Saturday, March 10, 2007


Guilty Plea In LANL Fraud Case

ABQ Journal, Santa Fe Edition, Saturday, March 10, 2007
By Martin Salazar, Journal Staff Writer

A former Los Alamos National Laboratory purchasing officer caught stealing more than $55,000 from the lab in 2005 pleaded guilty in federal court Friday.

Dolores Mae Arreola, a 26-year lab veteran fired in July 2005 after the embezzlement scheme was uncovered, faces up to 20 years in federal prison and hundreds of thousands in fines.

The U.S. Attorney's Office, however, has agreed to recommend that Arreola be sentenced at the lowest end of the sentencing guideline range.

Arreola pleaded guilty to one count of making false statements or entries, one count of theft or embezzlement of public money and one count of making a false, fictitious or fraudulent claim.

As part of her plea, Arreola has also agreed to forfeit a 2000 Ford Mustang, a 2000 Toyota Tacoma truck and $20,000 she acquired through the scam.

A sentencing hearing has yet to be scheduled in the case.

"I recognize and accept responsibility for my criminal conduct," says the plea agreement signed by Arreola.

Arreola also admitted a detailed set of facts about how she pulled off the scheme and what she did with the money.

According to the plea agreement:
Arreola worked as a buyer for the lab and was responsible for processing purchase requests for materials and services needed by lab personnel to carry out their duties.

As a buyer for the lab, she was allowed to make purchases for goods and services costing up to $100,000 without supervisory approval.

At the same time that she was executing her scheme, Arreola was president of the Santo Domingo de Cundiyo Heirs' Association, a land grant heirs group. The organization reportedly seeks recognition of land grant rights in the Cundiyo area, about 20 miles north of Santa Fe.

As president of the group, Arreola had signatory authority on the organization's Del Norte Credit Union account.

On Feb. 22, 2005, she entered false data into the lab's computerized vendor system to make it appear as if the Santo Domingo de Cundiyo Heirs' Association were one of the lab's legitimate vendors.

The same day she activated the organization as a vendor, she submitted a fictitious purchase order for the organization to construct and supply the lab with various fictitious items for a purchase price of $19,845. Arreola authorized advance payment on the order and asked the accounts payable department to notify her when the check was ready so she could pick it up. She picked up the check on Feb. 24, 2005, and deposited it into the organization's bank account. She then withdrew the money.

On May 9, 2005, Arreola prepared a second fictitious purchase order. The following day she picked up the $15,644 check made out to her organization. She deposited it into the organization's account and then withdrew the money.

Arreola used part of the proceeds from those two checks to buy the Mustang and the Tacoma truck.

On June 7, 2005, Arreola processed another fraudulent purchase order for $20,000. She picked up the check from the accounts payable department on June 8, 2005, and deposited it into her organization's account.

Before Arreola could pull the $20,000 out of the account, lab officials discovered what had been occurring, and the bank froze the account.

Arreola isn't the first lab employee to plead guilty to a procurement scam.

Peter Bussolini and Scott Alexander were accused of illegally buying more than $399,000 worth of hunting equipment, outdoor gear and television sets on a LANL account. The scandal, which occurred five years ago, landed the two men behind bars and drew the ire of Congress.

And now you know why we are buried in procurement paperwork and it takes three days to get the required signatures to buy $200 worth the goods from a known reputable vendor, making the total cost of this item ranging into the thousands of dollars. In really it's no longer about getting the job done in a timely matter, but all about providing evidence that we are all making legal procurements that are totally traceable, for accountability purposes to a higher authority. So the next time you come to your local procurement representatives and ask for something in a hurry, think again, it's not happening; thanks to screw-ups like this person. We're all going down with the ship thanks to a actions of a few individuals who have abused a once trusting system, and being scrutinized to the max by auditors at every turn along the way. Eventually the cost of doing business at these facilities will be driven so high, we will have no business at all.
The same thing applies to security and working with classified documents and information. Sure, you can put controls into place to get as close to 100% probability that nothing bad will happen...but, you hardly get any work done. The fact is that when you give employees a degree of trust to get work done, you expect they will do it. You accept a certain level of risk. If you accept risk against productivity, you have to be ready for the downside, such as what happened here and with classified information getting out. As a percentage, financial and security breaches are rare...but it seems there is no tolerance for any degree of "failure", whatsoever. You're right...because of it, we will have no business (or Lab) at all.
Unfortunately the 'fixes' that have been concocted to address the risks have often just been short-term, ill-planned layers of paperwork so the appearance of additional safeguards can be shown (to auditors, management, Congress or others) and often, serve to punish the folks in the trenches it seems. The additional steps of paperwork deflect attention in the short term but don't really address the real underlying problems or challenges. Checking the boxes to show compliance is a fast and cheap way to make it look like you're doing all the right things but it costs you in the long run. In LANL's case, it's cost the lab its reputation and perhaps its future.
The problem is that those of us workers who purchase the $200 items are subject to a lot of paperwork and scutiny. But, Buyers such as this woman apparently escape all of the scrutiny. Why is it that Buyers are considered to be trustworthy while those of us who brought in the WFO money and are accountable if the project does not stay within budget are not considered to be trustworthy?

The fact is that the major dollar volume of procurement fraud is committed by the Buyers. They have the greatest opportunity.
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