March 19 (Bloomberg) -- Richard T. Race, the Pentagon inspector general's chief investigator of procurement fraud and official misconduct, quit his job and pleaded guilty last month to violating U.S. banking laws.

The previously unpublicized case was filed Feb. 26 in federal court in Alexandria, Virginia, according to court papers. Race, 61, admitted he made cash deposits at the Pentagon's credit union on three straight days in March 2007 that were designed to evade laws that track large currency transactions. The government seized the total of $20,000 in deposits as part of the plea deal.

Race, who will be sentenced May 2, faces as long as five years in prison and a $250,000 fine. He voluntarily retired Feb. 16, the inspector general's office said in a statement.

He told a credit union teller that he had sold a car for $20,000 and reported that on his tax returns, according to court papers. Race told the teller he was making three separate deposits -- two for $9,000 and one for $2,000 -- that were ``to avoid generating a report to the government, which he believed could result in tax being assessed twice on the same sale,'' the papers said.

Race pleaded guilty to one count of structuring cash transactions to evade reporting requirements. Federal law requires that banks tell the Treasury Department about any single-day deposit of at least $10,000.

The government accused Race of making false statements about the transactions to the teller and federal investigators, court papers said. The documents gave no indication the cash was from any illegal activity or what his motive was for breaking up the deposits into smaller amounts.

Two Separate Accounts

At first, Race said ``he did not know why he deposited the cash in three transactions,'' according to the court papers. He later told law enforcement agents that he and his wife initially planned to deposit the money in two separate bank accounts and keep $2,000 at their home in Great Falls, Virginia.

James Rybicki, a spokesman for U.S. Attorney Chuck Rosenberg in Alexandria, said in an e-mailed statement, ``We see a fair number of structuring cases in the Eastern District of Virginia, and we intend to prosecute those seeking to evade the statutory reporting requirements.''

Patrick O'Donnell, Race's lawyer, declined to comment.

Gary Comerford, a spokesman for the Pentagon's inspector general, said in a statement yesterday that the office wasn't involved in reporting or investigating matters involved in the ``recent judicial action'' and has no reason to believe there was any connection between the case and Race's official duties.

On March 17 the Defense Department's inspector general, Claude Kicklighter, announced that Charles Beardall will be the office's new deputy for investigations, replacing Race. Beardall had held the job on an acting basis after Race's departure.

Race also served as acting chief of staff in the inspector general's office. The investigator's job includes overseeing probes of official misconduct, including procurement fraud by contractors.

Race in the early 1970s was a Secret Service special agent protecting the president and vice president. He joined the Pentagon inspector general's office in January 2003.

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net.

Last Updated: March 19, 2008 00:01 EDT