An Illinois man has been charged with bilking $20 million from investors partly by telling them he had a contract with the Metro system that had actually fallen through, according to the U.S. Securities and Exchange Commission. The SEC says that Gregory E. Webb touted his InfrAegis Inc. company to investors by telling them the company had a contract to install 15,000 machines that could detect the presence of weapons of mass destruction in the Washington subway system.
Metro has been stepping up its homeland security efforts since the Sept. 11, 2001, terrorism attacks, including adding sensors behind the scenes to fight possible attacks to the vulnerable train system. But the complaint, filed Tuesday in the U.S. District Court for the Northern District of Illinois, says Metro never awarded InfrAegis a contract for the deployment of the “iaMedium” device in its tunnels and stations.
The transit agency did talk to InfrAegis about adding the product to its rail system, beginning negotiations in July 2009, according to the complaint. But the deal required InfrAegis to deposit $615 million into an escrow account in January 2010 as proof of its financial wherewithal.
“InfrAegis never had anywhere near the required $615 million, and the negotiations quickly fell apart when InfrAegis failed to make the deposit,” the complaint says.
Metro formally terminated the deal in a Jan. 29, 2010, letter to Webb, the complaint says.
Yet Webb is accused of continuing to plug the relationship to get investors, saying the deal would lead to more than $20 billion in revenue over the next two decades. Metro’s entire annual budget is $2.6 billion.
InfrAegis and Webb could not be reached for comment. The transit agency declined to comment on the case.
Metro also had talked to the company about an approximately $15 million-per-year advertising contract, agency records show, but ultimately chose a different company in May 2010 “based on the technical and financial evaluation of the proposals.”
