Tag Archives: waste fraud and abuse

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.”

Bean Counters, Not Bullets, Are Key To Afghanistan’s Future

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“The “first line of defense” in what follows any potential peace deal in Afghanistan isn’t likely to be grunts on patrol but soldiers who monitor the billions of dollars spent on projects aimed at holding the war-torn country together.”

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“But a near blackout of information on the effectiveness of U.S. programs in Afghanistan is threatening to increase waste, fraud, abuse and malfeasance on projects intended to help the country when U.S. troops ultimately leave, John Sokpo, special inspector general for Afghanistan reconstruction, told members of the House Oversight and Reform Committee on Tuesday.

“Can the Afghan military fight? Well, you don’t know because they took away all of the metrics for success,” Sopko said. “And we don’t know.”

Sopko cautioned that without critical planning and oversight, any progress post-peace deal would be unlikely. As the number of troops are reduced, so is the number of people who oversee programs.

“Otherwise you might as well pile up all the dollars and euros in Massoud Circle in downtown Kabul and burn them for all the good they’ll do,” Sopko said.

Official estimates show that since 2002 the United States has spent $780 billion on combat operations and $137 billion on reconstruction efforts. More than 2,400 U.S. troops have died in the conflict, and at least 20,000 have been wounded.

Current troop levels hover at an estimated 13,000, down from about 100,000 at the height of the 18-year war. But as those troops and assets decrease, the programs put in place to rebuild Afghanistan are in jeopardy without sufficient oversight.

“The first line of defense is that soldier who’s monitoring the contract or monitoring the Afghan government,” Sopko said. “If further troop reductions happen, who’s going to come back?“Are they gun toters or are they monitoring?”

He continued, “If [monitors] come back in the first tranche, who’s going to protect your money?”

Bombing missions reached a near-decade high last year. A recent U.S. Air Forces Central Command report showed that U.S. aircraft dropped 7,423 munitions in the country in 2019. Comparatively, when U.S. troops were at their peak in 2010 and 2011, the U.S. dropped 5,100 and 5,411 bombs respectively.

While bombing may be up, it appears troop numbers and assets supporting those troops continue to decline.

A December 2019 Pentagon report titled “Enhancing Security and Stability of Afghanistan” showed plans to cut UH-60 Black Hawk helicopters for Afghan forces from 159 to 53 and the AC-208 attack and reconnaissance aircraft from 32 to 10.

Despite repeated invitations, neither the Department of Defense nor the State Department sent representatives to update Congress on Trump’s Afghanistan plan, which drew bipartisan ire from committee members.

“If you didn’t exist, we would have nobody at this hearing today to give us any answers,” Rep. Thomas Massie, R-Kentucky told Sopko.

In response, the inspector general pushed Congress to get the answers they need to do their oversight jobs.

“You’ve got to force the administration to be honest,” Sopko said. “The administration has to come in and tell you, why are you spending this money, what do you expect to accomplish at the end?”

But it’s become increasingly difficult for both Congress and the U.S. public to know what is happening with the billions spent in Afghanistan as information is increasingly limited by Trump officials.

The Washington Post’s “Afghanistan Papers” project, released late last year, highlighted many instances in which officials misled Congress and the public with rosy pictures of progress in the 18-year war.

Sopko stopped short of pointing to specific people in current or previous administrations outright lying, instead noting that exaggerated claims of progress had become part of the culture of dealing with challenges in Afghanistan years ago.

“That’s the real dishonesty, we have been dishonest to ourselves,” Sopko said. “A number of people have come here and tried to tell the good story. We also have this hubris that we can turn Afghanistan into a little America or another Norway. We can’t.”

Sopko ticked off a list of waste that’s been uncovered, from $9 billion spent on counter-narcotics that had no real effect on the drug trade, $500 million spent on airplanes that can’t fly and millions more spent on buildings that melted in the Afghan sun.

“Every commander I’ve met, I’ve met six of them. Every one of them has said, ‘the summer fighting season, we won,” Sopko said. “If we won, what does defeat look like?”

House members probed Sopko for reasons why there have been changes in classifying previously public measures of progress in Afghanistan under President Donald Trump’s administration and the shift away from Taliban versus Afghan government controlled territories.

“I can’t give you an answer because there was never a real good explanation to us why district and population control was no longer relevant,” Sopko said.

