Tag Archives: government fraud

The Vital Role of PERMANENT Inspectors General

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THE PROJECT ON GOVERNMENT OVERSIGHT (POGO)

Inspectors general (IGs) are the people on the front lines investigating waste, fraud, and abuse in our government. 

They are our eyes and ears into what’s happening—or shouldn’t be happening—in our government.

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“In fact, for every dollar invested in an IG office, they are able to identify about $17 dollars in potential savings to their agencies. But these essential watchdogs, until recently, weren’t the American public’s radar.

This video explains who IG’s are and why we should care.”

$876 Million In Disabled Veteran-Owned Small Business Contracting Fraud Dishonors Veterans

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Image: Georgia Tech Contracting Education Academy
PLEASE SEE https://contractingacademy.gatech.edu/tag/sdvosb/ FOR REPORT AND DETAILS

WASHINGTON TECHNOLOGY

The sad truth is that each time a government contract is awarded to a company falsifying its status as a SDVOSB, other veterans operating legitimate, eligible small businesses are denied opportunities that they’ve earned through their service to our nation.

It’s up to us to ensure these opportunities are safeguarded for our veterans today and tomorrow. It’s the honorable thing to do.

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“Ensuring that each veteran receives our full respect and support as he or she transitions back to civilian life is one of our duties as a nation.

While the personal sacrifice made by our veterans is impossible to measure and represents a debt that can never fully be repaid, it is vital that Americans do what we can to protect the benefits and services our nation’s veterans have earned. 

Extending opportunities to entrepreneurial veterans who have suffered service-related disabilities is one way our nation honors their extraordinary service. The Service-Disabled Veteran-Owned Small Business (“SDVOSB”) procurement program was established in 2003 as an extension of the federal government’s policy to maximize procurement opportunities for small businesses. The program provides opportunities for SDVOSBs by establishing a goal that at least 3 percent of all federal contracting dollars be awarded to service-disabled veteran-owned small businesses each year.

Three percent of federal contracting dollars may seem like a small amount—but the reality is this program represents billions of dollars in opportunity for our nation’s veterans. Unfortunately, over the years, this program has become a lucrative target for fraud and abuse. In fact, in a sobering December 2019 report from the Government Accountability Office focused on contracting fraud with the Department of Defense, one of the most rampant forms of abuse documented relates to contractors falsely claiming eligibility for contracts set aside for small businesses owned by service-disabled veterans. 

Schemes in which well-resourced, large companies either create fraudulent SDVOSBs or manipulate existing SDVOSBs to capture federal set-aside contracts for themselves are on the rise. These schemes are robbing our nation’s veterans of opportunities that they earned through their service. This is why it is critical that we understand the rules involving contracts set aside for SDVOSBs, as well as how to identify SDVOSB fraud.

First, let us look at the rules of SDVOSB procurement. In order to be eligible for a set-aside or sole-source SDVOSB contract with the federal government, a firm must meet four criteria. First, the firm must be a small business. Second, the company must be at least 51-percent owned by one or more service-disabled veterans. Third, a service-disabled veteran must hold the highest position in the company—such as the role of CEO—and be responsible for the day-to-day operation of the firm. And finally, the eligible veterans must have a service-connected disability.

It’s also worth noting that while SDVOSBs can join forces with large companies to bid on government contracts, to qualify for an SDVOSB set-aside opportunity, at least 51 percent of the net profits earned by the joint venture must be distributed to the SDVOSB and the SDVOSB needs to play the lead role as project manager on the project.

Even though these rules should be easy to understand and follow, the lure of securing set-aside government contracts worth billions of dollars is too much for some large business owners to resist, often leading some to commit fraud by creating small businesses to serve as a “pass through” entity to illegally win SDVOSB set-aside contracts. For example, the Virginia-based defense contractor ADS, Inc. and Luke Hillier, ADS’s former Chief Executive Officer, collectively agreed to pay the United States nearly $37 million to settle allegations that they violated the False Claims Act by fraudulently obtaining federal set-aside contracts reserved for small businesses that ADS was ineligible to receive. Specifically, ADS settled allegations that it had established a “pass through” small business named MJL Enterprises led by a former ADS employee who happened to be a service-disabled veteran. The lawsuit further alleged that ADS managed MJL’s day-to-day operations and supplied the necessary logistical services to allow MJL to perform under its SDVOSB set-aside contracts. In turn, MJL brought in more than $70 million in small business set-aside government contracts that ADS otherwise would not have been eligible to receive.

In the case of ADS, the punishment for allegedly using a fraudulent SDVOSB was severe. Hillier’s settlement of $20 million is among the largest secured against an individual in the history of the FCA. In addition to the $20 million settlement announced by the DOJ in August 2019, the firm also paid the U.S. government a settlement of $16 million in 2017 related to the same conduct.

So, what can be done about the issue? The GAO report underscores that the Defense Department should be doing more to verify who actually owns and manages the companies that supply the agency with goods and services. That sounds great, but the reality is the complex system that includes thousands of vendor companies and hundreds of thousands of contracts and subcontracts makes this kind of additional oversight a herculean task.

