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Case 8:12-cr-00272-AW Document 1 Filed 05/16/12 Page 1 of 20

AKA: USAO 20lOR00260


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IN THE UNITED STATES DISTRICT crmJitT I 0 FOR THE DISTRICT OF MARYLAND


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to} S DISTRICT COUR I F MARYLAHD

FILED

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UNITED STATES OF AMERICA, v. MICHAEL STRAYER, and KAREN EARLE, Defendants

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(Conspiracy, 18 U.S.c. ~ 371; Wire Fraud, 18 U.S.c. ~ 1343; Conflict of Interest, 18 U.S.c. ~ 208; Money Laundering, 18 U.S.c. ~ 1957; False Statements, 18 U.S.C. ~ 1001; Aiding and Abetting, 18 U.S.c. ~ 2; Forfeiture, 18 U.S.C. ~ 981(a)(1)(C), 28 U.S.C. ~ 2461(c), 18 U.S.c. ~ 982(a)(1))

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COUNT ONE (Conspiracy) The Grand Jury for the District of Maryland charges: Introduction At all times relevant to the Indictment: 1. The United States Department of Energy ("DoE"), a department within the

executive branch of the United States government, operated a facility in Germantown, Maryland. DoE's operations in Germantown included an Office of Science, which in turn included an
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Office of Advanced Scientific Computing Research' ("ASCR").

Scientific Discovery through

Advanced Computing ("SciDAC") was a program office within ASCR. 2. ASCR allocated funds through DoE research laboratories across the country to

accomplish ASCR's and SciDAC's program objectives. The laboratories, rather than ASCR and SciDAC, entered directly into contracts with vendors.

Case 8:12-cr-00272-AW Document 1 Filed 05/16/12 Page 2 of 20

3.

Oak Ridge National Laboratory ("ORNL") in Oak Ridge, Tennessee; Argonne

National Laboratory ("ANL") in Argonne, Illinois; and Pacific Northwest National Laboratory ("PNNL") in Richland, Washington, were major DoE labs with active supercomputing programs funded by ASCR al1:dSciDAC. 4. At various times, ASCR and SciDAC funded ORNL and ANL to contract with a

foreign scientific publishing company ("Corporation A"), which directly and through its United States subsidiary produced a magazine named SciDA C Review. 5. Defendant MICHAEL STRAYER ("STRAYER") was an employee of the

executive branch of the United States government and a member of the Senior Executive Service. STRAYER served as Director of the SciDAC program beginning in or about February 2004 and, after being appointed as Associate Director of ASCR on or about October 2, 2005, led ASCR and the SciDAC program and determined the priorities and allocation of ACSR and SciDAC program funds. Prior to filling these positions at DoE, STRAYER had been employed at ORNL as a private sector employee for over 20 years. 6. STRA YER initiated the publication of SciDAC Review in 2004, with a stated goal

of promoting awareness of SciDAC programs within the scientific community. SciDA C Review was under STRAYER's control, and he had complete budget authority for contracts under $20 million emanating from his division. STRAYER initiated a sole-source contract through ORNL for Corporation A to publish the SciDAC Review. The project was managed by Individual 1, a former ORNL colleague of STRAYER's, then employed by Corporation A. After the pilot

issue, STRA YER contracted for SciDA C Review to be published twice a year. It was distributed

Case 8:12-cr-00272-AW Document 1 Filed 05/16/12 Page 3 of 20

in hard copy free of charge, primarily through the contracting laboratories, and was also made available online through a website maintained by Corporation A. 7. ("EARLE") STRAYER was engaged in a romantic relationship with KAREN EARLE beginning no later than October 2006. EARLE previously had been married to a

scientist employed at ORNL, but had no scientific computing or publishing background. 8. As set up by Individual I, SciDAC Review budgeted funds to compensate article

contributors. In mid-2006, STRAYER enlarged the contract with Corporation A to publish four issues of SciDAC Review each year. Later the same year, STRAYER also reorganized the SciDAC Review's editorial board and tasked new board members with obtaining articles for publication from DoE and DoE-contracted employees at no cost to the publication. also notified the board members that EARLE was assuming most ofIndividuall's Review duties. 9. 10. In or about June 2007, STRAYER hired Individual 1 to work for him in ASCR. On or about July 24, 2008, STRAYER and EARLE purchased a home in STRAYER SciDAC

Lovettsville, Virginia, using a jointly held mortgage to finance the majority of the $740,000 purchase price. 11. EARLE incorporated K.J.E. Science Consultants ("KJE") in Tennessee in 2009.

