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For Immediate Release:  
For Further Information:
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January 14, 2009  

Peter Aseltine
609-292-4791

Office of The Attorney General
- Anne Milgram, Attorney General
Division of Criminal Justice
- Deborah L. Gramiccioni, Director

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Department of Corrections Official Charged with Assisting South Jersey Alarm System Contractor to Rig Bids on State Contracts

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TRENTON – Attorney General Anne Milgram and Criminal Justice Director Deborah L. Gramiccioni announced that an official for the New Jersey Department of Corrections was indicted today on charges he assisted an alarm system contractor to rig bids in connection with more than $230,000 in state contracts.

According to Gramiccioni, Frederick J. Armstrong, 58, of Pemberton, a construction management specialist in the Capital Planning & Construction Unit of the Department of Corrections, was charged with conspiracy (2nd degree), official misconduct (2nd degree), conspiracy in restraint of trade (2nd degree), theft by deception (2nd degree), contract fraud (2nd degree), and two counts of misconduct by a corporate official (2nd and 3rd degree).

“This state official corrupted the integrity of the state contracting process by helping to rig bids and steer lucrative contracts to a single alarm system contractor,” said Attorney General Milgram. “The bidding rules are designed to ensure that taxpayers get a fair deal when their money is spent on public projects. Mr. Armstrong broke those rules and violated his duties.”

The indictment is the result of an ongoing investigation by the Division of Criminal Justice Corruption Bureau and the Department of Corrections’ Special Investigations Division. It supersedes an indictment obtained by the Division of Criminal Justice on Dec. 3, which charged the contractor, Paul Kerth, 57, of Collingswood, owner of Independent Alarm Distributors, Inc., and several companies he owns. The December indictment did not name Armstrong.

Kerth is charged in the superseding indictment with conspiracy (2nd degree), official misconduct (2nd degree), conspiracy in restraint of trade (2nd degree), two counts of theft by deception (2nd and 3rd degree), two counts of contract fraud (both 2nd degree), and two counts of misconduct by a corporate official (2nd and 3rd degree). Independent Alarm, which is based in Kerth’s home, is also named as a defendant, along with two other companies Kerth owns that he allegedly used for rigging bids: Adirondack Alarm and Automatic Alarm Associates, both of Marlton.

The indictment alleges that Armstrong assisted Kerth in submitting rigged bids to the Department of Corrections and used his influence over contracting procedures to steer contracts awarded by the department to Independent Alarm.

“With this indictment, we send a strong message to officials who oversee government contracts, as well as the contractors with whom they do business,” said Director Gramiccioni. “Don’t cheat the taxpayers of New Jersey. We are watching, and we will prosecute those who break the law. I want to thank the Department of Corrections, which partnered with us on this investigation.”

The indictment alleges that between April 1999 and December 2004, Kerth – with the assistance of Armstrong – rigged bids in order to obtain contracts with the Department of Corrections to install alarm equipment. The state investigation revealed that Armstrong assisted Kerth in rigging nine DOC contracts with contract prices that, in the aggregate, exceeded $230,000.

Under state law, Independent Alarm had to be the lowest qualified bidder among at least three independent bids submitted for each project in order to win the contracts. It is alleged that Kerth fraudulently arranged for his other companies, Adirondack Alarm and Automatic Alarm, as well as other contractors not named in the indictment, to submit higher “cover” bids, so Independent Alarm would win the contracts. Armstrong allegedly encouraged Kerth to arrange for such cover bids so he could steer contracts to him, and Armstrong was aware that cover bids were being submitted. In addition, Armstrong allegedly solicited bids from contractors whose names were given to him by Kerth, sending them requests for proposals or phoning them on contracts where telephone price quotes were permitted.

On Dec. 2, a subcontractor that Kerth used, Edward F. Brewer Sr., 51, of Audubon, pleaded guilty before Superior Court Judge Thomas A. Brown Jr. in Camden County to two counts of fourth-degree falsifying records. He admitted that he arranged for a contractor friend, Jozef Caputa, to submit higher bids so that Independent Alarm would win two contracts from the Department of Corrections. Brewer must pay $5,000 in restitution and faces a five-year ban on doing business with the state. On July 9, Caputa was charged with two counts of third-degree theft by deception. In return for Caputa’s truthful statements before Judge Brown implicating himself and others, and his agreement to not seek public work for five years, the state did not oppose Caputa’s application for Pre-Trial Intervention, which was granted by the court.

The indictment also alleges that Kerth rigged bids on contracts with two Camden County municipalities. Between May 2000 and September 2004, Kerth allegedly used his two other companies to fraudulently submit higher bids so that Independent Alarm could obtain two contracts with Haddon Township totaling more than $20,000, and two contracts with Oaklyn Borough totaling more than $30,000.

The investigation was conducted and coordinated for the Division of Criminal Justice Corruption Bureau by Detective Sgt. Keith Lerner, Detective Paul Marfino Jr., Detective David Patella and Deputy Attorney General Steven J. Zweig. Senior Investigators Manuel Alfonso and Charles Walters led the investigation for the Department of Corrections’ Special Investigations Division. Deputy Attorney General Zweig presented the case to the state grand jury.

Attorney General Milgram thanked the Department of Corrections for its referral and extensive assistance in the investigation.

The indictment was handed up to Superior Court Judge Linda R. Feinberg in Mercer County, who assigned it to Camden County, where the defendants will be ordered to appear in court at a later date to answer the charges.

Second-degree crimes carry a maximum sentence of 10 years in state prison and a criminal fine of $150,000, while third-degree crimes carry a maximum sentence of five years in prison and a $15,000 fine. The corporate defendants could face fines of up to triple the aggregate amounts of any contracts they are found to have received through bid rigging.

The indictment is merely an accusation and the defendants are presumed innocent until proven guilty. A copy of the indictment is available with this press release at www.njpublicsafety.com.

Attorney General Milgram noted that the Division of Criminal Justice - Corruption Bureau has established a toll-free Corruption Tipline for the public to report corruption, financial crime and other illegal activities. The statewide Corruption Tipline is 1-866-TIPS-4CJ. Additionally, the public can log on to the Division of Criminal Justice Web site at www.njdcj.org to report suspected wrongdoing. All information received through the Division of Criminal Justice Corruption Tipline or Web page will remain confidential.

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