Another solution is to encourage those with insider knowledge of potential SDVOSB fraud to come forward as whistleblowers. Whistleblowers with direct knowledge about the ownership and management structure of these organizations are uniquely positioned to shine a light on fraudulent schemes that may otherwise never be uncovered.”

https://washingtontechnology.com/articles/2020/03/03/insight-miller-disabled-vet.aspx

‘Millions’ Stolen in Decade-Long Buying Fraud At Florida VA Hospitals

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Image: “Projectriskcoach.com

MILITARY.COM

At least 15 Department of Veterans Affairs employees and vendors in Florida were engaged in an “elaborate” fraud scheme that cost the government “millions” since 2009, two government agencies announced in a joint press conference .”

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“Declining to give the exact amount allegedly stolen or say what tipped them off, the U.S. Attorney General for the Southern District of Florida and the Department of Veterans Affairs Inspector General said people affiliated with the Miami and West Palm Beach VA clinics were charged and arrested on charges including conspiracy to commit health care fraud, committing health care fraud and bribery.

Nine of the suspects were “low-level” procurement staff, officials said. They allegedly defrauded the VA by letting vendors charge inflated prices for products or saying vendors supplied an order that was completely or partially unfilled. The employees would then receive a kickback on what the VA paid those vendors, officials said.

“This fraud scheme was clearly carried out, not only by the VA employees but deceptively with those vendors. And both of them are equally culpable in this scheme,” district Attorney General Ariana Fajardo Orshan said.

Officials also announced a separate but similar alleged fraud scheme that they suspect involved disabled veteran Lisa Anderson, 48, of Delray Beach. The attorney general has charged Anderson with false statements on her Service Disabled Veteran Owned Small Business application, accusing her of selling her preferred VA contract status to businesses she was not connected to.

OIG and AG officials praised their work in apprehending the suspects, but they called the investigation “ongoing” and did not comment on whether there will be any more arrests.

Orshan emphasized those arrested in the alleged kickback schemes were not representative of the VA at large.

“However, that does not reflect on the many, many well-intended, hard-working individuals that work for the VA medical services, she said, “and I want to clearly state that so it’s just a couple of bad apples.”

The maximum prison sentence for the charges are as follows: 10 years for conspiracy to commit health care fraud, 15 years for bribery and 20 years for falsifying records.”

https://www.military.com/daily-news/2019/12/11/millions-stolen-decade-long-buying-fraud-florida-va-hospitals-officials-say.html

Defense Agencies Continue Awarding Contracts to Suspended Firms, Report Finds

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Debarred and Priority

“GOVERNMENT EXECUTIVE”

Companies receiving waivers included some accused or convicted of major fraud, wire fraud, conspiracy, ethical bidding violations, and in the case of fuel-seller BP, an overall lack of business integrity.”

The agencies issuing waivers included the Army (16), the Defense Logistics Agency (9) the Air Force (4), and the National Geospatial Intelligence Agency (1).”


“At least nine major contractors, working primarily for defense-related agencies, have benefited from waivers under a 1981 law that allows federal officials to override the firms’ suspensions for such misconduct as fraud, bribery and theft.

That’s according to a new study of 22 contract decisions released this week by Bloomberg Government. Using a Freedom of Information Act request filed with the General Services Administration, the publication also found that some agencies had failed to forward the required documentation on the waivers to GSA.

Such household names as IBM, BP and Boeing have benefited from the law, wrote reporter Sam Skolnik.

The overall trend in agency suspensions and debarments of faulty contractors has been downward, in part because some of the military agencies cited by Bloomberg cited “life and death” and “compelling needs” for quick awards for use in war zones.

The nine that received waivers over the past 15 years, according to data from GSA and the Government Accountability Office, include S.K. Engineering and Construction Co.; Supreme Foodservice FZE; Unity Kabul Logistics and Supply Services; State Corps. Ltd.; Air BP Ltd.; Agility Public Warehousing Co; International Business Machines Corp.; National Air Cargo Holdings Inc.; and Boeing.

GSA is required to post such waivers on its website.

The issue of faulty contractors continuing to win business is one of those tracked by the nonprofit Project on Government Oversight. “The law is not being properly enforced, and there’s a definite lack of transparency,” Neil Gordon, a POGO investigator, told Bloomberg Government. “These are risky companies accused of serious crimes. It’s a real problem.”

https://www.govexec.com/contracting/2018/08/defense-agencies-continue-awarding-contracts-suspended-firms-report-finds/150424/


 

Managing Company Risk for Defective Pricing Under The Truth In Negotiations Act (TINA)

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Image:  Contractworks.com

“SMALLTOFEDS”  By Ken Larson

“Defective pricing actions by the government can have a severe impact on your past performance rating. 

They must be cited by you with any new business proposal in which you are asked if your company has been accused or convicted of a violation of the law or has open or pending government adjudications regarding legal violations.”


