FEBRUARY 3, 2001

THE VIRGINIAN-PILOT

SECRET DEAL PROTECTED

VA LAWMAKER BEACH SEN. FRANK WAGNER'S COMPANY TO PAY $400,000 TO SETTLE ACCUSATIONS OF OVERBILLING NAVY

WHISTLE BLOWER'S CHARGES KEPT SEALED DURING
DELEGATE'S ELECTION CAMPAIGN FOR STATE SENATE

Published: Saturday, February 3, 2001
Source: Mark Davis

©Landmark Communications Inc.

VIRGINIA BEACH -- State Sen. Frank Wagner's shipyard has agreed to pay $400,000 to settle allegations that it fraudulently billed the Navy -- charges that Wagner kept sealed in federal court during his December election campaign.

Wagner's company -- Wagner Maritime Inc., trading as Davis Boat Works in Newport News -- settled the case shortly after the Dec. 19 election. It is a civil case and does not result in a criminal conviction.

Wagner's former accountant alleged that the company submitted false bills to the government in 1997 and 1998 totaling more than $260,000.

In the settlement, Wagner and the company did not admit wrongdoing. In an interview Friday, Wagner repeated his contention that he did nothing wrong and said he settled the case to prevent a long and costly trial.

A federal judge unsealed the court record Friday.

Wagner succeeded in keeping the file sealed during his campaign for the Virginia Senate in December. After that, he tried to keep the file sealed permanently, arguing to a judge that the records could embarrass him and his company.

``It's still our position that we did nothing wrong, and we felt it was appropriate to keep it sealed,' Wagner said Friday.

But Judge Robert G. Doumar ruled Thursday that that wasn't a good enough reason, citing ``the public's strong right of access' to court documents and proceedings.

``This case involves allegations of misspent government funds, and the government's efforts to recoup those funds,' Doumar wrote. ``In such a case, the public's right of access to the record of the entire proceeding is quite strong.'

Doumar said federal rules do not exist to shield defendants from embarrassing publicity.

``Every day, in courts all across the country, and in almost every civil case, an unsealed complaint is filed that alleges acts arguably embarrassing to the defendants named therein,' Doumar wrote.

Wagner, 45, represented Virginia Beach in the House of Delegates for the past nine years before winning election to the state Senate on Dec. 19, filling the seat vacated by Edward L. Schrock. Wagner beat Democrat Louisa M. Strayhorn by a 2-1 margin.

The allegations against Wagner were filed in court in January 2000 by a whistle-blower, Wagner's former accountant, who said she quit in 1998 after Wagner insisted she file fraudulent bills.

The accountant, Becky J. Watson of Poquoson, will get a reward of 20 to 30 percent of the $400,000 settlement, said her attorney, John W. Drescher.

On Friday, Wagner acknowledged the settlement but said he did nothing wrong.

In a lengthy written statement and in an interview, Wagner said he merely followed the instructions of government contracting officials in submitting the bills. He said the government ``received full value and did not suffer any actual damages.'

``I can't overemphasize that,' Wagner said. ``They got dollar-for-dollar services. We didn't bill for anything we didn't do. All we did was bill the way the government told us to.'

Wagner said he settled the case to prevent a long and costly trial that would have disrupted the company and jeopardized its relationship with the government.

The U.S. attorney's office declined to comment Friday.

Wagner's shipyard, on the James River near the Monitor-Merrimac Memorial Bridge-Tunnel, repairs small ships and boats, including some for the Navy.

The case began Jan. 13, 2000, when the accountant filed a civil action against Wagner Maritime on behalf of the federal government, under the federal False Claims Act.

Watson's 13-page complaint accused Wagner and the company of submitting ``improper and fraudulent charges' for government repair work. She said Wagner Maritime ``routinely overbilled' for work in 1997 and 1998.

When government jobs ran over budget, according to the complaint, Wagner instructed Watson to add charges to other government work.

For example, the complaint said, Wagner ordered Watson to charge storage and boat lifting costs to the government when, in fact, no storage was provided and no vessels lifted.

In another example, Wagner Maritime routinely charged the government for labor hours actually spent working on civilian vessels, the complaint said. Employee time cards were altered by whiting out any record of the project that an employee actually worked on, then replacing it with a government job, according to the complaint.

Watson's complaint was filed under seal in Norfolk's federal court, as required by law. Watson served her complaint on the government, and the U.S. attorney then began investigating to decide whether to intervene in the lawsuit.

By law, the government has 60 days to decide, but can get extensions. In this case, the government got three extensions. Meanwhile, the complaint remained sealed.

The final extension was granted, along with a request by Wagner and the government to keep the file sealed, on Dec. 11 -- just eight days before the Dec. 19 election.

Soon after, Wagner agreed to the settlement and asked that the entire matter be sealed permanently. Doumar denied that motion.

This article is ©2001 Landmark Communications Inc., and many not be republished without permission. If you have questions or comments about the archives, please send us feedback.

Awarded: $400,000