Case 1:10-cr-00266-RBW Document 13 Filed 01/14/11 Page 1 of 14

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

UNITED STATES OF AMERICA : CRIMINAL NO. 10-00266 (RBW)

:
v. :
: VIOLATIONS:
NICOLE SHANTELLE SMITH, : 18 U.S.C. § 641 (Theft of
: Government Property)
Defendant. :
__________________________________________:

GOVERNMENT’S MEMORANDUM IN AID OF SENTENCING

The United States by and through its attorney, the United States Attorney for the District

of Columbia, hereby submits the following memorandum in aid of sentencing. Consistent with

the advisory sentencing Guidelines and the factors set forth in 18 U.S.C. Section 3553(a), the

Government respectfully requests that this Court sentence defendant to a period of incarceration

between 37 and 46 months and order her to pay restitution in the amount of $1,885,650.

I. FACTUAL BACKGROUND

The United States General Services Administration ("GSA") is the primary acquisition

arm of the federal government. GSA is headquartered in Washington, D.C. and provides

numerous services to other federal agencies. GSA's primary services include constructing,

managing and preserving government buildings, and acquiring equipment, vehicles, supplies,

telecommunications, professional services and information technology for government

organizations including the military. The Public Buildings Service (PBS) division of GSA is

specifically responsible for the acquisition, construction, and management of buildings and other

real estate to be used by customer federal agencies.

In 1995, NIH entered into an interagency agreement with GSA for assistance in the

construction and renovation of research centers throughout its main campus in Bethesda,
 Case 1:10-cr-00266-RBW Document 13 Filed 01/14/11 Page 2 of 14

Maryland ("NIH Project"). NIH funded the project through an appropriation of $670 million

from Congress. Among the centers to be renovated were research facilities for the Office of

Research Services ("ORS"),1 the National Institute of Diabetes and Digestive and Kidney

Diseases ("NIDDK"),2 the National Institute on Deafness and Other Communication Disorders

("NIDCD"),3 and the National Institute of Dental and Craniofacial Research ("NIDCR").4

To manage the contract administrative process, GSA hired contractors. GSA tracked

acquisitions and payments to prime contractors using Reimbursable Work Authorization

("RWA") fund accounts. For the NIH Project, GSA established individual RWA fund accounts

for each NIH center under renovation. For example, GSA established a specific fund account for

the ORS project, which was known as the ORS fund account.

Among the prime contractors who provided contract administrative services to GSA

under the NIH Project were Washington Business Group ("WBG") and Project Support Services

("PSS"). WBG, a certified minority-owned small business headquartered in Washington, D.C.,

had fewer than 50 employees. PSS, a service-disabled, veteran-owned small business, had

1
ORS plans and directs service programs for public safety and security operations,
scientific and regulatory support programs, and a wide variety of other program and employee
services.
2
NIDDK conducts and supports basic and applied research and provides leadership for a
national program in diabetes, endocrinology, and metabolic diseases; digestive diseases and
nutrition; and kidney, urologic, and hematologic diseases.
3
NIDCD conducts and supports biomedical research and research training on normal
mechanisms as well as diseases and disorders of hearing, balance, smell, taste, voice, speech, and
language that affect 46 million Americans.
4
NIDCR provides national research designed to understand, treat, and ultimately prevent
the infectious and inherited craniofacial-oral-dental diseases and disorders that compromise
millions of human lives.

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offices in Virginia and Florida.. It was not uncommon for prime contractors like WBG and PSS

to retain subcontractors to satisfy their contractual obligations to GSA. The prime contractors

received payment directly from GSA and subsequently dispersed the funds to the appropriate

subcontractor. These contract employees function in a variety of important capacities and are

entrusted with unique access to otherwise government exclusive databases.