INTRODUCTION:
 
We have previously discussed at this site the development of credible cost and pricing data. That data is the product of not only estimating and pricing but also job cost accounting for managing contracts, business system design to meet Cost Accounting Standards (CAS) and the integrated aspects of the company business system demonstrating regulatory compliance:
The purpose of this article is to cite the specifics of the “Truth in Negotiations Act” and recommend  management techniques to comply  with this law and avoid defective pricing claims by the US Government.THE TRUTH IN NEGOTIATIONS ACT (TINA)

Public Law 87-653 (codified by 10 USC 2306a) was originally enacted in 1962 to place the Government on equal footing with the contractor during contract negotiations.  The following are the principal features of the law:
  • Defines requirements for obtaining cost or pricing data
  •  Requires certification that data are current, accurate, and complete
  • Delineates exceptions to the requirement
  • Addresses data submission for pricing of commercial items, below threshold contracts, and “other information”
  •  Provides right of Government to examine contractor records
  • Defines cost or pricing data
  • Provides rules governing defective pricing
  • Downward Contract price adjustment
  • ·Recovery of overpayment (cost & profit) & interest (as of 1985)
  • Contract actions include contracts, subcontracts, and modifications
  •  TINA applicability is not affected by contract type
  •   For subcontracts, the $2M threshold applies to the submission of data from the subcontractor to the prime contractor.
Below is an excellent presentation on further details of TINA by the National Contracts Management Association.  (Note: the version included here has not been updated for the recent TINA threshold change discussed above).
 
FIVE POINTS THE GOVERNMENT UTILIZES FOR ESTABLISHING DEFECTIVE PRICING
 
1)    The information in question fits the definition of cost or pricing data.
(2)    Accurate, complete, and current data existed and were reasonably available to the contractor before the agreement on price.
(3)    Accurate, complete, and current data were not submitted or disclosed to the contracting officer or one of the authorized representatives of the contracting officer and these individuals did not have actual knowledge of such data or its significance to the proposal.
(4)    The Government relied on the defective data in negotiating with the contractor.
(5)    The Government’s reliance on the defective data caused an increase in the contract price.MANAGING THE RISK OF A DEFECTIVE PRICING CLAIM

 
A government auditor relates to TINA and defective pricing whether or not it is required contractually and uses the TINA provisions as a frame of reference in how he or she views trend analysis of your company. Even if you do not have the TINA requirement in your bid or your contract, be aware the auditor is forming his or her opinion of your compliance with the law against the TINA framework.
Post award audits can be ordered at any time by a PCO. During such audits your proposal is juxtaposed to your incurred cost and historical data on a given contract. During such juxtapositions, defective pricing stands out glaringly.  If you become aware of an anomaly, cover your tracks by immediately assessing the impact and deciding whether or not a disclosure should be made.
Integrate your system from pricing to billing to close out utilizing a consistent cost structure template and be aware you are putting audit history in place and that historical trends are what auditors follow.
Keep all subsequent disclosures under proposals to the government well documented, serialized and current at the prime and subcontract level, reflecting them in a detail record of negotiation.
If you have commenced work prior to final negotiations under a letter contract or similar interim arrangement, conduct a sweep of actual costs and commitments and reflect them in an updated proposal to the government prior to negotiation of a final price.  Reassess quotes, escalation factors, indirect costs and related factors in the same manner if a proposal expires and you are asked to extend your pricing.
If substantive conditions in an open proposal estimate change, document them thoroughly and disclosethem to the government based on an astute analysis of your risk if they can be misconstrued as defective pricing by an auditor.  Carefully convey the impact on the prospective contract and its pricing to the contracting officer if you decide to disclose.
Consistency with CAS and your CAS disclosure statement as well as your latest negotiated forward pricing rates is mandatory. Any departure from these baselines will attract audit attention.
In many defective pricing instances what you knew and when you knew it becomes a factor.  Continually assess changing conditions that may dramatically impact your cost performance and manage them by taking corrective actions, developing workarounds and carefully communicating requirements to your subcontractors and suppliers.
Remember under TINA you are required to perform cost/price analysis of your subcontractors if their work scope exceeds the $700k threshold. You must submit the results with your proposal to the government.  If a disclosure becomes necessary, make it sooner rather than later when the data may be under the cloud of a negative audit finding.SUMMARY

 Defective pricing actions by the government can have a severe impact on your past performance rating.  They must be cited by you with any new business proposal in which you are asked if your company has been accused or convicted of a violation of the law or has open or pending government adjudications regarding legal violations.
For examples of TINA violations please see the “Federal Contractor Misconduct Data Base”, maintained by the Project on Government Oversight:
Sculpt and educate your auditor, contracting officers and government analysts on the specifics of your company business system and preserve its integrity over the long run to maximize your win potential and lower the risk of defective pricing claims by the government.
A good rule of thumb is to consider every proposal as if it were under TINA compliance whether or not you must submit a “Certificate of Current Cost and Pricing” under TINA.  This will keep your business system sharp, your ethics and standards high and your past performance record clean.”
ABOUT THE AUTHOR:
My Photo
Ken Larson is a 2 Tour US Army Vietnam Veteran, retired from 36 Years in the Defense Industrial Complex after working on 25 major weapons systems, many of which are in use today in the Middle East. 
As a Volunteer MicroMento Counselor  he specializes  in Small, Veteran-owned, Minority-Owned and Woman-Owned Businesses beginning work for the Federal Government. Micro Mentor is a non-profit organization offering free assistance to small business in business planning, operations, marketing and other aspects of starting and successfully operating a small enterprise.

