Tag Archives: waste fraud and abuse

Pentagon Needs Better System to Track Fraudulent Spending

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“DEFENSE ONE”

“Recently, DOJ wrapped up a criminal investigation of Northrop Grumman Systems Corporation and its employees’ alleged bilking of the Pentagon for millions of dollars in dubious compensation claims.

The allegations levied by DOJ against NGSC, which the company recently acknowledged and paid for, are dumbfounding. “

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“The incoming Congress should tie defense budgets to accounting improvements.

While the public is generally familiar with weapons manufacturers delivering fighter jets and other costly products behind schedule and over budget, similar overruns have now crept into service contracting as well. Fortunately, the Justice Department is starting to strike back against rampant misuse of taxpayer funds, seeking criminal indictments and civil penalties against some of the worst abusers of the system. Now Congress must do its part.

In a late October letter, DOJ identified instances of [Northrop Grumman] company workers billing for hours “spent doing leisure activities, such as golfing, skiing, visiting amusement parks, partying at local clubs…or hours spent at the hotel enjoying the five-star amenities.” In a statement, NGSC officials blamed former employees and said the company itself had reported the fraud to the federal government in 2013. NGSC’s agreement to forfeit $27.5 million to the government is a start, but more work needs to be done to restore the public’s confidence in Pentagon spending. By making a broader, more consistent effort to track fraud in real time, the federal government can ensure that taxpayers don’t have to pay the price for such brazen misdeeds.

It would also make sense to cast a more critical eye on contractors with cozy relationships with the federal government who received longer-term or sole-source contracts. Given that the Pentagon has spent $131 billion on contracting for services in 2017, the prospect for repeat business is a lucrative one. NGSC, a leading IT and weapons systems provider for the federal government, has a sufficient profile with the federal government to be picky about which contracts it bids for, regularly holding out and taking the sole-source route. But signs abound that NGSC’s parent company is becoming overconfident, such as its refusal to pay for an $800-million cost overrun on the James Webb telescope, even after the CEO admitted and an independent review board found that Northrop Grumman was at least partially to blame for increased taxpayer costs.

In many instances, the Pentagon and its agencies are failing to adequately oversee its contractors. For example, leaked Inspector General reports show instances where the Army contracting officers “did not review invoices prior to approving payments for labor charges” for Northrop and its subcontractor DynCorp, leading to thousands of fake labor hours logged and hundreds of millions of dollars in overcharges. Even when companies are forced to pay for these misdeeds, an “unofficial reserve fund”controlled by the office of the Defense Secretary that escapes Congressional scrutiny ensures that offending companies will continue to get lucrative contracts.

Unfortunately, sometimes when Congress does get its say, the influence is not always for the benefit of taxpayers. In the defense budget recently passed for fiscal year 2019, for instance, lawmakers snuck in nearly 700 earmarks-in-all-but-nametotaling nearly $20 billion, according to a Taxpayers Protection Alliance count. Offending members of Congress are more focused on showering funds on in-district defense contractors than on providing oversight or accountability for the taxpayers they serve.

But it doesn’t have to be this way. Instead of helping contractors with latter-day earmarks, the incoming Congress could hold Pentagon leaders’ feet to the fire to make sure that their spending-tracking systems are up to date and devoid of the large holes that have enabled the excesses of the past. Tying defense budgets to accounting changes that ensure transparency and accountability could go a long way to preventing companies like NGSC from bilking taxpayers.”

https://www.defenseone.com/ideas/2018/12/pentagon-needs-better-system-track-fraudulent-spending/153592/

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Oversight Of U.S. Military’s Food Suppliers Called Into Question After Fraud Indictment

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Image: “The Bureau of Investigative Journalism”

“THE WASHINGTON POST”

Executives from a company responsible for providing food and water for deployed U.S. troops in Afghanistan have been charged with defrauding the government and creating a fake construction site to overstate progress on an $8 billion contract, the Justice Department said in a recently filed indictment. “

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“The allegations came four years after the company’s predecessor pleaded guilty to criminal charges that it inflated prices for basic items that it sold to the U.S. military. Both cases emphasize how the U.S. military has struggled to curb abuses of U.S. defense spending in America’s longest-running foreign war as the U.S. military presence in Afghanistan enters its 17th year, analysts said.

On Nov. 27, the Justice Department charged Abdul Huda Farouki, Mazen Farouki and Salah Maarouf — three Virginia residents who worked with a Dubai-based company called Anham Fzco — with defrauding the U.S. military under an estimated $8 billion military supply contract.

The Justice Department also accused them of laundering money, violating U.S. sanctions while shipping products through Iran, and photographing a fake construction scene to mislead contracting. The individuals pleaded not guilty.

