updated 10/15/2008 11:57:38 AM ET 2008-10-15T15:57:38

Three former executives of a charity with $834 million in government contracts were arrested Tuesday in a contract fraud probe that has grown to ensnare public officials in El Paso, Texas.

Robert E. Jones, who is charged with 37 counts in the new indictment, once headed the National Center for the Employment of the Disabled, which supplied chemical-warfare suits for the military. The company now known as Ready One Industries was raided in 2006 in an investigation of its government contracts, which required that at least 75 percent of NCED workers filling government orders be blind or severely disabled.

The indictment accuses Jones and two other men of lying to the contracts' overseers about the number of disabled people employed there and embezzling or stealing at least $5,000 from the company, said Shana Jones, a spokeswoman for the U.S. Attorney's Office in San Antonio.

The indictment issued Thursday is sealed. It replaces a five-count indictment against the three men issued in September.

Jones, Ernesto Lopez and Patrick James Woods waived arraignment Tuesday and filed not guilty pleas, said Mary Stillinger, Lopez's attorney. All were being held on bond.

Stillinger said Lopez looked forward to the case moving ahead so he could defend himself.

"We don't think Pat Woods is guilty of anything," said Woods' lawyer, Jim Darnell. Jones' lawyer, Joe Spencer, said his client had done nothing wrong. The lawyers declined further comment because they had not seen the indictment.

Public corruption probe
The federal probe of businesses tied to Jones also sparked a continuing investigation into public corruption that has targeted several current and former officials in El Paso, but federal investigators won't detail the connections.

Several people, including a former El Paso County commissioner and chief of staff to current County Judge Anthony Cobos, have pleaded guilty to corruption charges. According to federal court records, that probe involves 12 separate investigations and has uncovered widespread abuses.

Details of the cases against those who have pleaded guilty have remained sealed under court order.

Lopez, the former NCED chief operating officer, faces 17 counts in the new indictment. Woods is a former NCED officer and member of the board of directors and faces five counts.

Two civil oversight groups — the President's Committee for Purchase from People Who are Blind or Severely Disabled and a Virginia nonprofit that helps administer government contracts — concluded that only about 7 percent of workers were handicapped while Jones ran the company.

Jones abruptly resigned from NCED amid the investigation, and Darnell said Woods left in 2007.

The indictment calls for Jones and Lopez to forfeit tens of millions of dollars.

Shana Jones, the U.S. Attorney's spokeswoman, said prosecutors want Robert Jones to forfeit $58.9 million and Lopez to give up $51.2 million. Prosecutors are asking that Woods forfeit $4.2 million.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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