FDA Reverses Course On A $4.2 Million No-Bid Grant To A Former Commissioner

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FDA Sole Source Grant MuddassarAwan

Image:  Muddassar Awan

“WASHINGTON POST”

“The Food and Drug Administration is reversing a decision to award a no-bid $4.2 million grant to a policy center at Duke University headed by former FDA commissioner and current paid board member for Johnson & Johnson Mark McClellan.

McClellan served as FDA commissioner under President George W. Bush. The current commissioner, Scott Gottlieb, served as his senior adviser.”

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“The funding opportunity was posted in late April as a five-year grant for which only a single institution, the Duke-Robert J. Margolis Center for Health Policy, was eligible to apply. The grant’s purpose was to “to help advance regulatory science to promote the increased availability of safe and effective drugs to the public,” according to the request for application. FDA said in a statement that it is in the process of opening the grant application to other institutions.

Several health policy experts had expressed favoritism concerns about the initial no-bid proposal, raising questions about what made the Duke center uniquely qualified to do the work, which involves convening discussions with drug companies, health-care providers and patient groups to discuss key issues in the drug approval process.

They also raised concerns about McClellan’s role as a paid board member for Johnson & Johnson, one of the largest drugmakers in the world, given the pharmaceutical industry’s deep interest in drug approvals.

“It is not like there’s one laboratory on the planet that knows how to clone these particular genes — there’s a substantial number of groups out there that work on these issues. It frankly makes no sense that the only place you could go for this is the Duke center run by a drug company advocate,” said Jerry Avorn, a professor of medicine at Harvard Medical School, which has a center that conducts similar work. “The very fact that they could have thought this was a good idea, even to the point of publishing the request for proposals, is important because of what it reflects about the decision-making process within FDA and the administration.”

Ellen de Graffenreid, a spokeswoman for the Duke-Margolis Center, directed inquiries about the grant to the FDA and stressed that Gregory Daniel, the deputy director of the center, is the principal investigator on its current agreements with the agency — not McClellan.

The FDA, after initially defending the no-bid proposal, said in a statement that the agency had “become aware of other organizations who believe that they can submit a competitive proposal to conduct the needed research and related activities. As a result, FDA has decided to change the announcement from a sole source award to an open competitive grant.”

In a statement, McClellan said, “My work and the work of the faculty and staff affiliated with the Duke-Margolis Center speaks for itself, and complies with Duke’s well-established policies intended to address any issues related to conflict of interest.”

FDA has awarded sole-source grants in the past — though these are rare. In 2017, there were 548 funding awards by FDA, of which six were sole-source awards, according to an FDA spokeswoman.

Until this week, the FDA had defended this sole-source grant, saying in an email that “agency policy allows for exceptions to competitive bidding under certain circumstances, such as when the agency finds a particular institution is uniquely qualified to carry out a cooperative agreement.”

FDA made a sole-source award of a similar grant in 2013 to the Brookings Institution’s Engelberg Center for Health Care Reform, which  McClellan led from 2007 to 2013.

McClellan identified himself as director of the Center in June of 2013 in testimony before Congress. McClellan took a paid position on the Johnson & Johnson board in fall of 2013. He received $285,000 last year for his work, according to company filings.

De Graffenreid said Wednesday that McClellan was no longer affiliated with the Engelberg Center when he joined the corporate board, saying in an email he had stepped down in 2012 to spearhead a major initiative. Documents posted by Brookings Institution described the initiative as “within the Engelberg Center.” De Graffenreid later said that he continued to be affiliated with the Center through 2015.

FDA justified the 2013 grant at the time on the center’s “status as a neutral, nonprofit, research-focused institution” and reputation as “an ‘honest broker’ with the ability to identify practical solutions that reflect the best available science and input from all stakeholders,” according to a notice in the Federal Register in March of 2013.

The principal investigator of that grant was also Daniel, McClellan’s current deputy at the Duke-Margolis Center.

Alfred Engelberg, a patent lawyer who was a major funder of the Brookings Engelberg Center, said in an interview that he objected to McClellan’s role on a corporate board and cited that as a reason when he ended his financial support in March of 2015. He said the bulk of his $10 million contribution occurred before the conflict arose.

“I personally believe Mark McClellan could not serve as a director of the Engelberg Center and Johnson & Johnson, and because I believe that I withdrew. He has a fiduciary obligation to a drug company,” Engelberg said.

In 2015, McClellan left Brookings for Duke University. A. Eugene Washington, Duke University’s chancellor for health affairs, is also on Johnson & Johnson’s board.

Gerard Anderson, a professor at Johns Hopkins Bloomberg School of Public Health who has worked with McClellan, said he values his insights on topics like drug pricing and policy, but doesn’t consider him neutral.

