Inquiry grows in contract scandal

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Law-enforcement authorities are widening their probe into a $130 million federal contracting scam that has led to convictions against a General Services Administration procurement official and two former executives of a prominent security company.

A federal prosecutor disclosed the ongoing investigation yesterday at a sentencing hearing in federal court in Greenbelt for Michael B. Holiday, founder of Holiday International Security.

Holiday, 50, is a central figure in what U.S. Attorney Rod J. Rosenstein said last year ranked among the biggest public-corruption cases in Maryland history.

A former Montgomery County police officer, Holiday was caught in an unrelated child-pornography sting in 2004. Later, he began giving investigators details about corruption involving federal security contracting officer Dessie Ruth Nelson, defense attorney Bruce Marcus said.

At one point, Holiday wore a wire to secretly record a meeting in California with Nelson, according to court documents. She pleaded guilty to a bribery charge earlier this month and is awaiting sentencing. She admitted taking $45,000 in cash and a $7,000 cruise from Holiday for steering contracts to his company.

Through Holiday's undercover meetings with Nelson, authorities also learned about activities involving "unrelated contractors" that remain under investigation, assistant U.S. Attorney Jonathan Biran told a judge yesterday.

A spokeswoman for the U.S. Attorney's Office yesterday declined to elaborate, saying officials could neither confirm nor deny any ongoing investigations.

"Federal investigators have followed the evidence in this case across the nation, from Maryland to California, to ensure that anyone involved in this corruption scheme will be held accountable," Mr. Rosenstein said after Nelson's Jan. 10 guilty plea.

Under federal sentencing guidelines, Holiday faces up to nine years in prison, but prosecutors are recommending he get no more than six years. They credit him for helping to get guilty pleas from Nelson and another defendant.

Mr. Marcus is hoping the judge will give Holiday a bigger break. He said Holiday met Nelson roughly 10 years ago after he lost out on a big federal contract, despite being the low bidder.

Nelson told Holiday, "Don't worry, your time will come," according to Mr. Marcus.

Nearly two hours into yesterday's sentencing hearing, U.S. District Judge Deborah K. Chasanow met privately with attorneys, then abruptly postponed the proceedings for two months.

She said the attorneys needed to resolve "complicated legal matters."

Holiday also helped agents build a case against Richard S. Hudec, a Holiday International Security executive who later ran and renamed the company USProtect after his wife purchased it in 2003, the defense attorney said.

Hudec had four felony fraud convictions on his record and was released from federal prison in 2001. He landed a job at Holiday International that same year.

As head of USProtect, Hudec helped broker $150 million in contracts for the firm, including for the FBI, but withheld details about his criminal past.

Hudec's case has exposed potential loopholes in the federal procurement system, whereby executives at contracting companies potentially can conceal their criminal histories without government officials ever checking.