In 1998, defendant SMITH began working at GSA under various prime contractors

including WBG and PSS.5 Her immediate supervisor was GSA Contracting Officer E.V. and her

primary duties included: (1) preparing funding and task order documents; (2) gathering and

reviewing solicitation proposals from prime contractors; (3) accurately implementing and closing

all NIH Project RWAs in the GSA acquisition system; and (4) initiating and approving the

payment of work orders by confirming that the contracted services were rendered to the

government. To perform her duties, GSA granted defendant SMITH access and usage rights to

various government databases, including GSA's contractor invoice database (VITAP), GSA's

5
In 2001, defendant SMITH started her own business, NTT Consulting LLC ("NTT"),
with a childhood friend, S.C., who was also working at GSA for a subcontractor. NTT became a
subcontractor to WBG and PSS on contracts these prime contractors maintained with GSA. In
short, NTT replaced those companies who had employed defendant SMITH and S.C. Defendant
SMITH served as NTT's Chief Executive Officer and S.C. was NTT's President Defendant
SMITH and S.C.were equal owners of NTT. Defendant SMITH, however, controlled the
operations. Defendant SMITH prepared and maintained the business records, financial
statements and partnership income tax returns. She also signed and authorized payroll and
vendor payments, deposited payment receipts and was the point of contact with GSA contractors.
For the calendar years 2003 through 2008, defendant SMITH paid herself $1,362,581 from NTT
Consulting, while her business partner, S.C., received approximately $649,017. Defendant
SMITH also received monthly compensation of $1,500 from Interior Systems Inc (“ISI”) for
consulting work between 2003 and 2006. ISI, a service-disabled, veteran-owned small business
based in Washington, D.C., provided services that included administrative services to federal
government agencies.

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federal acquisition management system (Comprizon) and GSA's financial management and

payment system (Pegasys).

Beginning in July 2004 through September 2007, defendant SMITH used her GSA

position to steal $1,885,650 from the NIH Project. First, she created fraudulent work orders

between GSA and the prime contractors, WBG and PSS, for services she and S.C. were to

perform on the NIH Project. These work orders grossly overstated the value of their services,

overlapped with other work orders that had been legitimately authorized by GSA and bore

forged signatures of E.V.6 Second, defendant SMITH accessed the computerized program -

Pegasys - to direct payments to herself upon receipt of invoices from WBG and PSS. E.V.’s

approval for these payments was not required since SMITH was responsible for authorizing

payment of the contractor invoices. To conceal these payments, defendant SMITH used her

computer access rights to debit different NIH accounts. For example, she split the June 2005

fictitious work order payment of $1,500,000 between the NIDDK and NIDCD fund accounts

because she knew where these large debits would go unnoticed.7 E.V.’s approval was not

6
The Statement of Offense only includes four fictitious work orders. Two contracts
between GSA and WBG in 2004 for $50,000 and $65,000, respectively. These work orders were
paid out of the ORS fund account. The third, a June 2005 work order between GSA and PSS
for $1,500,000, was paid in two installments from different RWAs: $907,000 was taken from
the NIDDK fund account and $593,000 was drawn from the NIDCD fund account. The fourth
fictitious order in September 2007 was also between GSA and PSS for $270,650. The entire
amount was paid out of the NIDCR fund account. An additional work order for $1,243,394 in
November 2004 was not included in the loss amount even though it was suspicious because E.V.
could not conclusively state that her signature was forged. E.V., however, commented that the
amount of the work order was excessive for the work specified. Furthermore, defendant SMITH
directed a lump sum payment of $557,436 at the end of the work period in November 2006. This
was a payment for future services to be rendered, which is not an acceptable GSA practice.
7
From her participation in meetings with procurement officials, defendant SMITH knew
that it was a concern when a particular account had insufficient funds to meet its obligations.

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required for these actions.