He called the changes indicative of a larger problem, wherein every metric that Congress would find useful for evaluating successes or failures in Afghanistan is now “either classified or not being monitored anymore.”

https://www.militarytimes.com/news/your-military/2020/01/29/bean-counters-not-bullets-are-key-to-afghanistans-future/

‘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

Congress Learns Pentagon Wasted $1 Trillion, Promptly Gives It Bigger Budget

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Image: “Veterans for Peace” https://www.veteransforpeace.org/take-action/people-over-pentagon
Intelligencer

The Washington Postpublished “The Afghanistan Papers,” thousands of pages of war documents that our government did not want us to see, and which the paper only secured after a protracted legal battle.

Those documents include nearly 2,000 pages of notes from interviews with generals, diplomats, and other officials who played a central role in waging America’s longest war.

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“Here’s a fun little thought experiment: Imagine a “big government” bureaucracy embarked on a wildly ambitious project of social engineering — only to discover, almost immediately, that it had little hope of meeting its stated objectives. Reluctant to admit defeat, or jeopardize funding for its endeavors, this federal agency proceeded to deliberately mislead the public about how badly its project was going, and the likelihood of its ultimate success. Over an 18-year-period, these pointy-headed bureaucrats and their allied elected officials conspired to shovel roughly $1 trillion of taxpayer money into an initiative that exacerbated the very problems it purported to solve — and got 2,300 Americans killed in the process!

Now imagine that a major newspaper published a bombshell report meticulously documenting this bureaucracy’s conscious efforts to mislead the American people whom it claimed to serve, so as to ensure that it could carry on squandering our blood and treasure with impunity.

Would Congress reward that bureaucracy with a $22 billion budget increase hours later, with self-identified “small government” conservatives leading the call?

This week, we learned that the answer is “of course.”

Here is some of what the Post uncovered:

Several of those interviewed described explicit and sustained efforts by the U.S. government to deliberately mislead the public. They said it was common at military headquarters in Kabul — and at the White House — to distort statistics to make it appear the United States was winning the war when that was not the case.

Bob Crowley, an Army colonel who served as a senior counterinsurgency adviser to U.S. military commanders in 2013 and 2014, told government interviewers. “Surveys, for instance, were totally unreliable but reinforced thateverything we were doing was right and we became a self-licking ice cream cone.”

John Sopko, the head of the federal agency that conducted the interviews, acknowledged to The Post that the documents show “the American people have constantly been lied to.”

This campaign of deceit facilitated mindless misuses of public funds. The Defense Department was not directly responsible for all of this waste. And America’s civilian leadership bears primary responsibility for the war itself. But in routinely misrepresenting the state of the conflict, and lobbying for higher levels of funding for both military and aid operations in Afghanistan, the Pentagon is complicit in boondoggles like these:

During the peak of the fighting, from 2009 to 2012, U.S. lawmakers and military commanders believed the more they spent on schools, bridges, canals and other civil-works projects, the faster security would improve. Aid workers told government interviewers it was a colossal misjudgment, akin to pumping kerosene on a dying campfire just to keep the flame alive.

One unnamed executive with the U.S. Agency for International Development (USAID) guessed that 90 percent of what they spent was overkill: “We lost objectivity. We were given money, told to spend it and we did, without reason.”

… One unidentified contractor told government interviewers he was expected to dole out $3 million daily for projects in a single Afghan district roughly the size of a U.S. county. He once asked a visiting congressman whether the lawmaker could responsibly spend that kind of money back home: “He said hell no. ‘Well, sir, that’s what you just obligated us to spend and I’m doing it for communities that live in mud huts with no windows.’ ”

But no detail from our misadventure in Afghanistan may do more to validate the conservative critique of “big government” excess than this one: Before the U.S. invasion, the Taliban had almost completely eradicated the opium trade in Afghanistan. After 18 years of war — and $9 billion in U.S. funding for anti-opium programs in the country — the Taliban remains in power, only now, it presides over a country that supplies 80 percent of the world’s illicit opium.

The Washington Post and New York Times aired all this dirty laundry on Monday morning. Hours later, Congress’s Armed Services Committee released a bipartisan draft of the 2020 National Defense Authorization Act (NDAA) that would give the Pentagon an additional $22 billion to play with next year, bringing its annual budget to $738 billion. Before Donald Trump took office, the U.S. was already spending more on our military than China, Russia, Saudi Arabia, India, France, the United Kingdom, and Japan spend on theirs, combined. The Defense Department’s budget is now $130 billion larger than it was the day Trump was sworn in. Meanwhile, nearly 2 million Americans are still living in places that do not have running water.

