Scheme involved sales of railroad engine parts
An 81-year-old former prisoner of war and his 46-year-old son received prison sentences Friday in U.S. District Court in Spokane for a fraud conspiracy involving the sale of locomotive and diesel engine parts to customers worldwide.
The younger of the two, Frederick Manfred Simon, was the former president of Railway Logistics International Inc. and its predecessor, Engineering International Corp. Judge Frem Nielsen sentenced him to 125 months in federal prison and ordered him to pay $594,993 in restitution to two dozen corporations in England, Spain, Mexico, Germany, Switzerland, Canada, India and the United States.
Simon, who has been in custody since his arrest in 2007 by the FBI, said his business fell apart because the U.S. Department of Defense did not fulfill its $2.4 million contract to have Railway Logistics supply railroad parts to war-torn Iraq. He has a pending $6.4 million claim against the U.S. government in the Court of Federal Claims.
“I’m not a bad person,” Simon told the court. “I did not want to defraud these people.”
His father, Manfred O. Simon, who was treasurer of Railway Logistics, was sentenced to 24 months in prison and held responsible for $430,818 in restitution. He will be allowed to self-report to prison, while his son remains in custody.
If either of the men or their business entities prevail in the claim against the Department of Defense, any payments would first go to pay the restitution.
The two did not testify in their own defense or call any witnesses during their three-week jury trial that ended with guilty verdicts Nov. 11. Assistant U.S. Attorney Thomas Hopkins called more than 60 witnesses, including 13 from nine other countries.
“The jury verdict was absolutely justified,” Nielsen said Friday as he sentenced the pair. “A tough sentence is not only justified, it is mandated.”
Frederick Simon, formerly of Whitefish, Mont., and Indianapolis was convicted on conspiracy to commit wire and mail fraud, eight counts of mail fraud, 11 counts of wire fraud and five counts of money laundering.
Manfred Simon was convicted of conspiracy, eight counts of mail fraud and five counts of money laundering. He was found not guilty of one count of wire fraud.
The elder Simon was drafted into the German army and held as a prisoner of war by the Russians during World War II. He later became a naturalized U.S. citizen who served in the U.S. Air Force and volunteered for combat duty in Vietnam, the court was told.
Manfred Simon lived in an apartment in Spokane, answering the telephone for Railway Logistics and depositing checks into a bank account, while his son moved from Montana to Indiana and to Germany, using a billing address in Delaware.
“I have never engaged in any scheme to defraud anybody,” Manfred Simon said, telling the court he was only following instructions from his son.
The judge said that while he was convinced Manfred Simon played a minor role, “You can’t say you were naive and didn’t know what was going on.”
Both were convicted of similar federal fraud charges related to the sale of locomotive parts in 1997 in Montana and still owe an additional $279,000 in restitution ordered in that case.
A third federal fraud case filed in Montana against Frederick Simon, involving the fraudulent activities of Engineering International, was transferred to Nielsen’s court and combined with a 2007 indictment returned after an investigation by FBI agent Bernadette Brown.
“It is a pattern of activity you’ve been involved in,” the judge told Frederick Simon, who now has three federal felony convictions. The judge said Simon took prepayments from customers, then lied to them when they inquired about their unfilled orders.
The prosecutor described Frederick Simon as the leader and organizer of the “sophisticated fraud scheme” that involved numerous e-mail accounts and multiple cell phones, creating the illusion he had offices and staff in multiple locations.
“His fraudulent conduct caused substantial losses and gave American business a black eye in several foreign markets,” Hopkins told the court.
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