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Ex-BLM officials indicted in elaborate fraud scheme

Ex-BLM officials indicted in elaborate fraud scheme

Two former high-level federal Bureau of Land Management officials who worked in Virginia, including a deputy state director from Montana, have denied criminal charges accusing them of defrauding the government in an employment scheme.

A federal indictment filed in U.S. District Court in Great Falls accuses Larry Ray Denny, 66, of Box Elder, and John Grimson Lyon, 60, of Clifton, Va., of devising a scheme in which Denny continued to receive his $112,224 annual salary and benefits as a BLM deputy state director even though he left and never returned to his job.

Rather, Denny relocated to Montana where he contracted with the Chippewa Cree Tribe for drilling and consulting work.

Prosecutors also allege Denny claimed sick leave and regular pay while gone from his BLM job but that bank records showed he visited various golf courses and traveled to Las Vegas, Arizona and around Montana.

Denny, who was deputy state director for natural resources for the BLM’s Eastern States Office in Springfield, Va., pleaded not guilty to four counts during a Sept. 4 arraignment before U.S. Magistrate Judge Keith Strong in Great Falls.

Denny’s attorney, Penny Strong of Billings, said Thursday evening the matter should have been handled administratively. "My client certainly had no criminal intent. He's a long-term, very experienced, valuable employee of the Bureau of Land Management," she said.

"And it's very unfortunate that at the end of someone's career they have to face a stunning criminal indictment when there are lesser measures in the event that there were discrepancies and issues with the payroll and sick leave," Strong said.

Lyon, who was the BLM state director for the Eastern States in Springfield, Va., pleaded not guilty to three counts during an Aug. 19 arraignment before U.S. Magistrate Judge Robert Holter. The indictment was filed in July and unsealed with Lyon’s appearance.

Lyon is represented by Evangelo Arvanetes, an assistant federal defender in Great Falls. Arvanetes could not be reached for comment. Holter ordered Lyon to pay $300 a month for attorney fees.

Laura Weiss, a spokeswoman and prosecutor for the U.S. Attorney’s Office, could not be reached for comment.

The BLM fraud case is the latest in a series of indictments that have come from investigations by the U.S. Department of Interior’s Office of Inspector General into fraud and corruption on Rocky Boy’s Reservation.

The investigations already have led to convictions of former state Rep. Tony Belcourt and several contractors who provided kickbacks on federal contracts.

The indictment charges Denny and Lyon with wire fraud, false claims and theft of government property. Denny also faces a count of federal false statements regarding outside income.

Assistant U.S. Attorney Ryan Weldon said in the indictment that under the scheme, Denny left his BLM post “with the knowledge and approval” of Lyon, his supervisor, to relocate to Montana to pursue other business interests as a consultant with the Chippewa Cree Tribe and “for all intents and purposes” abandoned his federal job “without relinquishing payment” as an employee.

Lyon is accused of perpetuating Denny’s fraudulent wage claims by approving and submitting false information to the BLM.

The scheme began in about June or July 2012, the indictment said, when Denny told Lyon he needed to return to Montana to “overcome health-related issues.” Denny left BLM’s Springfield office in July 2012 and never returned.

But from July 2012 until March 23, 2013, Denny was paid for 550 hours of regular work, 461 hours of sick leave, 389 hours of annual leave and 72 hours for federal holidays, the indictment said. During that time, bank account activity showed Denny went to golf courses and traveled to Las Vegas, Arizona and in and around Montana.

In a 2012 job appraisal, Lyon rated Denny’s performance as “exceptional,” which led to Denny getting a $3,262 cash award in November 2012, the indictment said.

When BLM employees asked about Denny’s status for business reasons, Lyon refused to provide any information, claiming federal laws about releasing health information prohibited him from disclosing such information, the indictment said.

Meanwhile, in January 2012, the Chippewa Cree Tribe, located on the Rocky Boy’s Reservation in north central Montana, contracted with Denny Technical Services for drilling-related services, including exploration, energy use projects, research on mineral lease agreements, development of drilling programs and communication with relevant agencies.

Denny negotiated the contract with the tribe, while his daughter, Misty Ann Denny, also known as Misty Brooks, executed the agreement, the indictment said.

For a year beginning in March 2012, Denny received about $67,243 from the tribe in addition to his BLM salary and benefits, the indictment said. Of the amount from the tribe, Denny received about $49,000 during 2012 and did not report it on a federal confidential financial disclosure report, the indictment said.

The indictment also includes forfeiture allegations seeking a money judgment of $112,302 and other property that may be traced to the alleged crimes.

If convicted, Denny and Lyon face a maximum of 20 years in prison and a $250,000 fine on the wire fraud charge.

Both men were released pending trial. The case will be heard by U.S. District Judge Brian Morris of Great Falls.

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Federal Court, Yellowtone County Reporter

Federal court and county reporter for The Billings Gazette.

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