EARLE was the sole owner and principal of KJE. 12. STRAYER completed required annual DoE ethics training in 2006, 2007, 2008,

and 2009. On or about June 18,2009, STRAYER signed a document with DoE's Office of the General Counsel recusing himself from participation in "any Departmental matter in which Karen Jean Earle or KJE Consultants is a party." STRAYER and EARLE married on August 8, 3

Case 8:12-cr-00272-AW Document 1 Filed 05/16/12 Page 4 of 20

2009, in Loudoun County, Virginia. The Conspiracy 13. Between in or about May 2006 and in or about August 2010, in the District of

Maryland and elsewhere, the defendants, MICHAEL STRAYER, and KAREN EARLE, knowingly and willfully conspired and agreed (a) to defraud the United States and the DoE, an agency thereof, and (b) to commit certain offenses against the United States, namely: (1) Transmitting and causing to be transmitted by means of wire communications in interstate commerce, certain signs, signals, and sounds, in furtherance of a scheme and artifice to defraud the United States and DoE and to obtain and attempt to obtain money and property by means of material false and fraudulent pretenses, representations, promises, and omissions ("the scheme to defraud"), in violation of 18 U.S.c. ~~ 1343 and 2; (2) Being and aiding and abetting an officer and employee of the executive branch of the United States Government, to willfully participate personally and substantially as a government officer and employee, through decision, approval, recommendation, and otherwise, in a determination and contract, in which, to defendants' knowledge, they had a financial interest, in violation of 18 U.S.C. ~~ 208 and 2; and

Case 8:12-cr-00272-AW Document 1 Filed 05/16/12 Page 5 of 20

(3)

Knowingly engaging in monetary transactions in criminally derived property of a value greater than $10,000, those funds being derived from a specified unlawful activity, to wit, wire fraud in violation of 18 U.S.C. ~ 1343, in violation of 18 U.S.C. ~~ 1957 and 2.

Manner and Means of the Conspiracy and Scheme to Defraud 14. It was part of the conspiracy and scheme to defraud that STRAYER would cause

existing DoE contracts with Corporation A, under which it produced the SciDAC Review, to be enlarged on condition that Corporation A employ EARLE as an editorial consultant and subcontractor despite EARLE's lack of relevant qualifications, and later to suggest to Corporation A that a continuation of its business relationship with DoE was contingent on its continued employment and subcontracting with EARLE and KlE. 15. It was further part of the conspiracy and scheme to defraud that STRAYER

caused Corporation A to compensate EARLE for obtaining articles to publish in SciDAC Review without informing Corporation A that he was causing DoE employees and contractors to write such articles without compensation. 16. It was further part of the conspiracy and scheme to defraud that STRAYER failed

to inform contracting officials at ORNL, his supervisors at DoE, or DoE ethics attorneys with whom he consulted that he had a romantic or financial relationship with EARLE after she was contracted by Corporation A. 17. It was further part of the conspiracy and scheme to defraud that STRA YER led

officials at Corporation A to believe that contracting officials at DoE and ORNL were aware of his relationship with EARLE and, knowing this, had approved Corporation A's subcontracting 5

