Debt-Ridden Navy Employee Busted in $26M Scheme to Fulfill Her Italian Fantasy

A U.S. Navy civilian employee buckling under the weight of massive student loan debt but “infatuated” with European travel allegedly hatched a scheme to improperly funnel more than $26 million worth of military contracts to an Italian company she hoped would hire her away.

Mechanical engineer Nicole Kristen Schuster allegedly helped rig bids in favor of a Milan-based supplier of highly specialized vertical lathes and milling machines used to fabricate submarine propellers and other crucial parts, a Naval Criminal Investigative Service (NCIS) search warrant affidavit obtained by The Daily Beast reveals. To sweeten the deal, it says, Schuster regularly baked homemade cookies for the Italians in an ongoing effort to “be in [their] good graces.”

Schuster, 32, worked at the Naval Foundry and Propeller Center (NFPC) in Philadelphia from 2015 to 2020, followed by a posting to the Puget Sound Naval Shipyard in Bremerton, Washington, the affidavit states. She served as project lead on several multimillion-dollar projects supporting both Columbia Class and Virginia Class submarines, according to prosecutors.

She was good at her job but considered “crazy” by some of her coworkers, who also told NCIS agents the Georgia Tech grad was a “compulsive liar” and “manipulator” who often “used ‘flirting’ to get her way” the affidavit goes on, noting that Schuster received a formal warning in 2017 for “offensive, vulgar, and racial comments.”

Schuster told others she “hated” working at NFPC and that she would love to work at the Italian company, which The Daily Beast has agreed not to name at the request of federal prosecutors. The people there were “nice to her,” according to the affidavit, which suggests Schuster may have been dating one of her Italian counterparts, blurring boundaries even further.

“I mean, on one hand it’s nice to go to dinner with someone who is cultured and can pick good wine and puts in effort,” Schuster said in a text message to a colleague, according to the affidavit. “Like more than any guy I’ve ever ‘dated.’ But on the other, he’s 19 years older than me, lives in Italy, I want a job at [the Italian company], and even now [it] is a conflict of interest.”

Schuster was hit early Wednesday with one count of unauthorized disclosure of contractor bid, proposal, and source selection information, which carries up to five years in prison.

“Our office and the federal agencies with whom we work take government procurement fraud seriously,” Assistant U.S. Attorney Louis D. Lappen, who is prosecuting the case, told The Daily Beast on Wednesday. “Especially when we discover alleged misconduct relating to U.S. military contracts, such as those in this case, which involved naval submarines.”

‘I Will Ruin Them’

The investigation began with a tip.

On June 26, 2020, a former NFPC employee contacted NCIS headquarters to report what they believed were conflicts of interest concerning Schuster and the Italians, according to the affidavit. The source told investigators that Schuster was drawing up the procurement specifications for equipment on which the Italian company was bidding while simultaneously “actively seeking employment with the company,” the affidavit states.

Schuster “had a lot of student loan debt which was more than [one coworker’s] mortgage on her home,” it continues. A colleague told investigators that Schuster said her parents were no longer helping her pay off her college loans. However, Schuster is charged only with unlawful disclosure of procurement information, not accepting bribes or kickbacks.

In late July, NCIS agents gained access to the unclassified portions of Schuster’s U.S. Navy email account, according to the affidavit.

The messages suggested that Schuster was not only sharing competitors’ proprietary information, she was unlawfully drafting bid requests to match the Italian company’s proposals so no other supplier vying for the business could possibly win, according to the affidavit.

Another coworker told NCIS agents that Schuster was “infatuated with trips to Italy and wanted to be in the good graces of the Italian companies to travel to Italy more often,” the affidavit states. She baked cookies for them, and talked often about looking for a new job, it says. In one 2019 text to an associate, Schuster expressed outrage that another company was competing for a contract she wanted the Italians to win.

“[Company 2] decided to bid, even though it’s not for them,” she wrote, according to a bill of information prosecutors filed Wednesday morning. “No respect for me. … [I] flipped a shit at [Company 2]. Hopefully I don’t get in trouble and they back the fuck off. But I swear if they fuck up this contract, I will ruin them.”

Schuster had a direct line to the CEO of the Italian company, and said that when she eventually quit, she wanted her bosses in the Navy to have “an ‘Oh, shit’ moment when they realize the facility’s relationship with [the Italian company] goes with me,” according to a text included in the affidavit.

A review of federal procurement data shows ongoing DoD contracts with the Italian supplier through 2023 and into 2024.

‘Ciao, Nicole’

People carrying heavy debt loads are security risks, as far as the Pentagon is concerned.

Access to sensitive information is regularly denied over delinquent or excessive personal debt, as, according to the Office of the Director of National Intelligence, “an individual who is financially overextended is at greater risk of having to engage in illegal or otherwise questionable acts to generate funds.”

In 2021, as The Daily Beast first reported, a deeply indebted State Department contracting officer was arrested and charged with honest services fraud for steering government construction contracts worth more than $100 million to a company that paid her tens of thousands of dollars in kickbacks. Last year, the contracting officer, May Salehi, was sentenced to 12 months in prison, ordered to forfeit $60,000 in bribes, and pay a $500,000 fine.

On Tuesday, a South Korean contractor was ordered to pay a $9 million fine for bid rigging and restraint of trade in a years-long plot that saw the DoD overpay for repair and maintenance work at overseas U.S. military facilities and hospitals by some $3.6 million.

Regardless, Schuster, who underwent ongoing on-the-job training including an “Overview of Acquisition Ethics” course in May 2020, was blatant about favoring the Italian company, prosecutors say. She took to wearing her ID badge on a lanyard branded with the Italian company’s name, laughingly expressing surprise in a text message reviewed by investigators that her bosses hadn’t said anything about it. In another text, she allegedly told a colleague, “As long as the Italians get the [contract] I’m happy.” One email included in the affidavit shows Schuster signing off, “Ciao, Nicole.”

A month after Schuster took the ethics course, she allegedly contacted a pair of Navy officials she worked with to ask about purchasing a new vertical turning lathe, or a “VTL.”

“Just wanted to see if there were any thoughts on the VTL?” Schuster allegedly wrote in an email.

The officials responded by telling Schuster they had spec’ed out a Taiwanese-made machine, since the installation already had two and had not had “a single problem on either in the many years we have been running them,” the affidavit states.

Schuster then asked to see a copy of the Taiwanese company’s proposal, with its confidential prices and specifications, which she immediately forwarded to her main contact at the Italian company, according to the affidavit.

In all, the feds say Schuster provided a “competitive advantage” to the Italians that resulted in four contracts between 2017 and 2020, worth a combined $26,411,587.50. Ultimately, she never got the position she coveted, according to public records and her LinkedIn profile.

The warrant obtained by The Daily Beast sought permission for investigators to seize and search Schuster’s cell phone, which was still in service as of Wednesday morning. Schuster does not yet have a lawyer listed in court records, and she did not respond to multiple voicemail messages seeking comment.