Oregon company pleads guilty to selling $10 million in fake parts to U.S. Military

The owner of Kustom Products, Inc. and four employees pleaded guilty in the U.S. District Court in Portland to conspiracy to defraud the U.S. military. The company sold $10 million worth of phony parts to be used for attack helicopters and military vehicles.

According to court records, the owner charged with the crime is Harold Ray Bettencourt II. The other four implicated were his son’s Harold III, Nicholas, and Peter, and the office manager Margo Densmore. They remain free pending sentencing scheduled for later this year.

The Latin Post reported that Kenneth Hines, Special Agent in charge of the Internal Revenue Criminal Investigation released a statement stating, “These crooks took deliberate action to supply defective equipment to our military, putting our service men and women in harm’s way during a time of war. Then, they spun a web of complex lies to cover it all up.”

Suspicions began in 2008 when it was discovered that eight locknuts for a Kiowa attack helicopter did not meet specification. After further investigation, it was found that the same locknuts were being used in Kuwait.

In an affidavit, according to the Associated Press, James McMaken, a special agent with the Defense Department Inspector general and Defense Criminal Investigative Service, said, “The military field terminology for this locknut is the ‘Jesus nut,’ which is a colloquialism for the main rotor retaining nut that holds the main rotor to the mast of some helicopters. The failure of this part can be catastrophic, resulting in possible death or serious injury to military personnel.”

Between 2006 and 2010, the company secured 750 contracts with the U.S. government totaling $10 million. The company successfully sold phony parts to the government for 22 to 3,754 percent higher than their cost price.

The Associated Press reported that they were able to undercut bids from other companies by substituting phony parts for genuine parts. Investigators were able to show through emails and purchasing records that they were producing fake records in an attempt to cover up their actions.

As part of the guilty plea, the defendants have to forfeit more than $365,000 and several possessions including eight vehicles, a boat, two boat trailers, two jet skis and three ATVs.

Purchasing agent Josh Kemp, who was a cooperating witness in the case, was scheduled to appear in court later this month to plead guilty to the same charge.

Defense attorneys have not responded to telephone calls and emails asking for comment.