Former shipbuilding project manager sentenced to more than 4 years in prison for $1.5 million false invoice scheme

Defendant put shipbuilding company and 2,300 jobs at risk with embezzlement on government contract

Seattle – A former project manager for Portland, Oregon-based shipbuilder Vigor Marine LLC, was sentenced today in U.S. District Court in Seattle to 51 months in prison for his scheme to defraud his employer out of approximately $1.5 million, announced U.S. Attorney Brian T. Moran.  SHELTON LAYNE SMITH, 50, of Portsmouth Virginia was indicted in June 2019 and pleaded guilty to wire fraud on September 26, 2019.  At the sentencing hearing, U.S. District Judge Robert S. Lasnik found that SMITH had obstructed justice by making false statements to FBI agents and urging a co-conspirator to lie to investigating agents.  SMITH was also ordered to pay $1,483,802 in restitution.

“This fraud could have resulted in the shipbuilder being barred from government contracts – a key source of shipbuilding work,” said U.S. Attorney Brian Moran. “In order to line his pockets, this defendant put the future of his employer and its 2,300 person work force at risk.” 

According to records filed in the case, in 2016 and 2017, SMITH served as the project manager on the renovation of two U.S. Coast Guard cutters called the “Bertholf” and the “Waesche.”  The renovations took place at Vigor’s Seattle facility. SMITH was responsible for selecting vendors and approving payments to them for equipment and services related to the renovations.  Smith admitted in a plea agreement that, in this role, he fabricated invoices from a fictitious company called “Marine Service Solutions” (MSS).  The fraudulent invoices caused Vigor to pay out approximately $1.5 million for work that was never done and equipment that was never provided.  SMITH used the fraud proceeds for his own purposes, including to finance his gambling activities.

SMITH’s scheme to defraud was an elaborate charade.  SMITH persuaded a legitimate Vigor vendor to serve as a “pass-through” entity that received invoices from MSS, marked up the cost of the services, and passed on the fraudulent expenses to Vigor.  The local vendor was not aware that Marine Service Solutions was not a real company.  SMITH also misled a long-time acquaintance in Mississippi into setting up a bank account for MSS, cashing the checks, and funneling most of the proceeds to SMITH.  In emails, SMITH posed as the Mississippi man, making it appear as if the Mississippi man was the owner of MSS.

When questioned by the FBI, SMITH repeatedly lied about MSS and encouraged his acquaintance in Mississippi to stick to a false story about the company.

Vigor terminated SMITH in 2017, after discovering that SMITH had mishandled the Bertholf project.  SMITH’s successor discovered the fraud, and Vigor reported the crime to the FBI.

The case was investigated by the FBI.  The case was prosecuted by Assistant United States Attorney Seth Wilkinson.