Shortly after the Trump administration released its first budget in 2017, OMB director Mick Mulvaney defended the White House’s proposed cuts to Meals on Wheels by saying, “I think it’s fairly compassionate to … say, ‘Look, we’re not gonna ask you for your hard-earned money, anymore, single mother of two in Detroit … unless we can guarantee to you that that money is actually being used in a proper function.’” In a subsequent statement, the administration said that it had an obligation to cut spending on programs and agencies that had “failed to meet their objectives.”

https://www.msn.com/en-us/news/opinion/congress-learns-pentagon-wasted-1-trillion-promptly-gives-it-bigger-budget/ar-AAK3w7Q?ocid=msn360

Government Contract “Bad Actor” Awarded $400 Million Border Wall Contract

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UPDATE: The Number 2 – Historical “Bad Actor” in terms of government contract fines and violations cited in this “Project on Government Oversight” article earlier this year has now been awarded a $400 Million Contract for border wall construction.

Time for the competition protests; but none of them have a clean slate either.

Image: Matassii.com

“THE PROJECT ON GOVERNMENT OVERSIGHT (POGO)”

“The past conduct of three contractors—Caddell Construction, W.G. Yates & Sons, and Fisher Sand & Gravel—should concern contracting officers and prompt stronger oversight in future contracts to ensure that these companies play by the rules.”

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“Caddell Construction and W.G. Yates & Sons

“While Customs and Border Protection (Border Patrol) invited four companies to design one border wall prototype, Caddell Construction and W.G. Yates each designed two—one made of concrete and the second of other materials—giving them half of the prototypes that Border Patrol assessed. Both Caddell and Yates are currently the subjects of an unreported years-long whistleblower lawsuit alleging that they, through a joint venture, fraudulently misrepresented their use of small business subcontracts for a 2009 Camp Lejeune project. The government partially intervened in the case, securing a guilty plea from the owner of the subcontractor involved—Pompano Masonry. She pleaded guilty in 2015 to lying to investigators and received a 30-month prison sentence.

The lawsuit, filed by former Pompano Masonry employee Rickey Howard, alleges that Caddell and Yates, while engaged in a $190 million construction project for the Navy at Camp Lejeune, encouraged Pompano to create a sham small business that they would then use to route Pompano’s payments through. Doing so would allow Caddell and Yates to count the work done by Pompano (a large business) as if it were being done by a small business, helping them fulfill their small business subcontracting plan. For this service, the lawsuit claims, they offered and paid Pompano an additional 2 percent of the subcontract’s almost $15 million value—over $250,000.

Aside from the creation of a fake small business that existed only on paper, Caddell and Yates appear to have regularly used “pass-through” small businesses on that project. The lawsuit alleges a dozen different instances where Caddell and Yates chose large, trusted contractors to perform the work, and then paid small businesses one to two percent of the subcontract value to act as middlemen so Caddell and Yates could meet their small business subcontracting goal of 77 percent. This resulted in some rather unusual arrangements, such as Caddell and Yates routing a $1.4 million subcontract for food service equipment through a small landscaping company called Power Mulch—for a 1 percent fee.

Don’t write Howard off as just a disgruntled employee. After leaving his job at Pompano Masonry and filing the lawsuit, Howard went to work at Harper Construction. Within a few short months, he discovered that Harper was using sham small businesses as well. A much shorter lawsuit ensued, and in June 2016, Harper Construction paid the government $5.4 million to settle those allegations. “This type of fraud siphons taxpayer dollars and takes away opportunities for legitimate small businesses for which this money was set aside,” said then-U.S. Attorney Laura Duffy in a press release.

A spokesperson for Yates responded to our questions about the case with the following statement:

“Yates Construction believes that the plaintiff’s qui tam case against it is baseless. Plaintiff’s allegations are just that—allegations—untested and prove nothing. The government declined to join the case after conducting its own inquiry into this matter. Moreover, the Navy gave Caddell-Yates an outstanding rating for the construction project at issue. Yates Construction is vigorously defending the case, and is seeking summary judgement. Yates Construction fully expects to prevail in the matter.”

On a different contract in 2011, Caddell was caught abusing two different small business programs to defraud the government. Ironically for a border wall contractor, the fraud was discovered during a joint General Services Administration and Department of Laborinvestigation of a Caddell subcontractor that was hiring immigrants who were working in the country illegally. Caddell ended up paying $2 million in criminal penalties and $1.15 million in civil penalties.

As the investigation progressed, investigators found that Caddell was billing the government for time spent “mentoring” a Native American small business it subcontracted with, when in reality there was no mentoring going on. In fact, this small business, Mountain Chief Management Services, wasn’t even doing any work. Caddell was using the small business as a pass-through entity to claim incentive payments and boost their small business contracting goal statistics.