With her ill-gotten gains, defendant SMITH enriched herself, her business partner and

family members with new homes, high priced cars, luxury vacations, designer clothes and

cosmetic improvements. In 2004 and 2006, defendant SMITH purchased two newly constructed

properties: a two-story single-family home for $489,915 and a condominium for $390,072. The

five bedroom, three-and-a-half bathroom house contained many upgraded amenities, including

an intercom system, a jacuzzi tub, interior pillars, sky lights, hardwood floors, crown molding,

chair rails, and an enclosed porch and patio. See PSR at paragraph 54 where Probation Officer

Romualdez noted “the home is adequately furnished and appears to be an unusually large space

for one adult and two minor children.” She purchased two Lexus 6-cylinder vehicles for

approximately $65,000 and $33,000. During 2003 and 2008, defendant SMITH enjoyed

frequent shopping sprees at luxury-brand shops such as Louis Vuitton, Coach, Gucci, Burberry,

Channel, Christian Dior and Armani. Among defendant SMITH’s other purchases were

jewelry, fur coats and two tickets for $1,617.20 to attend a music concert. She also took trips to

the Virgin Islands, Las Vegas, Florida and Hawaii. Additionally, defendant SMITH used

approximately $82,539 of her ill gotten gains to pay for a tummy tuck, a breast lift and cosmetic

dental surgery for herself, a tummy tuck for her business partner and cosmetic dental surgery for

her mother.

Moreover, the evidence suggests that defendant SMITH committed these fraudulent acts

to finance many of these large expenditures. For example, defendant SMITH contracted with

the builder of her new home in September 2004 at approximately the same time she received

payments from the $50,000 fictitious work order. After the house was built, defendant SMITH

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took out a $558,000 mortgage in August 2005. During this same summer, defendant SMITH’s

business partner, S.C., purchased her home for $589,082 in July 2005. These purchases coincide

with creation of the $1,500,000 fictitious work order in June 2005 and the corresponding

payment defendant SMITH received in July 2005.

II. SENTENCING RECOMMENDATION

A. Sentencing Guidelines

Both parties have agreed that the Guidelines base offense level is 22. The defendant has

pleaded guilty to one count of Theft of Government Property, in violation of 18 U.S.C. Section

641. The Base Offense level for such an offense is six, pursuant to U.S.S.G. Section

2B1.1(a)(2). From there, a 16 point upward adjustment is appropriate for a loss of more than

$1,000,000. See U.S.S.G. Section 2B1.1(b)(1)(I).

The parties, however, disagree as to whether a two-point enhancement based upon an

abuse of position of trust is warranted. Section 3B1.3 mandates an upward departure of two

levels from the base offense level where the defendant abused a position of public or private trust

in a manner that significantly facilitated the commission or concealment of a particular offense.

U.S.S.G. § 3B1.3. Courts have applied a two-part analysis in evaluating this section, first

determining whether a position of trust existed and then considering whether this position of

trust was abused. United States v. Iannone, 184 F.3d 214, 223 (3d Cir. 1999). “[I]n determining

whether a defendant occupies a ‘position of trust,’ a Court ‘must look beyond the descriptive

labels to the actual nature of the relationship and the responsibility the defendant is given.’”

Iannone, 184 F.3d at 223 (citing United States v. Boyle, 10 F.3d 485, 489 (7th Cir. 1993): see

also United States v. Thomas, 315 F.3d 190, 204 (3d Cir.2002) (determining a position of trust

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requires looking beyond job title to consider “real scope of [defendant's] job”). Once a position

of trust is found, the Court should determine “whether the defendant abused that position in a

manner that significantly facilitated the commission or concealment of the offense.” United

States v. West, 56 F.3d 216 (D.C. Cir. 1995); see also U.S.S.G. Section 3B1.3, app. Note 1.

As stated in detail above, defendant SMITH clearly occupied a position of trust where

she developed the knowledge and tools to commit this crime. Although E.V.’s signature was

required on the work orders, defendant SMITH had sole discretion to authorize payments in

accordance with those work orders.8 It was this position of trust – her ability to authorize

payments – that defendant SMITH abused. She could do so by logging onto the computer

network even from a remote location, such as her residence. Knowing that no one would be

looking over her shoulder, figuratively and literally, defendant SMITH could bypass customary

GSA procedures without detection. As such, she authorized large payments to the prime

contractors for future work despite GSA’s policy of paying in arrears. She further avoided

detection for years through her comprehensive knowledge of the NIH Project. With a simple

computer entry, she disbursed the stolen funds out of more plentiful accounts to avoid suspicion.

