Capt. & Wife Skimmed U.S. Contracts, Feds Say

(CN)- A Marine Corps captain and his wife skimmed $1.75 million from government contracts intended to spur economic development in Iraq, the U.S. Attorney's Office in Los Angeles claims.

Prosecutors have charged Capt. Eric Schmidt, 35, of Murietta, Calif., and his wife, Janet Schmidt, 39, with conspiring to commit wire fraud and filing a false tax return to hide their profits.

Capt. Schmidt allegedly abused his position to steer military contracts under the Iraqi First Program to his preferred Iraqi contractor, the Al-Methwad Company.

Once the U.S. government awarded a contract to Al-Methwad, Schmidt's wife, Janet, would use the contractor's money to buy fewer products than the contract specified and have them shipped to Marines in Iraq, prosecutors say. Capt. Schmidt then falsely certified that the goods had arrived in the quantity stated in the contract, the government claims.

The Schmidts allegedly skimmed a total of $1.75 million from government contracts and failed to report the income on their 2008 tax return. Government agents seized two California properties, two vehicles and $400,000 in cash during their investigation of the couple, prosecutors say.

"Mr. Schmidt exploited the Iraqi First Program, as well as the trust placed in him by the United States Marine Corps and the people of this country, for his own and his wife's personal financial gain. That's a crime," said IRS Special Agent Leslie DeMarco.

DeMarco said the IRS will continue to stop people from exploiting "programs designed to benefit others to satisfy their greed."

Special Agent Chris Hendrickson added: "This is an example of public corruption that directly affected our Marines' military capabilities in Iraq. Captain Schmidt found an Iraqi partner, exploited his role as a logistics officer, and profited from the Marines' role in providing security in Iraq."

The Schmidts face up to 23 years in prison if convicted.

The investigation is being handled by the Defense Criminal Investigative Service, the Naval Criminal Investigative Service, the Special Inspector General for Iraq Reconstruction, and IRS-Criminal Investigation.

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