Two USPS Corruption Pleas in Three Days: Packaging Contract Steering and $465K in Repair Kickbacks

Two guilty pleas announced in the same week show federal prosecutors working both sides of the U.S. Postal Service supply chain: the official who shapes a contract from the inside, and the subcontractor who pays to get more of the work. On Oct. 29, 2026, former USPS product management specialist James E. Lee Sr. pleaded guilty to conspiring to commit bribery and honest services wire fraud over packaging contracts worth hundreds of millions of dollars in certain instances. Two days earlier, the Justice Department announced that Oregon facilities-repair contractor Ilya Zagaryuk had admitted paying more than $465,000 in kickbacks to an employee of a USPS prime contractor.

The cases come from different offices and different investigative teams, and neither press release links them to the other. Taken together, though, they map two familiar routes into procurement fraud: an insider on the government side who controls information, and an insider at a prime contractor who controls the flow of subcontract work.

How a Packaging COR Steered USPS Awards to Four Companies

According to court documents described in the Justice Department release (Press Release 26-1283), Lee was a product management specialist overseeing expedited packaging supplies for the Postal Service. He also served as a contracting officer representative on several contracts to manufacture and provide those supplies, which gave him a role in both the program and the administration of its contracts.

Between approximately mid-2018 and late 2023, Lee and others agreed to a scheme in which he steered the procurement process for USPS contracts so they would be awarded to, or retained by, four different companies. The department did not name the companies. Its release describes the core conduct plainly: "Lee provided preferential treatment and competitive advantages to the companies, including reviewing draft technical proposals and disclosing to them confidential internal information regarding pricing and other issues."

Lee also performed official acts and influenced other officials during the procurement process, according to the release. That detail matters for contracting officers: a COR rarely signs an award, but the technical evaluations and pricing insights a COR provides can shape what the contracting officer sees.

Why the Payments Went to a Relative's Consulting Firm

According to the release, Lee used a relative and the relative's consulting company as an intermediary to pass information to the companies and to conceal his efforts to steer the procurement process. In exchange, the companies hired Lee's relative as an employee or consultant, resulting in payments totaling nearly $183,000.

The relative and a former executive of one of the manufacturing companies have already pleaded guilty and are awaiting sentencing. Lee is scheduled for sentencing on Feb. 25, 2027.

Assistant Attorney General A. Tysen Duva of the Criminal Division, Executive Special Agent in Charge Kevin Cloninger of the USPS Office of Inspector General and FBI Special Agent in Charge Richard Evanchec announced the plea. The USPS OIG and the FBI Pittsburgh Field Office are investigating "this and related cases," and Chief Edward P. Sullivan of the Public Integrity Section is prosecuting them.

Inside the $465,000 Kickback Scheme on USPS Facility Repairs

The Oct. 27 announcement involved a different layer of the supply chain. Zagaryuk, 40, of Damascus, Oregon, owned a company that contracted and subcontracted to perform repairs on dozens of USPS facilities in Oregon, Idaho, Wyoming, Montana and Washington.

According to documents filed in the U.S. District Court for the Eastern District of California in Sacramento, from May 2022 to February 2024 Zagaryuk paid an employee of a prime contractor on USPS projects over $465,000 in kickbacks as a reward for directing additional work to his company. The co-conspirators inflated estimates and invoices to build in funds for the kickbacks that were not based on legitimate repair costs.

"Zagaryuk and his co-conspirator conspired to inflate subcontracts to build in a split between themselves," said Acting Deputy Assistant Attorney General for Criminal Enforcement Daniel W. Glad of the Antitrust Division. "They did this countless times and cheated the U.S. Postal Service out of honest contracting and invoicing."

"Collusion that harms the U.S. Postal Service, and ultimately the American taxpayer, is illegal and will not be tolerated," said Associate Attorney General Stanley E. Woodward Jr.

Zagaryuk pleaded guilty to conspiracy to commit an offense against the United States, specifically a conspiracy to pay kickbacks. He faces a maximum of five years in prison and a fine of up to $250,000, and he agreed to pay $465,347.75 in restitution to the Postal Service, jointly and severally with co-defendants. The Antitrust Division and the U.S. Attorney's Office for the Eastern District of California are prosecuting; the USPS OIG and the FBI Sacramento Field Office are investigating. The Antitrust Division's Procurement Collusion Strike Force, created in November 2019, targets this kind of scheme in government procurement.

"The USPS OIG will continue to aggressively investigate companies that engage in activities designed to defraud the Postal Service's contracting process," Cloninger said.

What It Means for Contractors

Neither case turns on exotic conduct. Both rely on a trusted insider and on paperwork that looked routine. Companies that sell to USPS, and primes that manage subcontractor networks on its facilities, should treat these pleas as a checklist.

Watch who is getting hired. In the Lee case, the payments flowed to a government official's relative as an employee or consultant. Compliance teams should screen new consultants and employees for family or business ties to the program officials who evaluate or administer their contracts, and should ask why a consultant is being retained during an active competition.

Treat nonpublic pricing as a red flag. Reviewing a bidder's draft technical proposal and sharing internal pricing information were central to Lee's conduct. A capture team that receives government-side pricing or evaluation insight it could not have obtained publicly has a disclosure problem, not a competitive edge. Procurement integrity training should spell that out for business development staff.

Audit subcontract awards and invoice trends. Zagaryuk's scheme ran through a prime contractor employee who directed work and through inflated estimates and invoices. Primes should test whether a single project manager or estimator steers a disproportionate share of work to one subcontractor, compare subcontract pricing against independent estimates, and rotate approval authority so the person selecting a subcontractor is not the only person approving its bills.

Consider the reporting incentives. The Antitrust Division notes that whistleblowers who voluntarily report original information about antitrust and related offenses leading to criminal fines or other recoveries of at least $1 million may be eligible for a reward. That raises the odds that an employee, competitor or subcontractor surfaces a kickback arrangement before internal audit does.