The lawsuit revived long-standing concerns over Anham’s stewardship of taxpayer dollars. It also raised questions about the government’s oversight of the subsistence prime vendor, which has a contract known as an SPV-A. . The contract is seen as important to the U.S. military’s presence in Afghanistan because it ensures deployed U.S. troops have access to food, water and basic provisions. Servicing it is immensely challenging, however, because the contractor is required to build and maintain a distribution network in the middle of a war zone.

Before Anham took over that work, a privately held Swiss company called Supreme Foodservice Gmbh, pleaded guilty to similar charges in 2014 and paid $288.36 million in criminal fines following a congressional inquiry.

Scott Amey, general counsel with the nonprofit Project on Government Oversight, described the Pentagon’s oversight of the food and water supply contract as a game of “catch me if you can,” in which the government is losing.

“Uncle Sam spends over $500 billion annually on contracts, so contractor responsibility and oversight of contracts are essential to prevent waste, fraud, abuse and corruption. Unfortunately, oversight often takes a back seat,” Amey said of the indictment. “The allegations of fraud against Anham are even more disturbing because other food service contractors in Afghanistan have pleaded guilty to similar charges in the past.”

Patrick Mackin, Defense Logistics Agency’s deputy director of public affairs, declined to comment on the allegations against Anham, but said the agency “employs a team of experienced acquisition specialists that have consistently administered this contract.” He described a detailed process through which the Defense Logistics Agency evaluates vendors in cooperation with other Defense Department Agencies. The agency is in the process of re-competing the contract, he said.

The indictment against Anham describes an elaborate scheme to mislead U.S. contracting officers as the company competed for lucrative government work.

When the company fell behind on a project to build a complex of warehouses near Bagram Airfield in Afghanistan, the DOJ alleged, the company submitted fabricated completion dates and “misleading photos” that made the project look further along than it actually was.

Anham employees were directed to “transport construction equipment, prefabricated sheds, generators, empty shipping containers and a construction crane to the site of the proposed Bagram warehouse complex to create the false appearance of a construction site,” the DOJ indictment states.

Abdul Huda Farouki and other Anham employees “knew that on or about December 1, 2011, little construction work had taken place on the Bagram warehouse complex — specifically, that ‘holes [were] dug and concret[e] [was] poured for the base of the supporting columns’ for the first warehouse, even though there was ‘no visible structure’ for the first warehouse and that ‘no work whatsoever’ had been done on the second warehouse,” DOJ alleged.

Anham denied the Justice Department’s allegations in a statementposted on its website, saying it had made “good faith efforts to meet aggressive construction timelines in one of the most difficult environments in the world,” adding that “at no point the company had caused any loss to the government.” The 442-word statement did not address the allegations that the company had constructed and photographed a fake construction scene.

“We are extremely disappointed that the Justice Department took this action, which is based on a mistaken reading of both the facts and the law, and which is contradicted in critical respects by positions the department itself has taken in past proceedings where it defended Anham against some of the same allegations it is now making,” the company wrote.

The company also claimed the investigation, which was handled jointly by the Department of Homeland Security and the Special Inspector General for Afghanistan Reconstruction, was orchestrated by a competitor. It did not name the competitor.

The indictment follows a government audit report, which accused the firm of overbilling the government on a separate contract, and a Wall Street Journal investigation that found the company had shipped supplies through Iran.

The indictment cites an email in which an Anham executive allegedly told an employee for a subcontractor, “Can you please take me off the email? . . . I am neither interested nor concerned with shipments going through Iran.” Then, according to the indictment, the subcontractor employee replied “how many times do we need to request to remove the mentioning of a specific country in all emails. STOP that mentioning please IMMEDIATELY.”

Anham admitted to shipping products through Iran, saying it reported that to the Justice Department in 2013 and has been cooperating with investigators.

“To be clear, Anham did not do business with any sanctioned individual or sell any prohibited materials to Iran,” Anham’s statement reads. The company also claimed that “U.S. law actually permits non-U. S. companies like Anham to make such shipments.” (The Justice Department said in its indictment that the contract solicitation required any bidder to abide by all U.S. laws, including sanctions prohibiting business involving Iran.)

Anham holds U.S. troop supply contracts for Afghanistan, Iraq, Kuwait, Syria and Jordan. In 2015, the agency awarded the troop supply contract for Kuwait, Iraq, Syria and Jordan to a different company. Anham protested the move, however, and was offered to $261 million bridge contract to preserve Anham’s business with the Defense Logistics Agency until September 2019.

Defense spending watchdogs have raised questions about Anham’s work for years. A 2011 report from the Defense Department’s Special Inspector General for Iraq Reconstruction faulted two government agencies for “poor government oversight” of Anham’s work on a different set of warehouses in Iraq, faulting the government for failing to scrutinize Anham’s relationship with its subcontractors.