The investigation found that this wasn’t the only project in which Caddell had been found to have defrauded the government. According to a report obtained by POGO, Caddell claimed over $1.2 million from the two programs by “citing Mountain Chief as a subcontractor on various U.S. Army Corps of Engineers projects from 2003-2005.”

In 2014, after the investigation was complete and the settlement agreed to, the U.S. Army Corps of Engineers still sent the Army’s Procurement Fraud Division a recommendation to debar Caddell, according to documents obtained by POGO through FOIA. The referral asserts that “it is in the Government’s interest to debar Caddell Construction Co. … based upon the submission of numerous false statements and/or false claims to obtain payment.” Debarment—which prevents a company from extending, renewing, or bidding on government contracts—usually lasts at least three years. It would have been a major problem for Caddell, which has received over $5 billion from the federal government in the last decade. In the end, Caddell escaped debarment, receiving only a warning.

The Caddell employee deemed most responsible for the fraud, Mark Hill, pleaded guilty to lying to investigators and was debarred in 2015. His debarment will end July 1, 2018, but debarring individuals only prevents them (or a company they run) from bidding on and receiving a federal contract or grant. It does not prevent them from working on federal contracts as an employee. Despite the wrongdoing, a company news article appears to indicate that Hill remains employed with Caddell as the Director of Operations for Caddell Power, a subsidiary of Caddell Construction.

Caddell has had a previous run-in with the debarment process. In 1999, the U.S. Air Force officially proposed to debar Caddell, making them immediately ineligible for any government contracts and giving them a chance to argue against it before it became final. The details of the proposed debarment are unclear, but in the end Caddell was ineligible for just eight days.

Caddell told POGO that it does not comment on its government contracting work. Caddell also did not respond to POGO’s request to verify Mark Hill’s continued employment. However, the 2017 article showing a picture of Mark Hill accepting an award on behalf of Caddell was removed the day after the request for comment was sent.

Fisher Sand & Gravel

Fisher Sand & Gravel has a rap sheet that is too long to list here, racking up around two thousand violation notices from city, county, state, and federal regulatory bodies, many relating to the company’s disregard for air pollution standards. Completely aside from the then-owner of the company being sent to prison for tax fraud in 2009, the city of Phoenix reportedly filed 467 criminal charges against the company in 2010, stemming primarily from violations at one facility’s asphalt plant. The company ended up shutting down the offending plant a month later and paying the city at least $243,000 in fines. Early the next year it settled a lawsuit with Maricopa County for $1 million, stating that it was “relieved to finalize this settlement and to move forward with a clean slate.”

Three months later, in April 2011, the company paid $312,000 to settle a civil case brought by the State of Arizona for air and water quality violations that spanned six counties. That settlement covered issues such as illegally dumping waste into a river, operating for up to 16 hours a day instead of the permitted 3.3 hours, and having exhaust stacks that were half as high as they were required to be. Instead of requiring Fisher Sand & Gravel to pay the full amount to the state, the settlement allowed them to put two-thirds of the fine towards an Environmental Management System that would prevent future problems. In 2013, however, the state found more violations and the company was forced to pay $500,000.

Also in 2013, the Environmental Protection Agency (EPA) fined Fisher Sand & Gravel $150,000 for “failing to comply with dust mitigation regulations” at three sand and gravel producing facilities in 2010. “Some nights there was so much [dust] in the air, it looked like fog outside,” a nearby homeowner told azfamily.com. “If you took a deep breath, it would make you cough.” That fine also included a requirement to install water spray bars in and around the machinery at one Phoenix area plant to help control the dust. While the dust problems at that location appear to have been addressed, the county air-quality department issued a $2,160 citation related to dust control as recently as January 2017 over a different Phoenix facility.

Other federal bodies have fined Fisher Sand & Gravel for additional issues. The Equal Employment Opportunity Commission fined them $150,000 in 2011 for discrimination and retaliation, the EPA fined them again in 2016 for $18,654, and there are several fines from the Mine Safety and Health Administration ranging from $5,000 to $10,000 between 2008 and 2016. Azcentral.com also reports that the company has faced environmental complaints and violations in other states including Michigan and Montana.

“Fisher Sand & Gravel Fisher is a good environmental steward and we take environmental responsibility very seriously,” the company wrote in a 2018 statement to Fox News. “We complied with all orders and everything has been resolved.” Given the company’s history of recurring violations and the recent county-level citations, however, it would be wise to take these words with a grain of salt.

Fisher did not respond to POGO’s request for comment.