In her position as contract specialist, she even participated in meetings where GSA and NIH

officials raised concerns about the lack of resources in some of these accounts. Undoubtedly, the

knowledge she gained during these meetings assisted defendant SMITH in concealing her

crime.9

8
She also used her access to the legitimate work orders to create the fictitious work
orders by cutting E.V.’s actual signature from the legitimate work order and affixing it to the
fictitious ones. As part of her job, she processed the invoices and authorized disbursement.
9
As proof that defendant SMITH’s scheme was difficult to detect is evidenced by the fact
that the fraud persisted for years before it was discovered. In fact, the fraud was only uncovered
when a tipster specifically identified defendant SMITH by name.

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In United States v. Darryl Lyles, this Court agreed with the parties that the defendant’s

offense level should be increased by two points for abusing his position as a contractor with the

Government Accountability Office (GAO). See 08-CR-330 (RBW). As this Court will recall,

Lyles was hired to perform information technology services. His duties included creating an

inventory database for computer parts, monitoring outstanding work orders, and assisting with

the issuance and retrieval of computers to and from GAO employees. During his employment at

GAO’s headquarters, Lyles stole computers and computer parts, valued at approximately

$180,794, and sold them over the internet for profit. His criminal conduct was difficult to detect

because Lyles was, in part, responsible for keeping the inventory. Lyles, like defendant

SMITH, used his access to government property to steal and his institutional knowledge of

GAO inventory procedures to conceal his crime for an extended period of time.

In United States v. Mellen, the Court of Appeals for the District of Columbia Circuit

upheld the imposition of an abuse of position of trust enhancement where the defendant similarly

used her government position as a contract specialist to steal. Mellon billed the Department of

Education for electronic purchases for herself and relatives, and authorized the payment for false

overtime. 89 Fed. Appx. 268 (D.C. Cir. 2004). Since it was her job to monitor this

telecommunications contract and authorize overtime for the contractors, the appellate court

agreed that Mellon had a position of trust which she abused.

Even if defendant SMITH was technically under E.V.’s supervision, she nevertheless

occupied a position of trust because E.V. did not monitor her work. Defendant SMITH knew

from working with E.V. for years that she had the authority to act without E.V.’s explicit

approval. See United States v. Lofink, 564 F.3d 232 (3rd Cir. 2009) (state employee abused

position of trust even though his official authority was limited to small dollar claims where

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supervisors delegated greater authority to him and did not scrutinize his work); United States v.

Hernandez, 231 F.2d 1087, 1090-91 (7th Cir. 2000) (staff accountant with limited authority

abused a position of trust where the defendant had access/authority over valuable property and

his supervisors merely rubber stamped their approvals); United States v. Becraft, 117 F.3d 1450,

1452 (D.C. Cir. 1997) (supervisor granted office manager “de facto final authority” by

accepting defendant’s decisions without question).

Accordingly, two levels should be added to the base offense level for a total offense level

of 24. The government has agreed that defendant SMITH is entitled to a three-level decrease

for acceptance of responsibility, pursuant to U.S.S.G. Section 3E1.1(a). The resulting total

offense level of 21, when combined with his criminal history category of I, yields a sentencing

range of 37 to 46 months.

B. Sentencing Factors Under 18 U.S.C. Section 3553

As the Court is well-aware, the recommended sentence set forth in the Sentencing

Guidelines is but one factor this Court should consider in determining an appropriate sentence.

The Court should also consider the factors set forth in 18 U.S.C. Section 3553.10 These

additional considerations similarly provide a basis in this case for a period of incarceration

within the Guideline range.

