Civilian charged in Edelweiss scheme was hired for his expertise
September 21, 2005
The U.S. civilian accused of accepting at least $350,000 in kickbacks by manipulating purchasing contracts at the Army’s resort hotel in Germany was a trusted employee with expertise in government regulations, a top official for the resort said Tuesday.
Steven G. Potoski, 45, director of contracting for the Edelweiss Lodge and Resort, was hired at the hotel specifically for his knowledge, said Peter Isaacs, chief operating officer for the resort’s parent organization, the U.S. Army Community and Family Support Center. Potoski is alleged to have concealed illicit deals with at least 15 contractors.
Potoski and two American businessmen accused of being involved in the kickback scheme were arrested Friday on bribery and conspiracy charges, the U.S. Department of Justice reported Monday.
Isaacs said Potoski was given oversight of “very extensive and numerous” purchases for the $80 million hotel. Potoski is accused of taking bribes and agreeing to accept contracts for items with inflated prices, then splitting the extra money with vendors.
It was Potoski’s lofty level of responsibility — he was one of “probably not more than a dozen” people in the CFSC with such a high level of purchasing power — that allowed him to navigate the dense regulations that govern Army contracts, Isaacs said.
Brought on board by the CFSC in the late 1990s after about 10 years of working with U.S. Army Europe as a contract purchaser, Potoski had the ability to spend up to $5 million on a single contract in connection with the Edelweiss project, according to the CSFC.
“Because of his reputation and experience and credentials, we hired him,” Isaacs said.
Potoski is accused of working in collusion with a dozen German contractors, the two American businessmen and one British firm and building up a stack of cash and material kickbacks that included televisions, computers, airline tickets and ski passes, according to the Justice Department.
Isaacs said there is an extensive network of controls and required documents — even legal reviews — designed to deter fraud.
“In retrospect,” Isaacs said of the CSFC’s efforts to audit Potoski’s purchases, “given what we know, I wish we did a more thorough job.”
It was an auditing process at the hotel — not CSFC’s finance office — that led resort managers to question one of Potoski’s purchases in June, Isaacs said.
“Our routine internal controls at the Edelweiss Lodge and Resort led us to question an incident regarding procurement,” he said.
By late July, the Army’s Criminal Investigative Command and the Internal Revenue Service were involved in the case and compiling information on how far the alleged misconduct went.
In the early phases of the investigation, Potoski tendered a resignation with the resort but Isaacs refused to accept it, and instead placed him on administrative leave, Isaacs said. The reason, he said, was to give Potoski “motivation” to continue to work with investigators, who were performing undercover operations at the hotel, according to Justice Department reports.
That has kept Potoski on the CSFC payroll until this week — at least eight weeks after he allegedly admitted misconduct.
Details about the arrest and whereabouts of Potoski were not clear Tuesday, although Isaacs said he did not think Potoski had ever been incarcerated.
Potoski’s wife, who lives in Schriesheim, Germany, declined to give her name when reached by telephone Tuesday and said she had not seen or heard from her husband in recent days.
As for the Edelweiss, Isaacs said although the CSFC was “robbed of an as-yet determined amount of money,” there has been no practical impact on the hotel. The products Potoski is alleged to have improperly were ones that work well for the hotel; the agency just paid extra for some of them, he said.
Stars and Stripes reporter Andrew Tilghman contributed to this report.