The review noted that Anham chief executive Abdul Huda Farouki held substantial ownership stakes in multiple companies that were subcontracted to work with Anham. Specifically, the review noted that Abdul Huda Farouki, through a holding company owned by his family, owned 25 percent of Anham. The chief executive also had 100 percent ownership of three of its subcontractors, including the Unitrans shipping company that is now accused of shipping products through Iran.

The report chided the government’s oversight of the contracts, saying that 15 different contracting officers had been assigned to oversee one of Anham’s contracts over a 2½ year period. The report flagged almost 40 percent of the payments it reviewed as “questionable.”

In a 2011 news release, Anham called the inspector general’s conclusions “false” and “without legal or factual justification.” The company also challenged the inspector general’s conclusion that government oversight had been insufficient.

“Anham has always operated with complete transparency and compliance and is continually audited by the Defense Contract Audit Agency,” the company wrote in its statement.

The inspector general’s review found a company called Pioneer Iraqi General Trading Company, which was 90 percent owned by Abdul Huda Farouki’s family organization, had, in some cases, been given work, despite bidding more than 10 times higher than a competitor’s prices.

Among the review’s findings: $900 for a water level electrical control switch that a competitor offered to supply for $7.05; $80 for a PVC pipe elbow that a competitor offered to supply for $1.41; thousands of dollars for circuit breakers that a competitor offered to supply for less than $300 each; $650 for a flood light that a competitor offered to supply for $35.25; and $350 for steel rebar that a competitor offered to supply for $16.92.

“The lack of transparency regarding the relationship between Anham and its subcontractors calls into question whether Anham used due diligence to ensure that the U.S. government received a fair price for the goods and services it purchased,” the inspector general noted in its report.

The report further criticized the Defense Contract Management Agency for failing to ask Anham executives about the company’s relationships with subcontractors.

“Exploring these relationships is important because it may raise important questions about whether there is truly an arms-length business relationship between the prime contractor and its subcontractors,” the review concluded, noting that DCMA officials admitted they could have been more thorough in reviewing Anham’s business.”

https://www.washingtonpost.com/business/2018/12/08/oversight-us-militarys-food-suppliers-called-into-question-after-fraud-indictment/?utm_term=.29856e864a48

The Consequences of Bribery Under the Foreign Corrupt Practices Act (FCPA)

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foreign-corrupt-practices-act-course-ec-f 360 Training dot comBAE Systems

Image:  360 Training.com                               Image:  BAE Corporation

“NEW YORK TIMES:

“BAE Systems, Europe’s largest military contractor, plead guilty to two criminal charges and paid nearly $450 million in penalties in the United States and Britain to end long-running investigations into questionable payments made to win huge contracts overseas.

The Justice Department’s charge related to just a small part of the billions of dollars in payments that BAE is thought to have made to Saudi Arabian officials over a 20-year period, and to more than $200 million of business that the company won in arms deals involving the Czech Republic, Hungary and other countries.”


“Under its settlement with the Justice Department, BAE will pay a $400 million fine and plead guilty to one count of conspiring to make false statements about having an internal program to comply with antibribery laws.

BAE, which is based in Britain, made the payments through a network of middlemen and Caribbean and Swiss bank accounts to win contracts for fighter planes and other equipment that American military companies were also seeking, the Justice Department said.

BAE said it would also plead guilty in London to an accounting violation for failing to properly record commissions paid to a marketing consultant involved in its sale of a radar system to Tanzania in 1999. BAE said it would pay about $50 million in Britain in fines and a charitable payment to Tanzania.

The investigation began in Britain. But Tony Blair, the prime minister at the time, halted the British efforts to investigate the deals with Saudi Arabia in 2006, after Saudi leaders threatened to stop providing the British government with tips on terrorism, according to documents later discussed by a British court.

Still, the inquiries have long represented one of the most prominent efforts by prosecutors in both countries to investigate claims that many large companies have passed bribes through middlemen to win overseas contracts.

BAE, which had previously denied any wrongdoing, said in a statement that it “very much regrets and accepts full responsibility for these past shortcomings.”

The company said that the last of the illegal activities had taken place in 2002 and that it had since changed the way it did business.

British press reports last fall had said that Britain’s Serious Fraud Office had pushed for hundreds of millions of dollars in penalties in return for any settlement. But BAE had rejected that offer.

Richard Alderman, the director of the Serious Fraud Office, described the $50 million settlement as a “pragmatic” one that would allow BAE to put the investigations behind it and allow his office to redeploy investigators to other cases.

But British advocacy groups that had fought several unsuccessful court battles to force authorities in Britain to investigate the company for corruption in arms deals involving Saudi Arabia and other countries criticized the settlement.

“This settlement means that the truth about these serious allegations against BAE will never be known,” said Nicholas Hildyard, a campaigner for the Corner House, a social justice advocacy group. “The U.K. fine may well be unprecedented, but it may easily create the perception that alleged bribers can simply pay their way out of trouble.”