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Case 8:12-cr-00272-AW Document 1 Filed 05/16/12 Page 6 of 20

arrangement with KJE. 18. It was further part of the conspiracy and scheme to defraud that EARLE, using, in

part, funds derived from her subcontract with Corporation A, provided the $120,000 down payment on the $740,000 home she and STRAYER purchased in Lovettsville, Virginia, and subsequently provided various $5,880 monthly mortgage payments and at least $57,443 in home renovations expenses from those funds. 19. It was further part of the conspiracy and scheme to defraud that STRAYER

solicited other business opportunities for EARLE and KJE from DoE contractors and used DoE funds he controlled to encourage and fund such contracts. 20. It was further part of the conspiracy and scheme to defraud that, even after

formally recusing himself from dealing with any matter concerning EARLE or KJE, that STRAYER met with EARLE and officials from Corporation A to discuss enlarging the SciDAC Review contract and, with it, EARLE's role, and reviewing and approving EARLE's renewed subcontracts with Corporation A. 21. It was further part of the conspiracy and scheme to defraud that defendant

STRAYER caused Corporation A to pay EARLE consulting fees and subcontract payments totaling more than $1,263,330. Overt Acts 22. In furtherance of the conspiracy and to achieve the objectives thereof, at least one

of the coconspirators performed or caused to be performed at least one of the following overt acts, among others, in the District of Maryland and elsewhere:

Case 8:12-cr-00272-AW Document 1 Filed 05/16/12 Page 7 of 20

A.

In or about August 2006, STRAYER caused Corporation A to hire

EARLE as a consultant for SciDAC Review with monthly compensation of$5,000 for obtaining articles for publication in the magazine. B. In or about November 2006, STRAYER informed the SciDAC Review

editorial board, comprised of computing heads at various national laboratories, that they would be responsible for providing articles to EARLE for the SciDAC Review at no cost to the publication. STRAYER did not notify Corporation A of the change to the article procurement process. C. In or about May 2007 , STRAYER, without disclosing to any officers of

Corporation A that he and EARLE were dating, caused Corporation A to increase EARLE's compensation and caused Individual 1, an employee of Corporation A who was in the process of becoming a federal employee in STRAYER's office, to believe that Individual l's federal

employment was contingent on the execution of a lucrative subcontract providing for payment to EARLE of nearly $100,000 per issue to procure articles for the publication. D. On or about May 23, 2007, STRAYER caused Corporation A to provide subcontract that STRAYER directed Corporation A to

him proposed terms of EARLE's

produce and justify for DoE contracting officials. E. On or about June 5, 2007, STRAYER caused Corporation A to provide a

draft subcontract template for use by KJE and forwarded the document to EARLE. F. On or about June 5, 2007, STRAYER sent an email to Corporation A

confirming that proposed rates of pay for EARLE and KJE set forth in a draft subcontract were satisfactory . 7

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G.

On o~ about June 6, 2007, STRAYER forwarded EARLE an email

containing copies of a draft 2007 subcontract between KJE and Corporation A. H. On or about July 1, 2007, STRAYER caused Corporation A to award KJE

a subcontract providing payment of $97,266 for the period from July 1, 2007 through October 31, 2007, knowing this business was operated by EARLE. I. On or about November 1,2007, STRAYER caused Corporation A to

award KJE a subcontract for $389,064 for the period from November 1,2007 through December 31,2008. J. On or about June 11,2008, EARLE wired $69,000 in funds from the

account into which her payments from Corporation A were deposited into a separate checking account. K. From that separate checking account, on July 24, 2008, EARLE wired a

total of$120,000 to an escrow company as a down payment on the Virginia home that EARLE and STRAYER jointly purchased. L. Between August 2008 and August 2010, EARLE made at least four

monthly mortgage payments of $5,880 from funds obtained through her contract with Corporation A on the home she owned jointly with STRAYER, although STRAYER lived alone in the home during the majority of that time. STRAYER did not contribute to the mortgage payments before March 2009. M. On or about September 5, 2008, STRAYER sent an email to

Corporation A noting that EARLE's subcontract was set to expire soon and threatened to end the SciDAC Review contract with Corporation A unless EARLE's contract was renewed, stating 8

