Executives of the bankrupt American company, Wellco Enterprises, have been sentenced to prison last June 13 after they pleaded guilty to conspiracy to commit wire fraud, smuggling goods in ripping off the US Defense Department to the tune more than US$8.1 million by supplying “Made in USA” military boots which were mainly made in China and partly in Peru and the Dominican Republic, violating the “Berry Amendment” in which domestically produced products, such as food, clothing, fabrics, and specialty metals are given preference in procurement by the DoD.

The company executives who were convicted are: Vincent Lee Ferguson, CEO; Matthew Lee Ferguson,  Senior Vice President for Sales; Kerry Joseph Ferguson, Marketing Director ; Matthew Harrison Martland, Director for Distribution and Logistics; and Stephanie Lynn Ferguson Kaemmerer, Operations Manager.

As to how the fraud was perpetrated by these company officials, the U.S. Attorney's Office, Eastern District of Tennessee put out some of the details last February 16, 2018 when the defendants pleaded guilty:

According to information on file with the U.S. District Court, Wellco was a leading manufacturer and supplier of military footwear to the U.S. Department of Defense (DoD) and to civilian (commercial) customers for over 70 years.  From 2006 through 2012, DoD alone paid in excess of $138 million to Wellco for the supply of combat boots.  Wellco pioneered and patented the first practical method for molding and attaching a rubber sole to a shoe upper in a single operation.  During the Vietnam War, the U.S. Army adopted Wellco technology for the manufacture of its hot-weather boots for the jungles of Vietnam, a boot that became known as the “Vietnam Boot” or the “jungle boot.”   In May, 2007, in a deal involving approximately $22 million, Wellco was acquired by two investment firms, Golden Gate Private Equity, Inc. and Integrity Brands, Inc.  Wellco became a wholly owned subsidiary of Golden Gate’s portfolio company, Tactical Holdings.

In March 2006, Vincent Lee Ferguson was made President and CEO of Wellco.  At that time, he discussed with Wellco’s Board of Directors, his turnaround plan for the company to increase commercial sales and “aggressively pursue” sales to the U.S. government.  From December 2008 through August 2012, he conspired with his executive team to import military-style boots that were made in China into the United States and then deceptively market and sell those boots to DoD (and other federal departments and agencies), government contractors, and the general public as “Made in the USA” and as compliant with the Berry Amendment and the Trade Agreements Act (TAA).   The Berry Amendment prohibits DoD from buying clothing that is not grown, reprocessed, reused or produced in the United States.  The purpose of the Berry Amendment is to protect the viability of America’s textile and clothing production base.  The TAA provides that the government may acquire only “U.S.-made or designated country end products” and requires government contractors to certify that each “end product” meets applicable requirements. 

By December 2008, Wellco was manufacturing certain military boot model uppers and insoles in China.  In order to conceal this fact, the conspirators required the Chinese manufacturing facility to include the American flag and “USA” on labels of certain boot uppers.  After two shipments of these deceptively marked boots were detained and seized by the U.S. Department of Homeland Security’s Customs and Border Protection, the conspirators ordered the Chinese facility to stitch tear-away “Made in China” labels in Wellco boot uppers.  After importation, the conspirators instructed Wellco factory workers in Morristown, Tennessee to tear out the “Made in China” tags prior to shipping the boots to government and commercial purchasers.

The defendants marketed and sold these Chinese-made Wellco boots as “Made in the USA.”  They also submitted false certifications to DoD and other federal agencies, and to government contractors that these boots complied with the Berry Amendment and TAA and met certain safety standards, including electrical hazard and blood-borne pathogen protections for U.S. troops.  For example, on August 15, 2012, the defendants submitted a signed “Certificate of Conformance” to a government contractor, representing that Wellco’s boot model S161 was “100% Berry Compliant” and “fully protective against Electrical Hazard,” even though the model was imported from China and not safety tested.  The boots were then supplied to troops stationed at Sheppard Air Force Base in Wichita Falls, Texas.   In total, Wellco sold at least $8.1 million of fraudulent boots.

This case was investigated by Homeland Security Investigations, Defense Criminal Investigative Service, Air Force Office of Special Investigations, General Services Administration Office of Inspector General, and Defense Contract Audit Agency.  Assistant U.S. Attorneys David L. Gunn and Timothy C. Harker represented the United States.

Photo: U.S. Army Soldier  Combined Joint Task Force - Horn of Africa (U.S. Air Force photo by Staff Sgt. Timothy Moore)

According to the Star Telegram, Matthew Ferguson and Kerry Ferguson were sentenced to six months in prison; Neil Streeter and Stephanie Lynn (Ferguson) Kaemmerer were sentenced to five years of probation; Matthew Harrison Martland was sentenced to six months of probation. Former CEO, Vincent Lee Ferguson, will be sentenced later this year.

Wellco Enterprises officially went out of business on  the 28th of November 2014, after filing for Chapter 11 bankruptcy.