Liberal members of Parliament also complained that with the company’s guilty plea, the full details of the British government’s role in supporting its arms sales may never be known.

The Serious Fraud Office also announced later on Friday that it was dropping charges against Alfons Mensdorff-Pouilly, an Austrian count who acted as a marketing consultant to BAE in helping to arrange leases for fighter planes in the Czech Republic and Hungary.

Justice Department officials said that while the guilty plea would end their investigation of BAE, they were continuing to investigate some of the individuals involved in the case. The department has stepped up its investigations in recent years of possible violations of the Foreign Corrupt Practices Act, and prosecutors believe that some of the convictions have helped deter business executives from paying bribes.

BAE also generates a significant amount of its revenue in the United States, where it is one of the Pentagon’s largest contractors. The criminal information filed by the Justice Department said the company’s American subsidiary was not involved in any of the illegal activities.

The criminal information document said BAE had set up a network of “marketing advisers” and encouraged them to organize offshore shell companies to disguise the identities of any foreign officials to whom they passed money. It said BAE itself set up an entity in the British Virgin Islands to conceal its relationships with the agents. BAE then paid about $225 million to the agents through that entity without formally tracking what they did with the money. But the company’s activities in Saudi Arabia, where it had an $80 billion contract since the 1980s to supply fighter jets and other military hardware, have long attracted the most interest.

It has been reported that BAE made payments to Saudi officials, including $2 billion that it deposited into bank accounts of Prince Bandar bin Sultan, the kingdom’s former ambassador to the United States. Peter Gardiner, a crucial witness in the case, has also identified Prince Turki bin Nasser, who controlled the Saudi air force, as a recipient of BAE’s money favors.

The criminal information did not name either of the princes, and neither of them have ever been charged with any wrongdoing. But the document described substantial benefits for an unnamed Saudi official that Mr. Gardiner said on Friday closely matched the company’s relationship with Prince bin Nasser, who has never commented on the deals.”

 

Department Of Justice Forces $30M From Northrop For Fraudulent Costs

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Northrop Grumman Fraud

Northrop Grumman’s chalet at the 2018 Farnborough International Airshow. (Aaron Mehta/Staff)

“DEFENSE NEWS”

“Northrop Grumman will have to pay the U.S. government $30 million as a settlement for falsely billing hours to the Air Force between 2010 and 2013, the Department of Justice announced Friday.

Per the Justice Department, between July 1, 2010, and Dec. 31, 2013, Northrop employees stationed in the Middle East billed hours they did not work to the government.”


“But in an internal memo to employees obtained by Defense News, Northrop Chairman and CEO Wes Bush expressed his belief that the company followed its own internal procedures and appropriately handled the issue.

Northrop will make a payment of $25.8 million to the federal government. Additionally, the company will forfeit an additional $4.2 million to the Criminal Division of the U.S. Attorney’s Office for the Southern District of California, bringing the total of Friday’s settlement to $30 million. (Northrop had previously been hit for $1.65 million for the same issue.)

The issue stems from two Northrop contracts, the Battlefield Airborne Communications Node, an airborne communications relay, and the Dynamic Re-tasking Capability.

“Federal contracts are not a license to steal from the U.S. Treasury,” U.S Attorney Adam Braverman said in a statement. “DOJ is firmly committed to vigilantly weeding out abuse and will swiftly pursue all available remedies when egregious fraud occurs.”

Added John Brown, special agent in charge of the FBI’s San Diego Field Office: “Uncovering this immense fraud against the government and returning the funds to the American taxpayer is vitally important to ensuring our military receives the honest services they are due.”

In a statement, Northrop Grumman spokesman Tim Paynter said the company identified the issue and reported it to the government in 2013.

After the DOJ announcement, Bush sent an internal memo to staff, saying: “There should be no doubt, the misconduct of these former employees does not reflect who we are as a company, nor the values we embrace.”

“We took disciplinary action against those who we found acted improperly and violated company policy, and we took corrective action to strengthen our time-charging processes even further. We cooperated with the government as it investigated the issues over the following years,” Bush wrote in his memo.

“I am proud of the responsible way the company acted ― investigating, reporting and fixing issues as they arose. As always when we experience a disappointing situation such as this, we are using this opportunity to learn and further improve,” Bush continued. “This provides a strong reminder of the importance of adhering to our values in everything we do. It also serves as a reminder to us all that we each have a responsibility to speak up if we have any concerns.”

https://www.defensenews.com/industry/2018/11/02/department-of-justice-forces-30m-from-northrop-for-fraudulent-costs/

Defense Contractor Agrees To Pay $1 Million To Settle Allegations Under The False Claims Act

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Alpha Reseaerch and Technology

Image:  Air Force Times

“U.S DEPARTMENT OF JUSTICE”

“In submitting its proposals, ART knowingly included millions of dollars in personal expenses of its owners Donne and DeAnn Smith, which ART knew were unallowable in government contracting.