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"that [Corporation A should] straighten this out as soon as possible. If [Corporation A] is no longer interested in this work I would appreciate [management] calling me as soon as possible." N. On or about September 7,2008, STRAYER sent EARLE two emails

containing separate draft subcontracts between KJE and Corporation A. EARLE responded to the message with the characters ":-$". O. On or about October 1,2008, STRAYER caused Corporation A to award

KJE a subcontract for $408,517 for the period from October 1, 2008 through December 31, 2009, knowing this business was operated by EARLE. P. On or about February 27,2009, without disclosing his relationship with

EARLE or KJE to the relevant DoE contractors or his subordinates at ASCR, STRAYER caused $1,000,000 in ASCR funds to be transferred to PNNL in an attempt to cause PNNL to contract for services with KJE. Q. On or about April 2, 2009, EARLE, using funds derived from the scheme

to defraud, transferred $21,187.20 to a contracting company performing renovations work on the home she jointly owned with STRAYER. R. On or about May 12,2009, after contracting officials at PNNL refused to

let out a contract with KJE for the project STRAYER had sent them $1,000,000 in ASCR funds because EARLE could not justify her company's prices, STRAYER caused the $1,000,000 to be withdrawn from PNNL accounts and returned to ASCR. S. On or about May 15,2009, EARLE, using funds derived from the scheme

to defraud, transferred $17,150.40 to a contracting company performing renovation work on the home she jointly owned with STRAYER. 9

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T.

On or about June 18, 2009, STRAYER met with DoE ethics officials, at

which meeting he disclosed that he was in a relationship with EARLE but failed to disclose that the two owned a home together or that EARLE's company worked exclusively on a project wholly funded by ASCR, even after the ethics official made clear in a confirmatory email that her determination that there was no current conflict of interest was based in part on the fact that STRAYER and EARLE "do not live in the same household." U. In or around August, 2009, STRAYER and EARLE met together with

officials from Corporation A at its office in Washington, D.C., to discuss expansion of the SciDAC Review by adding a second issue, or "Supplement," to each regular issue that contained a larger number of smaller articles. In the "Supplement" contract, EARLE, through KJE, would continue her role of procuring articles for publication. N either STRAYER nor EARLE disclosed to Corporation A officials that article writers would not be compensated for their contributions to the "Supplement." V. On or about August 20,2009, EARLE, using funds derived from the

scheme to defraud, transferred $13,808.90 to a contracting company performing renovation work on the home she jointly owned with STRAYER. W. On or about August 21, 2009 , STRAYER sent EARLE an email

containing a final copy of a 2009 subcontract between KJE and Corporation A, as well as a draft copy of a 2010 subcontract between KJE and Corporation A. X. On or about August 27,2009, EARLE sent STRAYER an email

containing a draft of a 2010 subcontract between KJE and Corporation A, and a "supplemental contract draft." The email message read, "~ook ok?" 10

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Y.

On or about September 1,2009, STRAYER caused Corporation A to

award KJE a subcontract for $461,824 for the period from September 1, 2009 through December 31, 2010, knowing this business was operated by EARLE.

z.

On or about September 1,2009, STRAYER caused Corporation A to

award KJE a subcontract for $418,768 for the period from September 1, 2009 through December 31, 2010, knowing this business was operated by EARLE. AA. On or about September 1,2009, STRAYER caused Corporation A to

award KJE a subcontract for $104,692 for the period from September 1, 2009 through February 28,2010, knowing this business was operated by EARLE. BB. On or about October 22,2009, EARLE sent STRAYER an email

containing copies of 20 10 draft subcontracts between KJE and Corporation A. STRAYER responded to the message, "These are fine." Cc. On January 20,2010, STRAYER sent EARLE an email containing

copies of several draft subcontract documents from 2007 between KJE and Corporation A.

