trying to support himself. The defendant, after all, had a sought-after government job. Instead, the defendant was motivated by greed and a drug habit. He took advantage of the lack of supervision of his work by the FTC. One can only imagine how much more FTC money the defendant would have stolen if he had not been caught in December 2010.

Indeed, it’s not clear why it took nearly two years to discover that a low-ranking supply clerk had been making multiple unauthorized purchases each month from government vendors. According to Seeley, Hughes operated largely in the open, having items “shipped directly from the vendor to FTC headquarters, and he used his proximity to the mailroom and his familiarity with its employees to avoid detection.” The FTC, which is headed by Chairman Jon Leibowitz, has issued no public statement on the Hughes case. In an April report to Congress, FTC Inspector General John Seeba said that his office investigated “11 individuals employed by either the FTC or contractors” in connection with the Hughes case:

The case involved management’s initial allegations that the FTC’s supply clerk responsible for ordering all office supplies for the agency, was making unauthorized purchases and misusing the agency’s Federal Express account number for personal use. We immediately investigated the allegations, obtained incriminating evidence and one week following the referral to us, we interviewed the subject with assistance from Department of Homeland Security, Federal Protective Service. Later that day, we informed management of the available evidence and management immediately placed the employee on administrative leave, pending further OIG investigation.

Seeba said that eight employees of FTC contractors were fired in connection with his investigation, and as of April, two FTC employees were subject to “administrative action” for either purchasing goods from Hughes or misusing their government Federal Express accounts for personal shipments. Seeba added that “related investigations remain ongoing,” but he did not offer specifics. Nor did Seeba’s report identify anyone in FTC management who should have been responsible for preventing Hughes’s actions in the first place.

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