Those expenses included payments for the design and construction of the Smiths’ luxury personal residence in Amador County, luxury cars, a personal caretaker, and a weekend at the Hotel del Coronado in San Diego.” 


“United States Attorney McGregor Scott announced today that Alpha Research & Technology, Inc. (“ART”), an El Dorado Hills company that provides command and control systems to the U.S. Air Force, has agreed to pay the United States $1 million to resolve allegations that it violated the False Claims Act by knowingly submitting inflated contract pricing to the government.

Between 2006 and 2011, ART submitted subcontract proposals to prime contractors including The Raytheon Company and The Boeing Company that were to be included in firm-fixed-price proposals made by those prime contractors to the Department of Defense.

The False Claims Act allows the government to recover damages and penalties for the presentation of false claims for payment to the United States. By improperly basing its government subcontract proposals on unallowable costs, ART caused the United States to pay improperly inflated prices.

“It is a priority of this office to safeguard public coffers against fraud and abuse that affect the integrity of federal contracting programs,” said U.S. Attorney Scott. “We will continue to work closely with our federal law enforcement partners to address the unnecessary expenditure of taxpayer funds, and results like this one help accomplish that objective.”

Chris Hendrickson, Special Agent in Charge of the Department of Defense, Defense Criminal Investigative Service (DCIS), Western Field Office, said, “Padding government contracts with personal expenses is an act of greed that diverts taxpayer dollars away from the critical support of our soldiers, sailors, airmen, and Marines.  DCIS is committed to working with partner agencies to root out fraud in Department of Defense contracting.”

“Cost mischarging schemes such as this cheat the Air Force and ultimately the American taxpayer,” said Air Force Office of Special Investigations Special Agent in Charge Cornelius King. “I appreciate the dedicated efforts of the Defense Criminal Investigative Service, The Defense Contract Audit Agency, and the U.S. Attorney’s office who helped hold this Air Force contractor accountable.”

The settlement is the product of a joint investigation by DCIS, the Defense Contract Audit Agency, and the Air Force Office of Special Investigations. Assistant U.S. Attorney Colleen M. Kennedy handled the case for the United States. The claims settled by this agreement are allegations only and there has been no determination of liability.”

https://www.justice.gov/usao-edca/pr/defense-contractor-agrees-pay-1-million-settle-allegations-under-false-claims-act

HUBZone’s Beware The Too Good To Be True Offer

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too good 1 McIntoshMD Rules

Free Lip Piercing Image:  “McIntosh MD”       Rules and Hub Zone Images “SBA”

“WASHINGTON TECHNOLOGY”  By Andrew Miller

“While the [HUBZone] program was designed to provide legitimate small businesses with a path to get their foot in the door with the federal government, it has become a prime target for fraud.

To retain their HUBZone eligibility and avoid potential civil or criminal liability, small business owners need to understand the potential pitfalls.”


I’m sure you’re familiar with the adage, “If it sounds too good to be true, it probably is.”

For owners of HUBZone businesses—small businesses that operate and employ people in Historically Underutilized Business Zones (HUBZones)—it’s a motto to keep in mind as they travel to one of the largest HUBZone matchmaking events in the country this October, the National HUBZone Conference in Chantilly, Virginia.

This annual conference provides a tremendous opportunity for HUBZone business owners and corporations to network and identify potential partners who can help them win business with the federal government. Unfortunately, such gatherings can also attract nefarious corporate executives who are on the hunt for a HUBZone business to illegally use as a pass-through to gain access to lucrative federal contracts that would otherwise be out of reach.

But there are proactive steps a HUBZone business can take to protect itself and the integrity of the HUBZone program.

Understandably, many small businesses are unable to comprehensively serve the needs of a federal contract on their own, so they partner with larger corporations. There are legitimate ways to engage in such a partnership and the SBA provides extensive guidance in how to do so. However, HUBZone businesses are sometimes approached with a proposal to sign off as a partner on a contract or bid without having to perform any of the actual work. That should raise a red flag. Experienced HUBZone businesses generally refuse to engage in these types of deals. But when large businesses are intent on establishing a pass-through with a HUBZone organization, they will often use conferences to shop the offer to many potential partners until someone says “yes.”

In other cases, large businesses and corporations are more covert about their intent to use a HUBZone organization as a pass through. In these instances, in the months immediately after partnering on a piece of business, a HUBZone organization may find their corporate partner slowly beginning to squeeze them out of performing the work for which they have been contracted, while still continuing to pay them. In these situations, when the work arrangement starts to look and feel less like a partnership and more like the HUBZone business is just being used for its HUBZone certification, it may be time to take a closer look at the engagement to see if the larger business is committing fraud.