Contractor Misconduct Rarely Leads the Government to Meaningfully Debar Companies

Unfortunately, contractor misconduct is not rare, and the government does little to punish frequent abusers—especially when they are large companies. POGO’s Federal Contractor Misconduct Database is full of contractors that have together paid out over $100 billion for various kinds of misconduct but continue to receive hundreds of billions each year in taxpayer funds. If the government ends up awarding one of these three contractors a future contract, it would be wise to build in additional safeguards and oversight.

What future contracts they might be involved in remains unclear. The Trump Administration appears dedicated to fulfilling the campaign promise of a “big beautiful wall,” but both Congress and Mexico have so far declined to pay for it. While the recently passed appropriations bill includes $1.6 billion in funding for border security, the vast majority of that funding is specifically dedicated to additional fencing, personnel, and border security technology. None of the fencing funds can be spent on new designs (aka “the wall”), and only $38 million is allocated towards border wall “planning and design” (Section 230, starting at p. 673). That is far below the $18 billion that Border Patrol requested from Congress in January for the first phase of the wall. President Trump, however, remains committed to the project and has requested that the states deploy the National Guard to bolster security—despite the fact that the Guard is prohibited from performing civil law enforcement duties. “The Guard will provide air support, reconnaissance support, operational support, construction of border infrastructure, and logistical support,” according to an Arizona National Guard statement. Exactly how involved they will be in “border infrastructure” is unclear, although California Governor Jerry Brown made clear that “this will not be a mission to build a new wall.” Adding to the uncertainty, California yesterday rejected the Trump Administration’s proposed duties for the troops because they were too closely related to immigration enforcement.

There has been speculation that President Trump might attempt to divert military funds to build the wall, but that would be a complicated process requiring Congressional approval. It is far more likely that the Administration will simply wait and request more funding for the wall in the next appropriations bill, which is due this October.

Despite President Trump’s early statements that he will personally select the winning border wall design, the Department of Homeland Security (DHS) “does not anticipate that a single prototype design will be selected,” according to an email from Southwest Border Branch Chief Carlos Diaz. “Rather, the eight different prototypes are each anticipated to inform future border wall design standards in some capacity.” As far as the DHS is concerned, the “contract for [prototype] construction has been completed” and agency leadership is evaluating potential next steps.

When asked about the potential for military funding for the wall, White House Press Secretary Sarah Huckabee Sanders declined to provide details, instead stating that “the continuation of building the wall is ongoing, and we’re going to continue moving forward in that process.”

https://www.pogo.org/analysis/2018/04/bad-actors-among-border-wall-contractors/

Millions In Federal Small Biz Cash For Banned Entities

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(Illustration: CJ Ostrosky / POGO)

THE PROJECT ON GOVERNMENT OVERSIGHT (POGO)”

“The inspector general found that federal agencies awarded more than $80 million in contracts to entities found to have engaged in conduct indicating a lack of responsibility, including fraudulently obtaining contracts though the use of pass-throughs, and submitting false certifications of business size, while an entity excluded because of a Clean Water Act violation received a loan valued at $2.9 million.

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Suspension and debarment are remedies that are meant to protect the federal agencies and taxpayers from individuals and companies who lack the integrity and business ethics required for receiving government contracts, grants, and loans. The Project On Government Oversight (POGO) has long pushed for strengthening and improving these remedies as a means of safeguarding taxpayer money and ensuring the success of federal programs and missions.

If the Small Business Administration does not improve its suspension and debarment process, how much money will be lost to fraud, waste, or abuse is anyone’s guess.

Those who are suspended, debarred, or proposed for debarment are supposed to be banned—or “excluded”—from doing business with the government. These individuals or companies are supposed to be excluded for a set period of time: while they are under investigation or are involved in a pending legal proceeding (suspension), or after the investigation or proceeding results in a finding that they did something that shows they can’t be trusted with federal funds (debarment). But, as we have known for many years, excluded individuals and companies sometimes slip through the cracks and improperly receive federal funds.

This was most recently highlighted in an audit report released last month by the Small Business Administration’s inspector general. According to the report, suspended and debarred entities were awarded millions of dollars in federal contracts and loans between 2012 and 2018 because of deficiencies in the agency’s oversight.

The inspector general found that federal agencies awarded more than $80 million in contracts to entities found to have engaged in conduct indicating a lack of responsibility, including fraudulently obtaining contracts though the use of pass-throughs, and submitting false certifications of business size, while an entity excluded because of a Clean Water Act violation received a loan valued at $2.9 million.

