Carpet Company Insiders Sentenced in Scam

Johnny Lamar Smith, 54, of Bridgeport, Ala., and William J. Percy, 65, of Dalton, Ga., have been sentenced to prison by United States District Judge Harold Murphy on a charge of conspiracy to commit interstate transportation of property obtained by fraud.

Smith was sentenced to 2 years, 6 months in prison to be followed by 3 years of supervised release, and ordered to pay restitution in the amount of $2,499,999. Percy was sentenced to 1 year, 3 months in prison to be followed by 3 years of supervised release, and ordered to pay restitution in the amount of $2,499,999. Smith and Percy pleaded guilty to the charge on January 15, 2009.

According to United States Attorney's Office, Smithwas a long-time employee of Beaulieu Carpets, holding the position of Quality Assurance Manager at the Bridgeport, Alabama, plant. Smith’s wife also worked at the plant in the accounting department. Percy owned Glenwood Tufters, a carpet processing company in Dalton.

For over three years, from 2001 through 2003, using his wife’s password, Smith reportedly manipulated Beaulieu’s computer system and diverted more than 3,931,000 pounds of first-quality yarn. He then sold the yarn as second-quality yarn at a price of twenty cents per pound to Percy, when the yarn was in fact worth over eighty cents per pound. Percy paid Smith more than $289,000 in kickbacks.

Beaulieu sustained a loss of almost $2.5 million. When Beaulieu discovered the loss, the company fired Smith, and Smith’s wife resigned from Beaulieu.