Contractor fraud in HUBZone set-aside programs is a little bit like an iceberg. It can be difficult to detect and prove, which is why even though the problem is pervasive, only a small percentage of fraud cases ever make it to a courtroom. This is why HUBZone contractors play a key role in helping to police their industry. In particular, there are a number of ways for HUBZone business owners to protect themselves and the HUBZone program from these pervasive forms of fraud.

First, if you are a HUBZone business owner who is approached at a convention like the National HUBZone Conference to become a “pass through” for a larger corporation, keep your eyes and ears open. There is a strong likelihood that the corporate contact who offered you a “too good to be true” deal will pursue your peers until someone agrees to their terms. When you have knowledge of this type of fraud, it is important to reach out to an attorney who specializes in government contracting fraud cases and can help you share this information with the federal government. Often, by serving as a whistleblower, you may be entitled to monetary rewards if the government can prove the fraud occurred.

Second, if you are a HUBZone business that enters into a partnership with a larger organization, make sure you have a tightly defined contract and scope of work. This scope of work should clearly state the percentage of work that you are required to perform, as well as what the work will entail. By having these legal documents established at the beginning of a relationship, it will be very difficult for a corporate partner to illegally squeeze you out of a partnership.

Third, and most importantly, it is critical that HUBZone businesses have a strong backbone to stand-up to corporate executives rather than giving in and accepting payment in exchange for the use of their certification. If you’re in a partnership, insist that you perform the work—even if your corporate partner pressures you not to. And if you’re presented with a “too good to be true” offer, protect yourself and your business by walking away. When in doubt, talk to a lawyer.”

https://washingtontechnology.com/articles/2018/10/08/insights-miller-hubzone-warnings.aspx?s=wtdaily_091018

ABOUT THE AUTHOR:

Andrew Miller is a shareholder and attorney at the firm Baron & Budd. 

U.S. RecentlySanctions Government Contractors for Human Trafficking Abuses

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“POGO”

“Tamimi Global Company and several of its subsidiaries and employees accounted for 15 of the suspensions and the compliance agreement, and Texas Gulf Global General Trading & Contracting Company accounted for one suspension.

Both companies were working on U.S. Army contracts.”


pogo-human-trafficking

Photo:  “Project on Government Oversight”

“POGO has identified two companies that were recently sanctioned by the government for violating U.S. restrictions on human trafficking. An official in the Pentagon’s watchdog told POGO that Tamimi Global Company and Texas Gulf Global General Trading & Contracting Company were the two of the companies referred to, although not by name, in a recent State Department report.

The State Department’s Trafficking in Persons Report 2018 released in June reported:

[The Department of Justice] and other federal law enforcement agencies continued to investigate allegations of debt bondage and excessive recruitment fees required of third-country nationals working on certain U.S. government contracts abroad, but no federal criminal prosecutions of employers or labor contractors resulted from these investigations in FY 2017. [The Department of Defense] took action against noncompliant employers or labor contractors from U.S. programs resulting in 22 suspensions, six debarments, one job termination, and one compliance agreement. (emphasis added)

The report does not name these employers and labor contractors or the U.S. contracts and programs on which were they were working. After several weeks of digging and numerous calls and emails to the State Department and the Department of Defense, an official at the Pentagon’s Office of the Inspector General provided some details.

Little is known about Texas Gulf Global. It is a Kuwaiti company that had approximately $500,000 in federal contracts from 2013 to 2015. The System for Award Management database of federal contractor registrations and exclusions indicates that the company was suspended from federal contracting by the Army for about four months—from September 29, 2017 until February 1 this year—but provides no other details.

By contrast, Tamimi Global has a fairly extensive paper trail. This Saudi support services company is a key supplier of food services to U.S. forces in the Middle East. In 2011, Tamimi paid $13 million to settle criminal and civil allegations of paying kickbacks to win contracts supporting Army operations in Iraq and Kuwait in the 2000s. Tamimi vice president Mohammad Shabbir Khan was sent to prison for his role in the scheme, which involved employees of defense contracting giant KBR. KBR and Tamimi were two of the infamous “Flagrant Five”—five companies former Wartime Contracting Commissioner Charles Tiefer called out in 2011 for their poor contract performance and checkered legal histories.

The System for Award Management database shows Tamimi was suspended by the Army from April 5, 2017 until July 28, 2017. The Federal Awardee Performance and Integrity Information System (FAPIIS) shows that, on the day the suspension was lifted, Tamimi entered into a three-year administrative compliance agreement with the Army resolving alleged violations of the Trafficking Victims Protection Act on a $134 million food services contract in Kuwait.