The inspector general found two key problem areas. First, officials are not always checking the list of excluded recipients—maintained in the System for Award Management database—prior to making awards, nor are they consistently documenting that they have checked the database. Out of 14 loans, the watchdog found that files for 11, worth a total of $3.8 million, lacked documentation confirming that officials had checked the database prior to approving the loan.

Second, the Small Business Administration is taking too long to process suspension and debarment referrals. Referrals are commonly made in connection with a legal proceeding, such as a criminal or civil judgment. The watchdog found 15 referrals that had been awaiting review for an average of 620 days—almost two years. Furthermore, the Small Business Administration often fails to document the reasons for declining suspension and debarment referrals; or, when an exclusion is imposed, the agency fails to promptly update the award management database so that all other federal agencies will know not to do business with these individuals and companies.

The inspector general made several recommendations to improve the oversight and management of the agency’s suspension and debarment program. Failing to adopt the recommended corrective actions could be a costly mistake. The watchdog warned that inadequately documented referral decisions could expose the government to adverse legal action by those claiming they were unfairly suspended or debarred.

Increasing workers

Explore the Federal Contractor Misconduct Database

The federal government routinely awards contracts to companies with histories of misconduct, including contract fraud and other violations. POGO maintains this database to improve contracting decisions and increase public knowledge of how the government spends billions of taxpayer dollars each year.Explore the Database

But much more is at stake—potentially billions more. According to the report, in just one year federal agencies awarded over $105 billion in small businesses contracts, while the Small Business Administration managed a loan portfolio worth $132 billion. If the agency does not improve its suspension and debarment process, how much of that money will end up in the hands of risky individuals and companies and lost to fraud, waste, or abuse is anyone’s guess.

That’s why POGO has kept on top of this issue for so many years. Whether through working with policymakers to improve the suspension and debarment system, maintaining a Federal Contractor Misconduct Database tracking the integrity and ethics of the government’s largest contractors, or pressing the government to create its own data resources to better track fund recipients, this area is a worthwhile focus for achieving a more effective, ethical, and accountable government.”

https://www.pogo.org/analysis/2019/10/millions-in-federal-small-biz-cash-for-banned-entities/

Defense Contractors Return $200 Million in Self-Reported Waste to U.S. Government

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Image: “EC&M Magazine”

BLOOMBERG LP.COM”

“Defense contractors have returned more than $200 million to the U.S. in the decade since it became mandatory to self-report potential fraud, waste or abuse, according to a new tally by the department’s inspector general.”

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“Until late 2008 the Defense Department had a voluntary program for contractors to disclose potential violations. Then lawmakers made timely disclosure mandatory at the risk of potential suspension or disbarment when there’s credible evidence of a criminal violation.

“The disclosures we receive involving recoveries” may be for “labor mischarging or timecard fraud,” such as when employees put in for time they didn’t work or for work they didn’t complete, Patrick Gookin, director of the inspector general’s hotline, said in an email. “We also receive disclosures involving overpayments, or false claims that can lead to additional recoveries than initially reported.” Gookin’s team assembled the tally.

In an example of the self-reporting requirement under the Contractor Disclosure Program, Sierra Nevada Corp.disclosed in December 2012 possible Pentagon overpayments for development costs on some contracts after a preliminary inquiry, according to a summary by the inspector general. The company later supplemented its disclosure, identifying $6 million in potential overpayments.

The inspector general’s criminal investigative arm, as well as the Navy’s, subsequently conducted probes, and the Defense Contract Audit Agency reviewed the paperwork.

‘Inflated Overhead’

The Sparks, Nevada-based company reached a $14.7 million settlement with the Justice Department in February 2017 to resolve allegations that it violated the federal False Claims Act “when it knowingly misclassified certain costs, resulting in inflated overhead rates paid,” according to the department.

Sierra Nevada said in a post-settlement statement that after the disclosure it “implemented rigorous and comprehensive accounting processes, and added additional training and tools designed to ensure adherence to the highest standards of compliance with regulations.”

In addition to the $200 million in self-reported possible overpayments, the inspector general’s latest semi-annual report cited $4 million in potential recoveries for reasons such as non-confirming or counterfeit parts, false certifications and theft of government property.”

https://www.bloomberg.com/news/articles/2019-08-15/defense-contractors-return-200-million-in-self-reporting-waste

Multi-Million Dollar Scam of VA Spina Bifida Program

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Image: “Daily Beast/Getty

MILITARY.COM

A phony home care businessman has pleaded guilty to paying more than $1 million in bribes to a Veterans Affairs employee, who allegedly set up an elaborate scheme to defraud the VA’s benefits program for children diagnosed with spina bifida of nearly $20 million, according to the U.S. Attorney’s office in Denver.

