Former Chippewa Falls defense contractor sentenced to 10 years in prison

Published: Jan. 20, 2022 at 10:54 PM CST
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MADISON, Wis. (WEAU) - A man living in South Dakota and formerly of Chippewa Falls is sentenced to 10 years in federal prison for wire fraud, money laundering and aggravated identity theft.

Craig Klund, 58, pleaded guilty to wire fraud against the U.S. Department of Defense, as well as money laundering. The judge imposed a 96-month sentence on each of these counts to run concurrently.

Klund also pleaded guilty to aggravated identity theft. The judge imposed a 24-month sentence to run consecutive to the concurrent 96-month wire fraud and money laundering sentences. Klund’s total prison sentence is 120 months, which will be followed by three years of supervised release. Klund is also ordered to pay $435,822.71 in restitution.

According to the indictment, Klund was a military contractor who supplied electrical parts to the various branches of the U.S. military, including the U.S . Army for the Patriot Missile System and the U.S . Air Force for the F-16 jet fighter.

From 2011 through July 17, 2019, Klund executed a scheme to defraud the DoD by obtaining defense contracts under false pretenses.

Klund’s fraud scheme included: (1) use of 15 shell corporations to hide his control of entities bidding on DoD contracts; (2) use of multiple aliases; (3) repeated identity theft; (4) collusive bids submitted by multiple Klund entities on the same contract; (5) knowingly shipping nonconforming parts and requesting payment for these parts; (6) signing Federal Acquisition Regulation certificates using fake names; (7) lying to Defense Contract Management Agency (DCMA) inspectors by claiming to be someone other than himself; (8) relocating his business from Wisconsin to South Dakota to evade DCMA inspectors who were questioning his operations in Wisconsin; (9) United States Attorney Timothy M. O’SheaWestern District of Wisconsin concealing receipt of DoD proceeds by not reporting these monies on his federal income tax returns; and (10) laundering DoD proceeds by moving the funds between accounts.

Using 15 different shell entities, Klund submitted 5,750 bids and was awarded 1,928 contracts worth $7,468,638. These contracts were for parts for the U.S. Army, Air Force, Navy, and Marine Corps. He was paid $2,905,484 during the fraud scheme.

At sentencing, the judge told Klund he thought he was a liar. Klund had three previous federal felony convictions, two of which were for defense contracting fraud, making his criminal history a very important factor in the judge’s sentencing analysis.

The charges against Klund were the result of an investigation conducted by the U.S. Department of Defense - Office of Inspector General, Defense Criminal Investigation Service; General Services Administration - Office of Inspector General; and IRS Criminal Investigation.

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