“He is smart and an excellent researcher, so I want his perspective, but you need someone who does not take a perspective in this role at the FDA. In many instances Mark is an advocate, somebody with a position and not as somebody who is neutral,” Anderson said.

“Sole-source contracts are very challenging to award in the government,” Anderson added. “You really have to have a unique skill or unique data set or a unique something that allows you to grant somebody a sole-source contract — and to give conferences and to give meetings isn’t one of them.”

McClellan did not disclose his relationship with Johnson & Johnson in his biography or in the white paper published from FDA-supported meetings in 2016 and 2017, which discussed the use of new kinds of evidence in the regulatory process.

“The fact that the center is headed by someone who also serves in a paid position on the board of pharmaceutical company is a clear potential conflict of interest,” Sean Moulton, open government program manager at the Project on Government Oversight, wrote in an email. “There are several safeguards that could be instituted. First and foremost is disclosure of the potential conflict. It should be made clear to all participants that the potential conflict exists. At any meetings that occur it should be disclosed at the beginning, especially if the head of the center is participating in the meeting.”

On several medical publications about health topics, McClellan does not disclose his board membership. Duke said he was following the university’s policies.

“Dr. McClellan follows Duke policies with regard to the time, place, and nature of appropriate disclosure,” de Graffenreid wrote in an email. She added that the kind of work Duke does for FDA “does not include providing advice or policy proposals to the agency.”

https://www.washingtonpost.com/news/wonk/wp/2018/05/16/fda-reverses-course-on-a-4-2-million-no-bid-grant-to-a-former-commissioner/?noredirect=on&utm_term=.063b7cf76794

GSA SAM Registration Hackers Used Spearphishing

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Spearphishing

 

 

 

 

“FEDSCOOP”

“It’s unclear how much the scammers have netted through their scheme, which is being investigated by the GSA inspector general and federal law enforcement.

GSA’s System for Award Management, or SAM.gov, didn’t provide two-factor authentication or use an email protocol designed to protect against incoming emails with spoofed domain names in their addresses. “


“Cybercrooks who stole federal payments by hacking contractor accounts on a GSA website used sophisticated spearphishing techniques to steal login credentials and then diverted payments to bank accounts they controlled, an executive of a contractor targeted in the scam told FedScoop.

The inspector general’s office declined to comment, but sources familiar with the investigation told FedScoop that the cyberattacks that facilitated the fraud had been identified last year and were ongoing as recently as last week.

Targeting was also aided by the rich data the website provided.

The scammers “didn’t need to do any reconnaissance or research, the usual kind of social media engineering” to find out who at each company controlled the SAM.gov account, the executive said. “SAM.gov handed them the targeting intelligence they needed for the campaign.”

The public website has a search function that enables visitors to identify the point of contact for any company with an account on the site — which contractors can use to manage the payments they receive under federal contracts.

“It’s a spearphishing guide,” said the executive, who asked not to be identified because of the sensitive nature of the case. The emails sent to the points of contact “were very high quality,” said the executive, adding that they appeared to come directly from SAM.gov and contained a message asking recipients to click on a link to a fake login page. “It was a high quality facsimile of the real page,” the executive said. When the recipient entered their username and password, the page harvested them, then redirected the user to the real site, along with random login data.

“What you see next [after entering your information] is the real login page with the error message, so you think you’ve fat-fingered it,” explained the executive.

Having harvested the credentials for the account administrator, the hackers were able to login and use the site’s management functions to change the bank accounts into which federal payments were delivered.

Security experts say such attacks can be prevented by at least two baseline best practices that SAM.gov lacked:

● Two-factor authentication (2FA) — requiring the user to identify themselves via a secure hardware token or one-time passcode sent to their mobile phone, in addition to their password. But SAM.gov didn’t offer that option for account administrators, the executive said.

● DMARC, or Domain-based Message Authentication, Reporting and Conformance, is the industry standard measure to prevent email spoofing — when hackers make their messages appear as if they come from trusted correspondents. If DMARC had been deployed and enabled, spoofed emails purporting to come from SAM.gov would have been marked as spam or simply discarded. SAM.gov has a DMARC record, but enforcement has not been switched on.

A GSA spokeswoman declined to address specific questions about 2FA and DMARC. “This is an active law enforcement-sensitive investigation,” she said in an emailed statement. “GSA has made public as much information as it is able on our website and will continue to update accordingly.”

The executive from the targeted company was very critical of SAM.gov’s security. “It’s ridiculous how poorly put together that site is,” he said, adding that when the company first discovered the cyberattack, he struggled to find a point of contact at GSA to report it to.

“I couldn’t convince anyone to listen to me,” he said. After his initial contact with federal
investigators last year, “There was silence for months,” he said.

“Once they knew there was a problem, they had a responsibility to notify the site’s users… Everyone with an account should have been told to check whether their banking information had been changed … There are a thousand things they could have done.”