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“In his guilty plea, Roland Brown, 58, of Clearwater, Florida, admitted to being long-time friends with the employee and to working with him to set up a bogus home care company called Legacy Home Health, whose purpose was to submit false claims to the Department of Veterans Affairs.

The employee was not named in a news release, but Joseph Prince, who oversaw the spina bifida program from the Denver VA’s Office of Community Care, was fired last fall and later indicted in the alleged ripoff.

Brown admitted to paying $1,007,205 to Prince, and in return, Legacy Home Health received more than $3,039,000 in false claims, the U.S. Attorney’s office said.

The U.S. Attorney’s office said that Prince and Brown targeted the VA’s Spina Bifida Health Care Benefits Program, which pays for home care providers.

Prince allegedly told family members and friends of children living with spina bifida that they could be paid for home care services if they signed up with Brown’s company, even though they were not authorized to provide the care.

Legacy Home Health then submitted claims to the VA for $88 an hour for the home care, although the friends and family members were actually being paid $16 an hour, the U.S. Attorney’s office said. A tentative sentencing date was set for Brown in December.

The scheme with Legacy was only one of several scams on the VA allegedly pulled off by Prince, according to the federal indictment and affidavits field last year.

He allegedly set up seven companies, including one run by his wife, to submit bogus claims to the spina bifida program.

According to his indictment, companies set up by Prince took in $18.9 million of the $25.2 million that the VA paid for home health services between June 2017 and June 2018.

In addition to the U.S. Attorney’s office, the FBI, the IRS and the VA’s Office of Inspector General joined in the investigation leading to the indictment.”

https://www.military.com/daily-news/2019/08/11/another-pleads-guilty-multi-million-dollar-scam-va-spina-bifida-program.html

Inspector General Community Launches New Online Reporting Tool For Whistle Blowers

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FEDERAL NEWS NETWORK

“The new page, which CIGIE launched on National Whistle blower Appreciation Day, includes resources for whistle blowers about their rights, as well as a detailed walk-through of the process for reporting waste, fraud and abuse at individual agencies.

It also directs whistle blowers to the appropriate inspector general hotline — or the Office of Special Counsel’s disclosure unit and Government Accountability Office’s FraudNet portal.

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“Federal whistle blowers have a little more guidance and direction now from the inspector general community to report the waste, fraud and abuse they see at their agencies.

The Council of Inspectors General on Integrity and Efficiency (CIGIE) this week launched a new feature on Oversight.gov, the publicly searchable website of all reports and updates from agency inspectors general.

“What we tried to do over the past year or so was think about how we could deliver more information to insiders, to whistleblowers, to come forward [and] report to the IG community on waste, fraud, abuse and misconduct, so that we can help make government more effective and efficient and root out wrongdoing,” Michael Horowitz, Justice Department inspector general and CIGIE chairman, told a group of whistleblowers Tuesday at an annual celebratory lunch on Capitol Hill.

The idea is to get the word out to the federal workforce, Horowitz said, to inform whistleblowers about their rights and encourage them to come forward.

Securing the funding to develop the new whistleblower landing page was a challenge, Horowitz said. Sen. James Lankford, former chairman of the Appropriations Subcommittee on Financial Services and General Government, championed the funding for this project in the fiscal 2019 spending omnibus, Horowitz said.

“The inspectors general and the whistleblowers and the folks who are actually engaged in this ongoing work… are the ones making the difference,” Lankford said. “We’re just trying to facilitate that communication and to make sure that everyone both knows that this is not legal behavior or sees it and has the opportunity to say, ‘where would I go to be able to report this?’”

The current site is a “beta” test, CIGIE hopes to the build out the site further with additional resources, Horowitz said. The next steps, however, are dependent on whether the council can secure new appropriations from Congress.

“We’re looking for you to tell us what else we can do to build that site out,” he said.”

Pentagon Contractor’s 9,380% Profit On A Half-Inch Pin – Tip Of Fraud Iceberg

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The review found potential excess profits for 98 of 100 parts sampled and concluded the Pentagon may end up paying TransDigm $91 million more in coming years for parts valued at $28 million.

With excess profit per part of 95% to the 9,380%, the Defense Department’s inspector general said in an audit labeled “For Official Use Only” and obtained by Bloomberg News.

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“The Pentagon is weighing legislation that would give contracting officers the power to demand back-up data on spare parts costs after its inspector general said TransDigm Group Inc. could be paid about 9,400% in excess profit for a half-inch metal pin.The Defense Logistics Agency could end up paying TransDigm $4,361 for the “drive pin” in a July contract that should cost $46, according to a Pentagon review endorsed by the inspector general.