18 U.S.C.

S 371

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COUNTS

TWO THROUGH (Wire Fraud)

SEVEN

The Grand Jury for the District of Maryland further charges: 1. Paragraphs 1 through 12 and 14 through 21 and Overt Acts A through CC of

Count One are incorporated here and constitute a scheme and artifice to defraud as described in paragraph 12(1) of Count One. 2. On or about the dates set forth in the table below, in the District of Maryland and

elsewhere, the defendants,


MICHAEL STRAYER, and KAREN J. EARLE,

for the purpose of executing and attempting to execute the scheme to defraud, did cause to be transmitted in interstate commerce, by means of wire communication, certain signs, signals, and sounds, described below for each count, each transmission constituting a separate count: Count 2 May 23,2007 An email from CorporationAinWashington, D.C., to STRAYER in Germantown, Maryland, in which Corporation A provided STRAYER proposed terms of EARLE's subcontract that STRA YER had directed Corporation A to produce and justify for DoE contracting officials. An email from STRAYER in Germantown, Maryland, to Corporation A in Washington, D.C., wherein STRAYER approved Corporation A's suggestion to justify an increase in the terms of EARLE's subcontract with Corporation A to DoE contracting officials. A wire transfer of$I,OOO,OOOin funds from ASCR accounts in Germantown, Maryland, to PNNL accounts in Richland, Washington, for the purpose of inducing PNNL to contract with KJE.

June 5, 2007

February 27,2009

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August 21, 2009

An email from EARLE in Tennessee to STRAYER in Germantown, Maryland, to which EARLE attached a copy of her current subcontract with Corporation A for STRAYER to review. An email from EARLE in Tennessee to STRAYER in Germantown, Maryland, to which EARLE attached a copy of a proposed subcontract with Corporation A for STRAYER to review and approve. An email from EARLE in Tennessee to STRAYER in Germantown, Maryland, to which EARLE attached a copy of her subcontract with Corporation A for STRA YER to review.

August 27,2009

October 22, 2009

18 U.S.C. 9 1343 18 U.S.C. 92

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COUNTS EIGHT THROUGH (Money Laundering)

ELEVEN

The Grand Jury for the District of Maryland further charges that: 1. Paragraphs 1 through 12 and 14 through 21 and Overt Acts A through CC of

Count One are incorporated here. 2. the defendants, MICHAEL STRAYER, and KAREN J. EARLE, knowingly engaged and attempted to engage in the following monetary transactions by, through, or to the listed financial institutions, in and affecting interstate commerce, in criminally derived property of a value greater than $10,000, that is, the transfer of funds derived from a specified unlawful activity, to wit, wire fraud in violation of Title 18, United States Code, Section 1343, as described in Counts One through Seven of the Indictment: On or about the dates set forth below, in the District of Maryland and elsewhere,

July 24, 2009

$90,000 and $30,000 wire transfers from EARLE's ING Checking Account ****2594 to a title and escrow company participating in defendants' purchase of their home in Lovettsville, Virginia. $21,187.20 wire transfer from EARLE's ING Checking Account ****2594 to a contractor renovating the defendants' home in Lovettsville, Virginia. $21,187.20 wire transfer from EARLE's ING Checking Account ****2594 to a contractor renovating the defendants' home in Lovettsville, Virginia.

April 2, 2009

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May 15,2009

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Count 11 August 20,2009 $13,808.90 wire transfer from EARLE's ING Checking Account ****2594 to a contractor renovating the defendants' home in Lovettsville, Virginia.

18 U.S.c. 18 U.S.c.

S 1957(a) S2

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COUNT TWELVE (Conflict of Interest)

The Grand Jury for the District of Maryland further charges: 1. Paragraphs 1 through 12 and 14 through 21 and Overt Acts A through CC of

Count One are incorporated here. 2. defendants,


MICHAEL STRAYER, and KAREN J. EARLE,

On or about September 1,2009, in the District of Maryland and elsewhere, the

being and aiding and abetting a United States government executive branch officer and employee, did knowingly and willfully participate personally and substantially through decision, approval, recommendation, and otherwise, in a determination and contract, in which he and his spouse had a financial interest, specifically in the award of the three subcontracts listed below involving money payments to KJE, a business operated by EARLE.