“The problem is not they had a problem, everyone has problems” concluded the executive. “The problem is the glacial speed with which they’ve responded.”

https://www.fedscoop.com/sam-gov-hackers-used-spearphishing-spoofing-credential-theft/

Related GSA Announcement:

http://www.smalltofeds.com/2006/12/registering-your-small-business-for.html

 

 

 

 

 

 

The Scam Artist Who Sold Fake Armored Trucks to U.S. Army

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Fake Trucks

PHOTO ILLUSTRATION BY THE DAILY BEAST

“THE DAILY BEAST”

“Whyte’s fraud is symptomatic of rushed, desperate weapons-purchases that were common during the Pentagon’s invasion and occupation of Iraq. 

Years after the Iraq occupation morphed into a wider U.S. intervention targeting Islamic State militants, the Pentagon still doesn’t know exactly what it’s spending its money on.”


“Sometime in the summer of 2006, John Ventimiglia, a plant foreman for Canada-based Armet Armored Vehicles, visited the company’s Ontario factory to inspect several Kestrel armored trucks that Armet was assembling for the U.S. military in Iraq.

Ventimiglia was horrified by what he saw, according to court documents. The vehicles lacked the floor armor that the military had specified. Instead of special, blast-resistant mineplate, workers had installed fragile plywood planks. It was also apparent that workers were using sandbox-style play sand in the vehicles’ construction—although Ventimiglia wasn’t sure why.

Ventimiglia emailed his coworker Frank Skinner, who then approached the FBI. Nearly 12 years later, this past week, a U.S. district court sentencedArmet CEO William Whyte to five years in prison for supplying fake armored vehicles to the U.S. military during the height of the American-led occupation of Iraq. Seventy-two-year-old Whyte, of Ontario, must also pay back the U.S. government for the trucks.

“Evidence at trial demonstrated that Whyte executed a scheme to defraud the United States by providing armored gun trucks that were deliberately under-armored,” the Justice Department stated.

But the military’s contracting problems aren’t unique to Iraq.

In 2011, the congressionally mandated Commission on Wartime Contracting in Iraq and Afghanistan reported that contractors had cheated the Pentagon out of $31 billion since 2001 (PDF). In one 2007 case, two South Carolina sisters—co-owners of a small parts-supplier—were found guilty of billing the Pentagon $20 million for hardware that was worth a fraction of that.

“Unfortunately, there are unscrupulous individuals out there who will take advantage of a wartime emergency, even one involving the lives and safety of our troops, to pad their own pockets,” Dan Grazier, a former Marine who is currently an analyst with the Project on Government Oversight in Washington, D.C., told The Daily Beast.

In Iraq, an escalating insurgency motivated many of the most flawed purchases. From mid-2005 to mid-2006, roadside bombs and other improvised explosive devices killed around 40 Americans per month in Iraq. Starting in 2006, the Defense Department spent $50 billion buying no fewer than 24,000 up-armored vehicles.

So-called Mine-Resistant Ambush-Protected trucks, or MRAPs—built by major defense contractors—accounted for most of the new vehicles. But the crash effort drew in small companies too, some of which assembled less-complex armored trucks for hauling Iraqi and coalition officials around Baghdad and other Iraqi cities.

Armet Armored Vehicles was one of those smaller companies. The Ontario-based company, which also operated a factory in Danville, Virginia, specialized in adding armor to SUVs and building ambulances and police vehicles. The company provided vehicles for Fast Five, the 2011 installment in the Fast and Furious film franchise.

In March 2006 the Defense Department hired Armet to build Kestrel armored trucks based on the chassis of a Ford F550 pickup. The price: around $200,000 per truck, including shipping. All told, Armet stood to earn $4 million.

The first four Kestrels were due in Baghdad 45 days after Whyte signed the contract in mid-March 2006. The rest, by the end of July. “Here we go, the first 20 Kestrels for Baghdad,” Whyte emailed his staff, according to court documents. “The only problems that I see is the chassis and FINANCE!”

Whyte was correct that it would be problematic to finance what was, for Armet, a substantial boost in production. The company fell behind. Unable to build the trucks on time and to spec, Whyte essentially faked them—replacing some government-mandated floor armor with plywood and leaving gaps in the protection on other parts of the vehicles.

“He knew he couldn’t meet the deadline,” Frank Skinner, who in 2006 oversaw Armet’s Danville factory said of Whyte during the latter’s two-month trial in in the U.S. District Court for the western district of Virginia beginning in June 2015. The first two Kestrels arrived in Baghdad at least two months late. Around the same time, Skinner secretly contacted the FBI about Whyte’s fraud.

While building faulty trucks and delivering them late, Whyte hounded military officials to pay Armet in advance for future vehicles. The military refused most of the requests. “You need to stop using progress payments for an excuse for your inability to deliver these vehicles against any type of credible timeline,” Cmdr. Tommy Neville, a contracting officer in Baghdad, wrote to Whyte.

“We miscalculated and were deluded when we believed that money was forthcoming,” Whyte wrote to another military official in October 2006. Years later, federal prosecutors would allege that Whyte repainted some of the Kestrels he had built for, but not yet shipped to, the U.S. military and instead sold them to the Nigerian government—because the Nigerians offered a higher price. A judge threw out that complaint for a lack of evidence.