According to the facts set out in the administrative agreement, Tamimi employees recruited in Bangladesh were promised salaries of 100KD (Kuwaiti Dinars) per month, but many were paid only 40KD. (Kuwaiti law requires employers to pay a minimum monthly salary of 60KD.) Employees worked 12-hour shifts for seven days a week, and one employee allegedly received “unacceptable treatment.” Tamimi disputed some of the facts, but agreed there was a “legally sufficient basis” for debarment. The agreement contains no monetary penalties, but it requires Tamimi to hire an independent compliance monitor and to take steps to strengthen its corporate ethics and compliance programs.

When notified of Tamimi’s latest wrongdoing, Charles Tiefer told POGO “Tamimi was one of the worst contractors from the wars in Iraq and Afghanistan.” In particular, he remembers the company’s stonewalling with regard to the KBR kickback affair.

“The Tamimi Group refused to let the Defense Contract Audit Agency look at the company’s books to see where the kickback money came from,” Tiefer said.

Finally, we have a few things to say about the government’s contractor accountability web resources. Both FAPIIS and the System for Award Management are extremely useful resources that help the public delve into the backgrounds of federal contractors and grantees. However, both have flaws that can also confuse or mislead the public. For example, FAPIIS contains three listings for Tamimi (two of which differ by a single punctuation mark) but only one contains a record of the administrative agreement. FAPIIS is supposed include data on human trafficking instances, but the “Information on Trafficking in Persons” section of Tamimi’s and Texas Gulf’s listings contains no records. The System for Award Management keeps active and inactive exclusion records separate, so the suspensions of Tamimi and Texas Gulf do not appear in the initial search of the database. Both databases also suffer from a government-wide identification system that assigns some business entities more than one identifying number, making it even more difficult to track down records for a particular company.

All of this underscores the need for the government to finally adopt a better unique identifier system and create a one-stop public portal for all spending and contractor accountability data, as well as agency watchdog reports and audits. Improving these tools is essential for ensuring the public is aware of companies that commit serious human rights violations.

POGO has long been engaged in the fight against human trafficking involving federal contractors, a worldwide problem our government exacerbates as the single largest purchaser of products and services on the global market. For many years, we have pushed for reforms to ensure contractor involvement in this form of modern slavery is stopped.

We are heartened to hear that there are criminal investigations into the other recent instances of alleged human trafficking by government contractors. These abuses are unacceptable, let alone from companies doing business with the U.S. government. Powerful safeguards, meaningful transparency, and strong punishments are necessary to ensure human trafficking is eradicated.”

https://www.pogo.org/investigation/2018/08/pogo-identifies-defense-contractors-recently-sanctioned-for-human-trafficking-abuses

Army Carefully Considering Next Worldwide Logistics Contractors

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Logcap Contractor

(Photo: U.S. Army / Summer Barkley)

“The United States Army is still deciding to which companies it will award a major contract that supports U.S. troops stationed around the world.

Past versions of the contract were plagued by contractor misconduct that resulted in waste, fraud, abuse, and consequent harm to service members.”


“The Army has delayed the award date multiple times, but one can hope it is to ensure the contract is granted to companies that will faithfully execute it.

The contract, called the Logistics Civil Augmentation Program (LOGCAP) V, is currently capped at $82 billion and will consist of four to six contracts lasting up to ten years­—a five-year base term followed by five one-year options. Contractors will provide services ranging from supplying food, water, and shelter to performing facilities maintenance and construction.

The previous version of the contract, LOGCAP IV, was awarded to DynCorp International LLCFluor Intercontinental, Inc., and Kellogg Brown & Root Services, Inc. (KBR). Two of the companies allegedly committed misconduct while working on it. Employees accused Fluor of retaliating against them after they claimed the company manipulated reports to hide lost government property. Firefighters on military bases accused KBR of denying them pay and benefits, and the company was disqualified from fulfilling part of the contract for refusing to take action after an employee viewed sensitive and proprietary information. KBR is the contractor that originally drew controversy to the LOGCAP contracts in 2001. KBR’s former CEO, Dick Cheney, was Vice President of the United States when LOGCAP III was awarded to the company. The government and employees sued the company numerous times for waste, fraud, and abuse. Most famously, KBR exposed thousands of troops stationed in Iraq to unsafe wastewater that the troops used when showering, washing clothes, brushing their teeth, and occasionally making coffee. Troops may have suffered health problems due to exposure. KBR was awarded LOGCAP IV despite its track record on LOGCAP III.

The other incumbent, DynCorp, has not been charged with misconduct while working on LOGCAP IV, but it too has a history of malpractice on other government contracts. Ecuadorians accused the company of causing extreme physical and mental harm as well as property damage after the contractor sprayed pesticides over Colombia and Ecuador to eradicate cocaine and heroin crops. DynCorp employees also pleaded guilty to overcharging the State Department for rent in Iraq.

