INDUSTRIAL SUPPLY COMPANY SENTENCED FOR OVERBILLING THE CITY MORE THAN $550,000

The City of Philadelphia Inspector General Amy L. Kurland and United States Attorney Zane Memeger of the Eastern District of Pennsylvania announced that Airmatic, Inc., was sentenced after pleading guilty to one count of mail fraud for defrauding the City of Philadelphia of approximately, $556,633 by supplying unapproved, off-contract products to various City departments in violation of its agreements with the City.

“Working for the City is a privilege, and companies and individuals who abuse that privilege will be investigated, discovered and pursued to the fullest extent of the law,” said Mayor Michael A. Nutter. “I want to commend Inspector General Kurland and her entire team on their continued good work in identifying and eliminating corruption, fraud, misconduct, waste and mismanagement. I also want to thank the U.S. Attorney’s Office for their support throughout this investigation.”

Airmatic, Inc., a company based in Malvern, Pa., held several contracts to provide City departments a wide range of industrial products, including pneumatic tools, specialized pumps and lawnmower and chainsaw parts. The company pleaded guilty to submitting false and fraudulent invoices to the City. Airmatic has agreed to pay the City full restitution of $556,333, as well as a $350,000 federal fine and a $400 special assessment. In addition, Airmatic will serve three years of probation and will accept a three-year debarment from City contracts.

“The Office of the Inspector General is aggressively pursuing City contractors who violate the public’s trust by stealing from the City,” said Inspector General Kurland. “This case shows our commitment to recover losses on behalf of taxpayers and to hold responsible companies that violate that trust.”

In hundreds of transactions between January 2007 and August 2012, Airmatic sold the City unapproved products, which the company had no contract to supply, at huge profit margins. Instead of reflecting the off-contract items that Airmatic actually provided, the company billed the City for things that were listed under the firm’s existing City contracts. Airmatic also inflated the cost of the unapproved, off-contract items it provided to the City by an average of 87 percent and, in total, stole approximately $556,633 from the City.

For example, Airmatic falsely billed the City for a bearing assembly, an approved contract item. But, Airmatic delivered 12 asphalt rakes instead, which it did not have a contract to provide. To disguise the transaction, Airmatic manipulated the invoice and billed the City for the price of the more expensive bearing assembly, which the City never received and which resulted in a large mark-up on the cost of the rakes. Similar transactions occurred hundreds of times between January 2007 and August 2012.

This investigation began when a City employee provided a tip to the Inspector General’s office. It was investigated by the City of Philadelphia Office of Inspector General and the Federal Bureau of Investigation. It is being prosecuted by Assistant United States Attorney Jennifer Chun Barry and Bea Witzleben.

Posted in Mayor's Press Releases, Press Release
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