In March 2008, the Pentagon rejected the seventh gun truck that Armet had shipped to Iraq and canceled the contract. By then the military had paid Armet around $2 million for six trucks it could not use. The Justice Department indicted Whyte in July 2012 and issued a warrant for his arrest the same day.

“None of the armored gun trucks delivered by Armet and Whyte met the ballistic and blast protection requirements of the contracts, despite the defendant’s claims that the vehicles met the standards,” the FBI stated. “Armet and Whyte knew that each of the six armored gun trucks failed to meet the required standards, that they were defective, and that they would not protect the officials they were intended to protect.”

Whyte fled to Canada to avoid prosecution. Armet shut its doors. Canadian authorities extradited the former CEO after a three-year legal battle. On Oct. 9, a jury unanimously found Whyte guilty on three counts of major fraud against the United States, three counts of wire fraud and three counts of criminal false claims.

Five months later on Feb. 20, Judge Jackson Kiser sentenced Whyte to spend 70 months in prison—and to pay back the $2 million his company received for the fake armored vehicles.

For the Pentagon, the underlying problem likely persists. In January 2017, the Government Accountability Office estimated that, as recently as 2016, as much as 5 percent of all federal payments to individuals and contractors were “improper” and resulted in $144 billion in waste in that year alone (PDF).

But that calculation didn’t take into account military contracts, owing to “serious financial management problems at the Department of Defense that have prevented its financial statements from being auditable,” the GAOexplained. In late 2017 Congress finally passed a law requiring the Defense Department to conduct a full audit starting in 2018.

In the meantime, it’s unclear how many other William Whytes are out there, cheating American servicemembers and taxpayers. “This is just one of the many reasons why we need to have effective oversight of the DoD acquisition process,” Grazier said.”

https://www.thedailybeast.com/the-scam-artist-who-sold-fake-armored-trucks-to-us-army

 

Transparency International 2017 Survey of U.S. Citizens on Corruption in the U.S.A.

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U.S. Corruption

“TRANSPARENCY INTERNATIONAL”

“The US faces a wide range of domestic challenges related to the abuse of entrusted power for private gain, which is Transparency International’s definition of corruption.

Key issues include the influence of wealthy individuals over government; “pay to play” politics and the revolving doors between elected government office, for-profit companies, and professional associations; and the abuse of the US financial system by corrupt foreign kleptocrats and local elites.”


” The current US president was elected on a promise of cleaning up American politics and making government work better for those who feel their interests have been neglected by political elites.

Yet, rather than feeling better about progress in the fight against corruption over the past year, a clear majority of people in America now say that things have become worse. Nearly six in ten people now say that the level of corruption has risen in the past twelve months, up from around a third who said the same in January 2016.

A new survey by Transparency International, the US Corruption Barometer 2017, was carried out in October and November 2017. It shows that the US government and some key institutions of power still have a long way to go to win back citizens’ trust.

The results show:

  • 44 per cent of Americans believe that corruption is pervasive in the White House, up from 36 per cent in 2016.
  • Almost 7 out of 10 people believe the government is failing to fight corruption, up from half in 2016.
  • Close to a third of African-Americans surveyed see the police as highly corrupt, compared to a fifth across the survey overall.
  • 55 per cent gave fear of retaliation as the main reason not to report corruption, up from 31 per cent in 2016.
  • 74 per cent said ordinary people can make a difference in the fight against corruption.

OFFICE OF THE PRESIDENT SEEN AS MOST CORRUPT

The survey asked about the degree of corruption in nine influential groups. These included the national government (the president’s office, members of congress, government officials), public officials who work at the service level (tax officials, the police, judges, local officials), and those who are not part of government but who often wield strong influence (business executives, religious leaders).

Of these categories, government institutions and officials in Washington are perceived to be the most corrupt in the country. The results show that 44 per cent of Americans now say that most or all of those in the Office of the President are corrupt, up from 36 per cent who said the same last year.

Additionally, many people hold an unfavourable view of big business. Almost a third of people in the United States think that most or all business executives are corrupt.

In comparison, judges are seen to be the cleanest, with just 16 per cent thinking that they are highly corrupt.

A higher proportion of African-Americans surveyed view the police as highly corrupt: 31 per cent, versus an average of 20 per cent across all those surveyed.

WEAKER GOVERNMENT EFFORTS TO STOP CORRUPTION

The findings also reveal that people are now more critical of government efforts to fight corruption. From just over half in 2016, nearly seven in ten people in the United States now say that the government is doing a bad job at combatting corruption within its own institutions – this is despite widespread commitments to clean up government.

VOTING STILL THE MOST EFFECTIVE ACTION PEOPLE CAN TAKE

At the same time, the survey reveals that despite increased concerns about the level of corruption, many people feel empowered to make a difference, demonstrating that citizens can engage with the issue.

When we asked what actions would be most effective at fighting corruption, using the ballot box came out top. Twenty-eight per cent said that voting for a clean candidate or a party committed to fighting corruption is the most effective thing they could do. However, this figure has declined from 34 per cent in 2016.

