Corrupt Department Head at Walter Reed Sentenced to Federal Prison for Accepting Cash, Event Tickets, and Other Gratuities from a Maryland Company That Received More Than $25 Million in Government Business
Greenbelt, Maryland – U.S. District Judge Theodore D. Chuang sentenced David Laufer, age 64, of Pittsburgh, Pennsylvania, formerly of Bethesda, Maryland, today to eight months in federal prison, followed by one year of supervised release, four months of which is to be served in home confinement, for acceptance of gratuities by a public official. Judge Chuang also ordered Laufer, the former Chief of the Prosthetics and Orthotics Department at Walter Reed Medical Center, to pay restitution in the amount of $7,890.62.
The sentence was announced by Acting United States Attorney for the District of Maryland Jonathan F. Lenzner; Special Agent in Charge Christopher Dillard of the Department of Defense Office of Inspector General, Defense Criminal Investigative Service; Special Agent in Charge Maureen Dixon, Office of Investigations, Office of Inspector General of the Department of Health and Human Services; and Special Agent in Charge Thomas J. Sobocinski of the Federal Bureau of Investigation, Baltimore Field Office.
According to his plea agreement, from 2009 until May 2019, Laufer worked as the Chief of the Prosthetics and Orthotics Department at Walter Reed National Military Medical Center, the largest joint military medical center in the United States. Walter Reed is located in Bethesda and provides medical services, including orthotic and prosthetic services to U.S. service members and their dependents, including wounded soldiers. Bruce Thomas lived in Montgomery County and owned, operated, and controlled Pinnacle Orthopedic Services (Pinnacle), located in Germantown, Maryland. Pinnacle provided prosthetics and orthotics materials to Walter Reed in return for payments from the government.
“David Laufer accepted thousands of dollars in cash and other gifts from a company to which he steered government business worth millions in taxpayer funds,” said Acting United States Attorney Jonathan F. Lenzner. “Laufer’s illegal acts not only unfairly helped Pinnacle Orthopedic Services, his actions also hurt other businesses and caused the U.S. government to pay more for goods and services than it should have. We are committed to holding accountable public officials like David Laufer who undermine the market and abuse their positions in government to benefit themselves at the expense of the taxpayers.”
“Attempting to defraud the government is a losing proposition,” said Frank Robey, director of the U.S. Army Criminal Investigation Division's Major Procurement Fraud Unit. “This sentencing is yet another example of the great cooperation among federal law enforcement agencies to put a stop to fraud within the contracting community.”
As detailed in the plea agreement, from 2010 until May 2019, the Walter Reed Prosthetics and Orthotics department used Blanket Purchase Agreements (BPAs) to order and purchase prosthetics and orthotics materials. This allowed the department to obligate funds to purchase materials that employees could order without charging a credit card each time or engaging in a formal contract for each purchase. Thomas regularly interacted with Laufer about Pinnacle’s business with Walter Reed, including the award of BPAs, future BPA funding, orders charged against the BPAs, and fulfillment of orders. Walter Reed awarded multiple BPAs to Pinnacle, which the Prosthetics and Orthotics department used to order and purchase prosthetics and orthotics materials from Pinnacle.
According to court documents, between 2012 and 2016, Laufer and his wife received things of value, that is the airlines travel, lodging and entertainment tickets, as well as direct cash payments, for and because of Laufer’s official acts as the Chief of the Prosthetics and Orthotics department and Laufer’s official acts in connection with the purchase of prosthetics and orthotics materials from Pinnacle. Laufer admitted that he undertook official acts in connection with the gratuities, including seeking renewal of BPAs with Pinnacle, sending multiple purchase requests obligating millions of dollars to Pinnacle for prosthetics and orthotics materials, and causing the repeated ordering of supplies from Pinnacle.
Laufer admitted that he restricted the availability of BPAs to some of the manufacturers and distributors from whom Pinnacle purchased products, thereby inhibiting those companies from doing business directly with Walter Reed, and actively encouraged and directed those companies to sell to Walter Reed through Pinnacle, knowing that it would result in a higher price to the government. At the same time that he was funneling business through Pinnacle, Laufer was personally involved in ordering materials and causing materials to be ordered from Pinnacle, as well as taking official acts that impacted Pinnacle.
According to the plea agreement, Laufer’s job required him to complete annual Confidential Financial Disclosure forms which required him to report: all sources of outside income greater than $200; any business outside the U.S. Government in which Laufer or his spouse was an employee or consultant, whether or not compensated; any agreements or arrangements concerning past, current, and future employment; and travel-related reimbursement or other gifts totaling more than $350 from any one source during the reporting period. Laufer’s financial disclosure filings from 2014 to 2019 failed to disclose the financial benefits received from Pinnacle.
Furthermore, when interviewed by federal agents as part of a corruption investigation at Walter Reed, Laufer denied receiving any financial benefits from Pinnacle. Laufer also was interviewed by federal agents several times between 2017 and 2019 concerning unexplained cash deposits. On each occasion, Laufer lied to the agents, initially stating that he earned extra money from the purchase and sale of bicycles and small collectibles at swap meets, then falsely stating that he earned cash by working for Person C and Company C, and finally stating that the unexplained cash came from moonshine and liquor sales.
On September 9, 2021, Judge Chuang sentenced Thomas, to eight months in federal prison, followed by one year of supervised release, with four months of that to be served in home confinement, for paying gratuities to a public official in exchange for official acts. Judge Chuang also ordered Thomas to pay a fine of $50,0000 and forfeit and pay restitution in the amount of $27,890.62.
In a related case, another employee of the Walter Reed Prosthetics and Orthotics Department, Timothy Hamilton, age 60, of Columbia, Maryland, is expected to be sentenced in November 2021. Hamilton previously pleaded guilty to conspiracy to commit health care fraud and to acts affecting a financial interest. Hamilton admitted that beginning in 2009, he allowed Person A to use his orthotist certification for Person A’s business, Company A. Hamilton was aware that Company A used his certification to obtain national accreditation and as part of its documentation for Medicare credentialing, which allowed Company A to bill insurers for medical treatment that required the involvement of a certified orthotist, even though Hamilton was not providing those services in the vast majority of cases. Hamilton admitted that he received monthly financial payments from Company A from 2009 until October 2015, totaling more than $45,000. From 2011 to 2015, Company A used Hamilton’s credentials to submit more than 225 fraudulent insurance claims of more than $150,000.
Further, Hamilton admitted receiving more than $15,000 in gift cards, checks, and other benefits such as tickets and lodging, from Bruce Thomas and Pinnacle. During the time that Hamilton was receiving payments from Company A and Pinnacle, Hamilton ordered products on behalf of Walter Reed from both companies.
Acting United States Attorney Jonathan F. Lenzner commended the DCIS, HHS OIG, and the FBI for their work in the investigation and thanked the U.S. Department of Veterans Affairs Office of Inspector General, the U.S. Army Criminal Investigation Division’s Major Procurement Fraud Unit, the Office of Personnel Management Office of Inspector General, DOD Cyber Crimes Center Defense Cyber Forensics Laboratory, and the Defense Contract Audit Agency for their assistance. Mr. Lenzner thanked Assistant U.S. Attorneys Harry M. Gruber and Dana Brusca, who are prosecuting the case.
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Department of Justice
Office of the U.S. Attorney
District of Maryland