ATLANTA , Georgia ( CNN ) -- A Georgia military contractor tricked law enforcement agencies into buying faulty stun grenades , ultimately leaving three FBI agents injured , federal prosecutors announced Monday . `` Flash-bang '' grenades were relabeled and sold to police after the Navy deemed them faulty , an indictment says . Pyrotechnic Specialties Inc. is accused of relabeling and selling `` flash-bang '' grenades that the U.S. military rejected after its personnel were injured . The company also mixed defective grenades with others that had been fixed `` to camouflage the defective devices from receiving personnel '' at the FBI , the indictment says . Last week 's indictment alleges that company officials bribed a federal official and paid for a visit to a strip club . The officials are accused of conspiracy , money laundering , mail fraud and defrauding the government . Watch how the grenades work » . The company , known as PSI , did not immediately respond to calls for comment . The indictment names three company officials -- CEO David J. Karlson , sales representative F. Brad Swann and production manager Daniel Ramone -- as taking part in the conspiracy . The indictment does not say whether they still hold those titles . PSI had a multimillion-dollar contract with the Defense Department to provide stun or `` flash-bang '' grenades , referred to as `` MK141 diversionary charges '' in the indictment . From 1996 to 2007 , the Navy awarded three contracts to PSI for the MK141 , according to the indictment . The devices are designed to produce a bright flash and loud bang , disorienting their targets . They 're considered nonlethal weapons , though they can be dangerous . The indictment alleges , `` On or about March 2003 , a flaw in the original Navy design of the MK141 diversionary charge became apparent . '' A plastic piece would sometimes crack , which `` could result in a hazardous situation to those in close proximity . '' `` Improper detonation could , and did , cause serious injuries to personnel using the device , '' according to the indictment . The indictment says that the Department of Defense issued a `` stop work order '' on the devices , and PSI `` developed a procedure to correct the defect '' that cost about $ 3.72 per unit . PSI officials later engaged in a scheme to sell the defective devices by claiming that they had met the department 's standards , the indictment alleges . The defendants sold and attempted to sell the devices `` to the Department of Defense and to federal law enforcement agencies , as well as to state and local law enforcement agencies , '' the indictment says . At one point , some of them prematurely detonated , `` causing serious injuries '' to three FBI agents who were on a SWAT team investigating a kidnapping , the indictment says , adding that the interior of their government vehicle was damaged . `` To further implement the scheme and artifice to defraud , the defendants provided gratuities and additional compensation to a Department of Defense employee , '' the indictment adds . The devices were sold to more than a dozen FBI offices between 2003 and 2004 , as well as to the San Rafael Police Department in San Rafael , California , and the Orange County Sheriff/Coroner 's Department in Santa Ana , California , the indictment says . The Department of Defense said it could not comment because the case is under investigation . `` Our understanding is that the Naval Criminal Investigative Service is supporting the FBI in this investigation , '' Lt. Geraldine Carey of Marine Corps Systems Command said in a written statement . Carey added that it is `` against DOD policy to discuss matters under investigation prior to the requested official or government agency receiving a formal report . '' According to the company 's Web site , PSI supports `` the U.S. and many foreign military services with custom compositions , pellets and devices . '' Automotive airbag products are atop the list of commercial products it manufactures , according to the Web site . The company employs 160 people at its manufacturing facility near Byron , Georgia , the Web site says . E-mail to a friend . CNN 's Scott Zamost and Abbie Boudreau contributed to this report .
Indictment : Georgia company of relabeling stun grenades . Devices sold to at least 12 government offices ; Defense Department declines comment . Georgia company officials charged with money fraud , by the government . Incident : FBI agents injured when stun grenades detonated prematurely .