10
Section 3553(a) factors include:(1) the nature and circumstances of the offense and the
history and characteristics of the defendant; (2) the need for the sentence imposed to reflect the
seriousness of the offense, promote respect for the law, provide just punishment for the offense,
afford adequate deterrence to criminal conduct, protect the public from further crimes of the
defendant, and provide the defendant with needed educational or vocational training, medical
care, or other correctional treatment in the most effective manner; (3) the kinds of sentences
available; (4) the kinds of sentence and the sentencing range established for the offense as set
forth in Guidelines; (5) any pertinent policy statement issued by the Sentencing Commission; (6)
the need to avoid unwarranted sentence disparities among defendants with similar records who
have been found guilty of similar conduct; and (7) the need to provide restitution to any victims
of the offense.

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1. Nature and Circumstances of the Offense and its Seriousness

Defendant SMITH’s criminal activity was not an isolated event. To the contrary, she

repeatedly manipulated GSA’s procurement process for at least five years. Her criminal conduct

involved significant effort and planning. It further involved the commission of other offenses.

For example, her criminal conduct included several violations of the Aggravated Identity Theft

statute. See United States v. Blixt, 548 F.3d 882 (9th Cir. 2008) (affirming conviction for

Aggravated Identity Theft, in violation of 18 U.S.C. Section 1028A, for forging another's

signature). Due to the serious nature of this crime, Congress mandated a two-year term of

imprisonment.

The harm caused by her crime goes beyond the monetary loss. According to NIH, the

financial consequences resulting from defendant SMITH’s theft impacted other research

programs when important biomedical research lost funding to replace the monies stolen by

defendant SMITH. See Government Exhibit 1. As the NIH Director of the Division of

Property Management pointed out, “[i]t cannot be known what would have been accomplished in

the treatment of individuals if this money had been available for research and medical

treatment.” Id.

In addition to the loss of money to NIH, GSA and its employees have suffered collateral

consequences as a result of defendant SMITH’s crime. In its victim impact statement, GSA

explained that actions like defendant SMITH’s have a negative impact on the integrity of the

federal procurement process and more than likely damaged its relationship with NIH and other

federal agencies:

As GSA’s mission is the support of its customer agencies, client relationships are
of paramount importance. Because GSA was entrusted with the NIH funds stolen
by Ms. Smith, her acts likely damaged GSA’s relationship with NIH, and may
also impact GSA’s reputation among other customer agencies.

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See Government Exhibit 2.

2. Defendant’s History and Characteristics

Defendant’s history and characteristics also counsel in favor of a Guidelines driven

sentence. According to the PSR, defendant SMITH dealt with many personal challenges, but

nevertheless excelled professionally and was more than capable of sustaining a lawful

livelihood. Indeed, defendant SMITH earned her bachelor of arts degree from the George

Washington University and has since been gainfully employed. She was well paid by various

contractors, formed her own company and lived comfortably with her daughter. Her mother

described her daughter to Probation Officer Romualdez as “passionate and loving,” having a

deep “compassion for others,” and hard working. There was absolutely no reason, other than

simple greed, that caused defendant SMITH to engage in this criminal conduct.

3. The Need to Promote Respect for the Law and Deter Similar Criminal Conduct11

Here, the need to reflect the seriousness of the offense and to provide just punishment for

the offense requires a lengthy period of incarceration as indicated by the Guideline range. The

defendant’s punishment must also significant to deter others in similar positions from stealing

taxpayers’ money. There are thousands of government-contractors in our community that serve

vital roles in helping the government provide necessary services to citizens. Sadly, the negative

effects of a corrupt contractor are not confined to the contractor’s specific organization. Corrupt

conduct by contractors and other public servants tends to cast skepticism and, worse, cynicism

broadly against the government and those public servants who everyday provide honest services

often at great personal sacrifice. If left unchecked, the selfishness of a few contractors or public

11
The government is unaware of any policy statements issued by the United States
Sentencing Commission applicable here.

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servants leads to a broader lack of faith in public service and the government’s ability to serve

the needs of its citizens. As a result, the ultimate loss to the government may exceed by several

magnitudes the amount of money that any one corrupt contractor or public servant selfishly

stuffed into his or her own pocket. The defendant’s sentence, therefore, should serve to deter the

defendant from future criminal conduct, vindicate the conduct of honest contractors, and serve as

a message to the broader community that the criminal law will deal harshly with those who seek

to steal taxpayers’ money. These factors also suggest that a sentence that includes a period of

incarceration within the Guideline range is appropriate.

