James G. Maloney, who served as the Chief Scientist for the Georgia Tech Research Institute (GTRI), has been sentenced to federal prison for conspiring to defraud Georgia Tech and the Central Intelligence Agency (CIA). Maloney’s co-conspirators, James J. Acree and James D. Fraley, III—both of whom pleaded guilty in 2016 and cooperated with the government—were also sentenced.
“Maloney, who was trusted to work on classified contracts for the U.S. government, took advantage of his high position at GTRI to line his own pockets at the public’s expense,” said U.S. Attorney Ryan K. Buchanan. “In addition to losing his job and his top-secret security clearance, Maloney is now facing a prison sentence and will be required to pay more than $1.9 million in restitution.”
“Maloney’s sentence should send a clear message to anyone seeking to abuse their positions for personal gain, the FBI will find you and hold you accountable”, said Keri Farley, Special Agent in Charge of FBI Atlanta. “Thanks to our extraordinary partnership with Georgia Tech, even with Maloney’s defense tactics he was unable to avoid the consequences of his crimes. He will now be held accountable with his coconspirators, closing out this lengthy case.”
According to U.S. Attorney Buchanan, the charges, and other information presented in court: From early 2007 through late 2013, Maloney, Acree, and Fraley engaged in a scheme to defraud Georgia Tech and the CIA. The men are experts in electromagnetic analysis and measurements and were assigned to GTRI’s Advanced Concepts Laboratory (ACL), where they worked on projects funded by the United States Department of Defense, various intelligence agencies, and private industry.
As part of his duties and responsibilities at GTRI, Fraley had access to a Georgia Tech credit card known as a “PCard.” Fraley was only authorized to use his PCard to purchase materials and supplies for official Georgia Tech business. Neither Fraley nor anyone else was allowed to charge personal expenses on a PCard.
Maloney, Acree, and Fraley falsely led GTRI to believe that all of their PCard charges were for official business. In fact, they charged approximately $200,000 in frivolous personal expenses on Fraley’s PCard. Maloney and Fraley also used Fraley’s PCard to pay for remodeling and maintenance expenses related to six rental properties that they owned together in the name of a Georgia corporation called J’s Services, Inc.
Some of the fraudulent PCard charges and some of the remodeling and maintenance expenses for Maloney and Fraley’s rental properties were fraudulently charged to a classified GTRI contract funded by the CIA.
Fraudulent Consulting Activity
In February 2007, Maloney and Acree were reprimanded by GTRI for engaging in outside consulting activity that violated Georgia Tech’s conflict-of-interest policy. Maloney and Acree sent a letter to their supervisor at GTRI, acknowledging that they had used facilities and equipment owned by Georgia Tech for their personal gain and benefit and promising that they would never do so again. But Maloney and Acree continued to engage in outside consulting activity that harmed Georgia Tech, and they were soon joined by Fraley.
From December 2007 through March 2013, while they were employed full-time by Georgia Tech, Maloney, Acree, and Fraley received approximately $500,000 from Picatinny Arsenal, SRA International, and the U.S. Air Force. They obtained those consulting contracts by using Acree’s former employer, Tec-Masters, Inc., as a billing pass-through. Tec-Masters, a defense contractor located in Huntsville, Alabama, performed no labor on any of the projects but merely facilitated the transfer of money from the customers to Maloney, Acree, and Fraley. Maloney, Acree, and Fraley falsely led those customers to believe that the work would be done by GTRI. They fostered this false impression by using their official GTRI telephone numbers and GTRI email addresses in their communications with customers. In addition, they met with customers at GTRI’s headquarters on the Georgia Tech campus and gave customers tours of GTRI’s labs and other facilities. Maloney called this conduct “hiding in plain sight.”
Spectra Research, Inc.
From December 2010 through July 2013, Maloney and Fraley also moonlighted as consultants for Spectra Research, Inc., a defense contractor located in Dayton, Ohio. Spectra paid J’s Services $196,000 for this work. Maloney and Fraley directed Georgia Tech employees under their supervision at GTRI to help perform this consulting work for Spectra. Maloney and Fraley also directed those Georgia Tech employees to bill time for Spectra work to a classified CIA contract, even though that contract had nothing to do with Spectra.
In their outside consulting work, Maloney, Acree, and Fraley violated Georgia Tech’s conflict-of-interest policy and code of business conduct; diverted customers and revenue away from Georgia Tech for their personal gain; and used Georgia Tech facilities and equipment for their personal benefit.
During a routine audit in early 2013, Georgia Tech discovered problematic charges on Fraley’s PCard and scheduled a meeting with him. Maloney suggested to Acree and Fraley that they meet to get their “story straight.” Fraley, fearing that Maloney would seek to shift all the blame to him, recorded the cover-up meetings and provided those recordings to the FBI.
In their cover-up meetings, Maloney asked Acree and Fraley to help him create a fictitious story to mislead Georgia Tech auditors. Maloney also suggested that they try to force Georgia Tech to shut down the audit by telling the auditors that the items charged to Fraley’s PCard were purchased for use on a classified CIA contract, and that the auditors did not need to know further details. That false narrative foreshadowed Maloney’s planned defense in the criminal case.
James G. Maloney, 58, of Marietta, Georgia, was sentenced to five years, ten months in prison to be followed by three years of supervised release and ordered to pay restitution of $1,972,543.61. Maloney was convicted on these charges on May 22, 2023, after he pleaded guilty.
James J. Acree, 58, of Atlanta, Georgia, was sentenced to serve three years on probation, with the first 12 months to be served on home confinement, and ordered to pay restitution of $604,692.56. Acree was convicted on these charges on August 15, 2016, after he pleaded guilty.
James D. Fraley, III, 45, of Canton, Georgia, was sentenced to serve three years on probation, with the first eight months to be served on home confinement, and ordered to pay restitution of $476,960.95. Fraley was convicted on these charges on September 2, 2016, after he pleaded guilty.
This case was investigated by the Federal Bureau of Investigation.
Assistant U.S. Attorneys John Russell Phillips and Stephen H. McClain and Trial Attorney Emma D. Ellenrieder of the Department of Justice National Security Division’s Counterintelligence and Export Control Section prosecuted the case.