BIRMINGHAM—Former Adams Produce Chief Executive Officer Scott David Grinstead pleaded guilty today in federal court to fraud against the company, failure to report a felony against the government, and failure to file federal income tax returns, announced U.S. Attorney Joyce White Vance, FBI Special Agent in Charge Richard D. Schwein, Jr., and IRS-Criminal Investigation Division Special Agent in Charge Veronica Hyman-Pillot.
Grinstead, 45, of Birmingham, entered his plea before U.S. District Judge Karon O. Bowdre. His sentencing is scheduled August 21.
Federal prosecutors charged Grinstead in January, and he entered a plea agreement with the government at that time. As part of that agreement, Grinstead must pay $450,000 in restitution to the bankruptcy estate of Adams Produce for the benefit of the company’s employees who were not fully paid because of Adams’ abrupt closing and its filing for bankruptcy last year.
Grinstead is the third Adams Produce official to plead guilty to federal charges in connection with fraud at the Birmingham-based company that had been a leading distributor of fresh fruits and vegetables across the Southeast for many years.
David Andrew Kirkland, 44, formerly of Birmingham and now living in Texas, pleaded guilty in March before U.S. District Judge Abdul Kallon to conspiracy to defraud the federal government of several hundred thousand dollars through a scheme to create false invoices and purchase orders. Kirkland is scheduled for sentencing June 27.
Kirkland, director of purchasing for Adams Produce, was charged in the same purchasing fraud scheme as Christopher Alan Pfahl, a purchasing program specialist for Adams. Kirkland was Pfahl’s supervisor. Pfahl, 41, of Birmingham, pleaded guilty in January to conspiracy to defraud the government of $481,000 on produce contracts.
Pfahl and Kirkland engaged in a scheme to create false records that reflected a higher purchasing cost for fruits and vegetables than the company actually paid. The inflated costs were then presented to the U.S. government, which had agreed to pay a certain amount over Adams’ cost for produce.
The federal government, through the Defense Supply Center Philadelphia, was one of Adams’ customers. The supply center contracted with Adams Produce to provide fresh fruits and vegetables to military bases, public school systems, junior colleges, and universities. Adams Produce entered into contracts with the government worth millions of dollars, according to court records.
Grinstead pleaded guilty to misprision of a felony for knowing of the fraud Pfahl and Kirkland were engaged in and allowing it to continue and end slowly, so as to avoid raising red flags with the government, rather than stopping it immediately and reporting it to authorities.
Grinstead also pleaded guilty to wire fraud for wiring hundreds of thousands of dollars from an Adams Produce account to American Express to pay for clothing, jewelry, personal travel for himself and his family, lawn care at his home, and items for a house on Lake Martin. He pleaded guilty to two counts of failure to file a federal tax return, one for 2009 and one for 2010. According to court records, Grinstead had a gross income of about $748,801 for the 2009 calendar year and willfully failed to file an income tax return with the Internal Revenue Service. In 2010, he received about $1,878,700 in gross income and willfully did not file a return with the IRS.