4. The Need to Avoid Sentencing Disparities

Finally, a sentence within the applicable Guideline range will promote uniformity in

sentencing. It is clear from the explicit language of 18 U.S.C. Section 3553(a) that the framers

both endorse and respect the ranges set by and the policy statements made by the Sentencing

Commission, which in these circumstances recommends imprisonment. The converse is also

true: the Guidelines explicitly recognize Section 3553 as its linchpin, setting forth in its preamble

its reliance on the statute and calling out each and every factor set forth therein. As stated by the

Supreme Court, “We have accordingly recognized that, in the ordinary case, the Commission’s

recommendation of a sentencing range will ‘reflect a rough approximation of sentences that

might achieve § 3553(a)’s objectives.’” Kimbrough v. United States, 552 U.S. 85, 109 (2007)

(quoting Rita v. United States, 551 U.S. 338, 350 (2007)).

A Guideline sentence is consistent with sentences of other defendants with similar

criminal records who have been convicted of stealing government property. In United States v.

Ronnita Dunbar, Judge Friedman agreed with the prosecutor’s recommendation and imposed a

Guideline sentence after a plea to theft of public money, in violation of 18 U.S.C. § 641. See 10-

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CR-00088 (PLF). Dunbar, a government contractor assigned to the Walter Reed Army Medical

Center, Department of Surgery, used her computer access rights to create and process 22

fictitious travel reservations. Through the fake travel reservations, she was able to divert

$165,477.27 to her personal bank account and to a pre-paid credit card account that she created

by stealing a co-worker’s identity. Likewise, in United States v. Sonia Coleman, Judge Kollar-

Kotelly sentenced the defendant to 24 months, the top of the Guideline range, after she pled

guilty to stealing $236,256 from the District of Columbia Water and Sewer Authority (WASA),

in violation of 18 U.S.C. Sections 2314 and 2. See 09-CR-0048 (CKK). Coleman used her

position as a payroll specialist to alter the payroll of WASA employees and direct the electronic

payments of this fictitious compensation to bank accounts under her control. Judge Collyer, in

United States v. Karen Burroughs, also sentenced this government employee to a period of

incarceration in the Guideline range – 18 months – for fraudulently claiming $282,134 in

overtime from the United States Forest Service. See 08-CR-277-01 (RMC).12

A period of incarceration between 37 and 46 months is short when compared with

sentences imposed upon defendants whose criminal conduct resulted in significantly less

financial loss to the government. In November 2008, Judge Kollar-Kotelly sentenced another

GSA contractor employee, Charles Anthony Wehausen, to 33 months in prison for stealing a

substantially smaller amount – $384,500. – from GSA.13 See 07-CR-251 (CKK). In that case,

Wehausen engaged in a scheme to falsely inflate project costs to generate kickback income for

himself and others. See also United States v. Mellen, supra (government employee was

12
This Court sentenced Lyles to 18 months’ incarceration, the low end of the Guideline
range.
13
An additional point was added to the defendant’s Guideline calculations for failing to
pay $44,260 to the Internal Revenue Service.

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sentenced to 54 months for stealing approximately $750,000 from Department of Education);

United States v. Melendez, 41 F.3d 797 (2d Cir. 1994) (postal employee sentenced to 70 months

for stealing $700,000 from restricted area of the post office). Accordingly a sentence including a

period of incarceration within the Guideline range will further the sentencing objective of

uniformity.

III. CONCLUSION

For the reasons set forth herein, a Guideline sentence of between 37 and 46 months and

order her to pay restitution in the amount of $1,885,650 is necessary, reasonable and appropriate

in this case.

RONALD C. MACHEN, JR.

United States Attorney for
the District of Columbia

By: /s/
__________________________________
SUSAN B. MENZER
Assistant United States Attorney
(202)252-7819

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