There has been a slight increase in the proportion of people saying that some form of direct action away from the ballot box would be most effective – speaking out on social media, joining a protest march, joining an anti-corruption organisation, signing a petition, talking to friends or relatives, or boycotting a business. Collectively, a quarter of people in the United States now think these are the most effective things they can do, up from 17 per cent in 2016.

A further 21 per cent said that reporting corruption was the most effective solution.

FEAR OF RETALIATION PREVENTS MORE PEOPLE FROM REPORTING CORRUPTION

In reality, however, many people don’t come forward to report corruption when they see or experience it. When we asked why that might be, Americans now overwhelmingly say it is because they are afraid of suffering retaliation as a result. Over half of people (55 per cent) cited this as the main reason more people don’t come forward: a substantial increase since 2016, when only 31 per cent said the same.

RECOMMENDATIONS

Americans have expressed their frustration with Washington and its elected officials in myriad ways. Yet there are things that can be done to ensure that institutions are clean and that taxpayer dollars are spent in alignment with the public’s concerns and not just with special corporate and elite interests.

Transparency International calls on the US Government to address the following:

1.  TRANSPARENCY IN POLITICAL SPENDING:

Make all spending on politics genuinely transparent, with:

– real-time information accessible in online, machine-readable form to the public
– transparency on political spending by publicly traded companies
– transparency to the public on every level of influence, from political ad campaigns, to lobbying, to bundled campaign contributions.

2. PREVENTION OF REVOLVING DOORS:

Stop the unchecked exchange of personnel among corporations, lobbyists and our elected and high-level government officials.

3. ESTABLISHING WHO OWNS WHAT:

End the use of anonymous shell companies, which can be a source of conflict of interest and/or vehicles for illicit activity.

4. STRENGTHENING THE ETHICS INFRASTRUCTURE:

Reinforce the independence and oversight capabilities of the Office of Government Ethics.

5. PROTECTION OF WHISTLEBLOWERS:

Improve and implement laws and regulations to protect the whistleblowers who expose corruption and other misconduct by the government and its contractors.

6. PROVIDING BASIC ACCESS TO INFORMATION:

Increase access to information about the government, as a means to empower the public to fight corruption.

Earlier this year Transparency International highlighted how corruption and inequality can create fertile ground for populist leaders, but that such populist politics do little to actually stop corruption. The findings of the US Corruption Barometer 2017 reinforce this message. America needs actions – not just words – towards a cleaner and more open government.

METHODOLOGY

Transparency International commissioned Efficience3 to carry out the US Barometer 2017. Efficience3 directed a Computer Assisted Telephone Interviewing of 1,005 respondents from October 2017 to November 2017. Respondents were selected using Random Digital Dialling. Data were weighted to be demographically representative of all adults in the United States aged 18+ by age, gender, social grade, region, rural/urban area, and ethnicity. Efficience3 conducted a comparable survey of 1,001 respondents for Transparency International from January 2016 to February 2016.”

https://www.transparency.org/news/feature/corruption_in_the_usa_the_difference_a_year_makes

 

 

Ex-GSA Contracting Official Gets Prison Time for Nepotism

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GSA Official Goes to Jail

“GOVERNMENT EXECUTIVE”

“The director of a central contracting office at the General Services Administration has been sentenced to one year in prison for a nepotism conspiracy, while her husband received 18 months, the Justice Department announced.

Part of the more than $200,000 scheme executed from 2010-2014 involved inducing an Arlington-Va.,-based contractor to hire Steve Ballard based on false statements about his education, qualifications and status as the husband of Renee Ballard, who would supervise the contract in question.

Helen Renee Ballard, 52, and Robert “Steve” Ballard, 56, both of Brandywine, Md., pleaded guilty last March to conspiracy to make false statements to authorities concerning the work qualifications Robert Ballard used in attempting to obtain work for federal agencies and contractors. Helen Ballard, who left GSA in 2016, had been director of the agency’s Central Office Contracting Division from May 2006 to May 2011.

The couple acknowledged causing more than 139 false employment applications and fake certification documents to be submitted to the FBI, the Office of the Director of National Intelligence, the State Department, the Transportation and Security Administration, the Veterans Affairs Department, the Education Department, the Federal Communications Commission, the Federal Emergency Management Agency, the Labor Department, the Office of Personnel Management, and the Internal Revenue Service.

“The Ballards sent Steve Ballard’s false resume to the Executive Office of the President in an attempt to obtain employment there,” the release said. Steve Ballard also submitted falsified applications to six private contractors working for GSA and Customs and Border Protection, among other agencies.

A co-conspirator, Donna C. Hughes, 32, of Lanham, Md., who worked under Renee Ballard as a contracting officer at GSA, pleaded guilty on April 21 and last week received a year of probation.

The sentencing in federal court Alexandria, Va., was announced by Dana Boente, U.S. Attorney for the Eastern District of Virginia, and GSA Inspector General Carol Ochoa.”

http://www.govexec.com/contracting/2017/08/ex-gsa-contracting-official-gets-prison-time-nepotism/139975/?oref=federal-news-all