- The Washington Times - Saturday, March 22, 2008

Millions of dollars in “irregular” payments were made last year to the owner of a security company hired to protect federal courthouses nationwide, court papers said. The company, USProtect Corp., is now suffering a financial crisis that resulted in hundreds of guards not getting paid last week.

A total of $5 million in payments from the company to its owner, Lisa Hudec, “had a dramatic negative impact” and caused a “liquidity crisis,” according to documents filed this week by Wachovia Bank NA, a subsidiary of Wachovia Corp. The documents, filed in bankruptcy court in Greenbelt, said Mrs. Hudec received a salary of $384,615 from the company the previous year.

Wachovia, along with two other creditors, forced the Silver Spring-based company into bankruptcy proceedings, citing more than $16 million in unpaid debts.

The bankruptcy case and resulting loss of contracts aren’t the only legal troubles involving USProtect. This week, federal authorities filed papers to seize about $7 million, saying the money and other assets, including two homes in Florida, were tied to illegal activities involving two former officers.

The bank’s attorneys said Mrs. Hudec “did not provide any function … other than to operate in the figurehead capacity as chairman of the board of directors.” The bank also said payments came in “irregular intervals and in varying amounts.”

Telephone calls to USProtect and an attorney were not returned this week, although the company told The Washington Times in an e-mail in December it had “consistently provided superior security services to a broad array of federal agencies, and the company’s outstanding performance has been repeatedly acknowledged by agency contracting officers both formally and informally.”

In the e-mail, attorney Thomas F. O’Neil III also noted that no criminal charges had been filed against the company or any current member of its senior management.

Federal authorities cited the cash shortfall in recent letters to USProtect terminating company contracts. The documents also note the company’s inability to cover its payroll.

Steve Blando, spokesman for the U.S. Marshals Service, said guards are still showing up to work. He said two newly hired companies, MVM Inc. and Inter-Con Security, are taking over USProtect’s assignments and its guards will work under newly awarded contracts.

Mrs. Hudec is married to the company’s former chief operating officer, Richard Hudec, who is awaiting sentencing after pleading guilty last year to charges of tax evasion and concealing information about fraud judgments from federal contracting officials.

Mr. O’Neil previously said Mr. Hudec had not been involved in USProtect “for a number of years.”

Mr. Hudec helped broker tens of millions of dollars in federal contracts for years before authorities learned of his criminal record, which included four felony convictions and time in federal prison. In one contract, the company was hired to help guard the FBI’s training center in Quantico, Va.

The company’s founder, Michael Holiday, sold USProtect to Mrs. Hudec in 2003, two years after Mr. Hudec began working as a consultant for the company, then known as Holiday International Security. Holiday, too, is awaiting sentencing after pleading guilty to charges of bribing a former General Services Administration contracting official.

Wachovia’s filing prompted a Maryland judge to name a trustee to take over USProtect this week, a relatively uncommon move in bankruptcy.

“That’s usually only done when there’s a concern of gross mismanagement or fraud,” said Sam Alberts, an attorney at White & Case LLP, who specializes in financial restructuring and insolvency and is not involved in the case. “It would mean that the judge must have thought the facts are clear and there is a strong basis to appoint a trustee.”

L. Samuel Pfleifle, editor of Security System News, said scandals are fairly rare in the industry, but it was not uncommon for large government security contracts to change hands as companies come and go. In general, he said, problems can surface when companies bid too low on contracts, paying guards too little while skipping corners on equipment and training to turn a profit.

“It’s a really tough place to make money, but there are literally thousands of companies,” he said. “The security industry is very fractured.”

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