As the Pentagon weighs whether to recommend legislation to require more disclosure by contractors, the House Committee on Oversight and Reform will review the audit and TransDigm’s pricing policies in a hearing on Wednesday.

The inspector general’s report “exposes how a company entrusted with supporting our military men and women took advantage of American taxpayers by overcharging the government more than $16 million” in parts sales sold between 2015 and 2017, Oversight Chairman Elijah Cummings said in a statement. The hearing will “investigate whether these pricing issues are more widespread, and demand answers,” he said.

From 2013 through 2015, according to the audit, the contractor increased the price of a valve that opens and closes to change the pressure of fuel moving through an engine to $9,801 from $543. In those years, TransDigm also charged $1,443 each for a “non-vehicular clutch disk” that cost $32 to make.

Planes, Copters

The Pentagon’s inspector general first raised pricing concerns over TransDigm in a 2006 report, followed by the one this year that was released in redacted form in February.

TransDigm manufactures spare parts for airplanes and helicopters including the AH-64 Apache, C-17 Globemaster III, F-16 Fighting Falcon and the CH-47 Chinook. From April 2012 through January 2017, DOD issued 4,942 contracts valued at $471 million to TransDigm.

Liza Sabol, a spokeswoman for the Cleveland-based company, said in an email “that we are not providing comments on specific questions related to the IG report.”

“TransDigm has been and remains committed to conducting business within the framework of applicable laws and regulations,” she said. “The IG report does not make any assertion of wrongdoing on TransDigm’s part with respect to its pricing.”

The underlying debate is over laws and acquisition regulations that hamstring Pentagon contracting officers from demanding back-up data on parts contracts. Legislation from the Federal Acquisition Streamlining Act of 1994 to recent defense policy bills sought to encourage commercial contractors to conduct business with the military by freeing them from providing information that could be competitively sensitive and onerous to collect, according to the inspector general’s report.

The provisions discourage contracting officers from asking for the data when “determining whether a price is fair and reasonable,” it said. The inspector general “previously identified contracting officers’ limited success in negotiating fair and reasonable prices for sole-source parts dating as far back as 1998,” a spokeswoman said in a statement Tuesday.

In a sample of contracts awarded from 2015 through 2017, TransDigm “refused to provide uncertified cost and pricing data to contracting officers when requested” for 15 of 16 contracts, the audit found. “Contracting officers had limited options once TransDigm refused.” TransDigm earned $2.6 million in excess profits on the parts, the inspector general said.

Legislation Recommended

The watchdog office recommended legislation “to compel companies to provide cost data when required.” The Pentagon responded by issuing a memo in mid-March to jump-start a moribund system requiring contracting officers to report and share the names of recalcitrant companies.

“We are considering potential options for legislation proposals and weighing the ‘pro’s and cons’ of how that could impact the entire industrial base, including our desire to reach more non-traditional defense contractors,” Lieutenant Colonel Michael Andrews, a Pentagon acquisition spokesman, said in an email.

TransDigm shares have climbed more than 36% this year. It drew 34% of its 2017 sales from defense, up from 24% in 2006. In its 2017 annual report, TransDigm estimated 80% of its sales revenue that year came from products for which it’s the sole supplier.

Patrick Mackin, a spokesman for the Pentagon’s Defense Logistics Agency, said the agency is managing the July 2018 contract that was questioned by the review in a way that “limits ordering” due to “the potential overpricing and scrutiny” of TransDigm.

He said the agency can’t “unilaterally change pricing outside of the contractual repricing periods” but will assess the contract at its first chance in 2021. The agency is “currently seeking alternatives to support these items where such alternatives may exist.”

Among the parts of concern in the current contract, according to the review:

  • TransDigm charged $803 for a retainer bearing that should have cost $32.
  • A part described as a “ring” for which TransDigm charged $4,835 apiece should cost $71.

  • *TransDigm charged $67 for a lug used in the auxiliary power unit of an F-15 jet that should have cost $3.

  • *TransDigm charged $8,819 apiece for a valve assembly check oil pump that should cost $369.

The inspector general’s report also outlines the history of a three-inch TransDigm coupling with a “quick disconnect” that illustrates the problem that Pentagon contracting officers confront.

While TransDigm estimated the coupling cost $287 to make, the contractor’s pricing has “contained excess profits” since the Defense Logistics Agency first purchased the part in 2007 for $1,239 apiece, the unredacted report said. The price increased to $7,325 by 2017.”

http://fortune.com/2019/05/14/transdigm-pentagon-costs/