According to the Department of Justice, Moritz Embroidery Works won a competitively bid contract with the Department of Defense to manufacture a minimum of 3 million U.S. flag patches for military uniforms at a price of 22 cents per flag patch. As part of the contract, Moritz agreed to comply with the Buy American Act and the Berry Amendment – which prohibit the Defense Department from procuring items of clothing that have not been grown or produced in the United States.

According to the Justice Department, federal investigators – prompted by a qui tam False Claims Act civil suit filed on behalf of the federal government by Action Embroidery Corp., a California-based corporation that had lost to Moritz in bidding for the defense contract – confirmed that production of the flag patches had been outsourced to the Sheen Ray Embroidery Co. Ltd. of Chiang Mai, Thailand.

In order to obtain payment from the Department of Defense, Moritz Embroidery Works filed false certifications that the flag patches had been made in the United States, the Justice Department said.

Sales Manager Sentenced to Probation, Community Service

As part of the settlement of the civil False Claims Act case, the Justice Department said, Moritz has agreed to pay the United States $500,000 in damages and penalties. Of this amount, 20 percent ($100,000) will be shared with Action Embroidery.

Brian Moritz, 33, of Stroudsburg, Pa. – the company’s sales manager who was involved in the production of the flag patches and submission of the contract paperwork to the government – pleaded guilty to conspiring to cause the filing of a false Buy American Act certification. A federal magistrate sentenced Moritz to serve one year on federal probation, pay a $500 fine and a $25 special assessment and complete 100 hours of community service.