WASHINGTON -- A federal grand jury indicted an Army colonel Thursday on charges he took $70,000 cash and a $4,722 Rolex watch as bribes for helping an Illinois arms company win more than $3.7 million in sales to the Salvadoran government.
The seven-count indictment, handed up in Alexandria, Va., alleged that Col. Juan Lopez de la Cruz, who was a military adviser stationed at the U.S. embassy in El Salvador, joined in a scheme to falsely bill the government for the bribe money as 'commissions' paid to Salvadorans.
Lopez, who also was accused of failing to report the bribe money on his tax return, was charged with conspiracy, bribery, filing false claims with the government and lying to federal investigators.
If convicted on all counts, Lopez would face up to 55 years in prison and maximum fines totaling about $1,470,000.
Prosecutors cleared the way for the indictment last month when Dennis Reese, president of Springfield Armory Inc. of Geneseo, Ill., who alleged arranged the payoffs, pleaded guilty to lesser charges and agreed to cooperate with investigators.
The indictment said Lopez proposed the scheme while serving as adviser to the Salvadoran Military Group, which was responsible for advising the Salvadoran government about purchases of weapons and supplies under the U.S. Foreign Military Sales financing program.
A loan to El Salvador covering the purchases was administered by the Defense Security Assistance Agency, which permitted contractors to pay up to $50,000 in sales commissions, but required them to certify they had complied with the regulations.
The indictment said that, after meeting Reese in 1983, Lopez informed him that he controlled the Salvadorans' decisions on purchases from U.S. suppliers.
It alleged that Lopez told Reese that the company could generate 'tax-free' money by setting up a Salvadoran resident as a local agent and declaring on documents that commissions had been paid to the local agent.
Lopez then allegedly introduced Reese to two Salvadorans who agreed to serve as local agents, traveling to the United States to cash 'commission' checks, then returning the money to Reese for a fee, the indictment said. The Salvadorans also agreed to sign 'invoices' falsely stating that commissions had been paid, prosecutors charged.
The indictment said that around August 1983, Lopez phoned Reese and asked him to buy a Rolex watch for his wife. It said Reese bought the $4,722 watch in Davenport, Iowa, and sent it to Cruz on Aug. 17 in Bayonne, N.J., 'as a bribe payment.'
The following February, it said, two Salvadorans flew to Illinois and Reese gave them checks to cash 'under the guise as payments for commissions.' In the spring, it said, Lopez 'solicited a $40,000 bribe payment,' which Reese delivered in cash at the Miami airport.
A similar, $30,000 payment solicited by Lopez was delivered by Reese's father, Robert Reese, in September 1984, at Chicago's O'Hare Airport, it said.
Lopez counseled Reese to falsely certify in two letters on June 7, 1984, that sales commissions totaling $94,600 were paid on four arms contracts worth more than $3.72 million, the indictment said.
Reese, who was named as an unindicted co-conspirator, pleaded guilty in February to single counts of conspiracy and filing false statements.