September 1, 2009 September 1, 2009 September 1, 2009

December 3 1, 2010 December 31, 2010 February 28,2010

$461,824 $418,768 $104,692

18 U.S.c. 18 U.S,C.

SS 208 S2

and 216(a)(2)

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COUNT THIRTEEN (False Statements) The Grand Jury for the District of Maryland further charges: 1. Paragraphs 1 through 12 and 14 through 21 and Overt Acts A through CC of

Count One are incorporated here. 2. On or about July 20,2010, DoE investigators interviewed STRAYER.

Investigators told STRAYER they were investigating allegations of impropriety on his part with regards to the SciDAC Review and EARLE's role with respect to both the publication and Corporation A. It was material to the DoE investigation whether STRAYER had participated in the negotiation or drafting of any contracts between KJE and Corporation A and whether EARLE had ever made mortgage payments on the home that STRAYER and EARLE had purchased. 3. On or about July 20, 2010, in the District of Maryland, the defendant, MICHAEL STRAYER,

in a matter within the jurisdiction of the executive branch of the Government of the United States, knowingly and willfully made materially false, fictitious and fraudulent statements and

representations, in that: (a) STRAYER stated that he had no part in drafting, nor did he maintain, any subcontract between Corporation A and EARLE, whereas in truth and in fact employees of Corporation A and EARLE had repeatedly sent draft

subcontracts to him for his review and approval, and he maintained a file

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folder on his DoE computer named "KJE" that contained multiple draft subcontracts between Corporation A and EARLE; and (b) STRAYER stated although he and EARLE jointly owned a home they had purchased together in July 2008 but that he paid the mortgage for the house "exclusively," whereas in truth and in fact EARLE had made a $120,000 down payment, paid for $57,000 in home renovation, and made at least $23,516.60 in mortgage payments on the property by that date.

18 U.S.C.

S 1001(a)(2)

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FORFEITURE ALLEGATION The Grand Jury for the District of Maryland further charges that: 1. Pursuant to Federal Rule of Criminal Procedure 32.2, notice is hereby given to the

defendant that the United States will seek forfeiture as part of any sentence in accordance with Title 18, United States Code, Section 98l(a)(l)(C), and Title 28, United States Code, Section

2461 (c), as a result of the defendants' conviction Counts One through Seven under the Indictment, and in accordance with Title 18, United States Code, Section 982( a)(l), in the event of the defendants' conviction under Counts Eight through Eleven of this Indictment. Wire Fraud Forfeiture 2. As a result of the offenses alleged in Counts One through Seven of the Indictment,

defendants MICHAEL STRAYER and KAREN EARLE shall forfeit to the United States all property, real and personal, which constitutes or is derived from proceeds traceable to the offenses and all property traceable to such property, including but not limited to $1,263,330 in United States currency, in that such sum in aggregate was the proceeds of the aforementioned offenses. Money Laundering Forfeiture 3. As a result of the offenses alleged in Counts Eight through Eleven of the

Indictment, defendants MICHAEL STRAYER and KAREN EARLE shall forfeit to the United States all property, real and personal, involved in such offense, or any property traceable to such property.

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Substitute Assets 4. If any of the property described in the Indictment as being subject to forfeiture, as a

result of any act or omission of any defendant -a. b. c. d. e. cannot be located upon the exercise of due diligence; has been transferred or sold to, or deposited with, a third person; has been placed beyond the jurisdiction of the Court; has been substantially diminished in value; or, has been commingled without difficulty; it is the intent of the United States, pursuant to Title 21, United States Code Section 853(p), to seek forfeiture of any other property of said defendant up to the value of the forfeitable property, that is, $1,263,330, including but not limited to the property at 12364 Moon Lake Lane, Lovettsville, Virginia, held in the name of defendants MICHAEL STRAYER and KAREN EARLE. with other property which cannot be subdivided

18 U.S.c. 18 U.S.C. 28 U.S.C.

S 981(a)(I)(C)

S 982(a)(l)
S 2461(c)

.%J1
A TRUE BILL:

~/1ttA

Rod J. Robtein United States Attorney

SIGNATURE REDACTED

/dAt5t/ 02tJ IX
Date

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