LOGCAP IV expired in April 2018, but the Army has repeatedly delayed awarding LOGCAP V. According to LOGCAP V project manager Jerome Jastrab, the decisions will be announced around December 2018. In the meantime, services will continue to be provided by the three incumbents whose contracts were extended for up to two one-year terms. LOGCAP IV ended up costing approximately $22 billion prior to the extension, although the government capped it at $150 billion. The Army has not publicly disclosed the dollar amount of the contract extensions.

In October 2017, the Army hosted Industry Day, an event for companies that were interested in bidding on contracts and learning more about contract expectations. Representatives from LOGCAP IV incumbents Fluor and KBR attended; DynCorp was not present at the event. While the Army only allowed three representatives from most companies to attend the event, Fluor was allowed seven.

There are plenty of other companies also looking to come away with a piece of LOGCAP V. One such company is Pacific Architects and Engineers (PAE), once a subsidiary of Lockheed Martin. PAE has created two separate joint ventures with defense suppliers—one with Parsons Corporation and the other with Vectrus Systems—in hopes of increasing its chances of winning. The joint ventures are headed by Scott Welker, who was a senior official at the Army contracting headquarters three months prior to leading the ventures. All three companies were at Industry Day, with Vectrus being allowed six representatives despite the three-person limit.

The new companies have also had their share of alleged and proven misconduct while working on other government contracts. Most recently, PAE paid the government $5 million for failing to conduct, and falsely billing the government for, personnel background checks. Prior to this, PAE paid $1.15 million for bid-rigging on a services contract in Afghanistan. Vectrus, who is teaming up with PAE, retaliated against employees who were cooperating with an investigation into illegal activities at Bagram Air Base in Afghanistan. The jury awarded the employees $1.7 million in damages. Parsons, the other defense supplier partnering with PAE, failed to complete two thirds of the projectsassigned in a construction contract in Iraq, prompting the Army to ask the company to show cause for why it should not be debarred.

The Army is taking steps to improve performance and to safeguard against contractor fraud and misconduct in the next LOGCAP contract. First, the contract will be awarded on a competitive basis in hopes that competition will improve contractor accountability. This was the approach implemented in LOGCAP IV and resulted in far fewer instances of misconduct than the previous, sole-source contract. Second, the Army will require contractors to create crisis action plans to prepare for unforeseen or sudden warfighter needs. These plans will be put to the test during the three planning exercises per yearnow required at bases in each region. In principle, implementing these measures will help contractors respond more quickly to troop needs.

In addition, the Army is learning from mistakes from past contracts. They agreed to implement in LOGCAP V all corrective actions suggested by the Department of Defense Inspector General in a LOGCAP IV audit to increase accountability and effective contractor oversight.

While nothing is certain about which companies will win the LOGCAP V contract, it’s good to see the government designing the contract with safeguards, such as requiring contractors to submit crisis action plans, to ensure they do what they’re supposed to and are held accountable when they don’t. Hopefully the extra time that was needed to amend LOGCAP V and to deliberate over who will win the contracts will result in improved decisions when it comes to the contractors the Army chooses and, ultimately, in improved logistical support for our troops.”

http://www.pogo.org/blog/2018/08/army-carefully-considering-next-worldwide-logistics-contractors.html

 

The 37 Year Tax-Day Impact Of The Project on Government Oversight (POGO)

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POGO and Your Taxes

“POGO”

“POGO exposed the fact that the Pentagon was buying $7,600 coffee makers and $435 hammers.  [POGO works] with government insiders in order to sound the alarm on wrongdoing by government contractors and workers and to save taxpayer dollars—all on behalf of the public.

[POGO] investigations have found billions of dollars in actual and potential savings. Here are some of the highlights.”

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“In a 1999 report, POGO pointed out that if contractors could inflate the price of everyday items like coffee makers and hammers, how much were they overcharging for things taxpayers didn’t understand, like high-tech weapon systems? Our investigations have found billions of dollars in actual and potential savings. Here are some of the highlights.

POGO publicized over $893 billion in improper payments.

The American taxpayers lose hundreds of billions of dollars every year because the federal government makes payments to the wrong people or institutions, or in the wrong amount. For example, the government sometimes sends benefits to individuals who are deceased, or FEMA pays fraudulent claims following disasters like hurricanes. Unfortunately, the government doesn’t do enough to address the problem. In 2016, POGO completed a set of reports that publicized $893 billion in improper payments between FY 2008 and 2015. In our reports, we provided recommendations to identify and recover improper payments that potentially could save the government billions of dollars. Currently, POGO is advocating for a bipartisan bill, the Stopping Improper Payments to Dead People Act. This act would allow the Social Security Administration to share its database of deceased people with many other government agencies to reduce inaccurate payments to dead people.

In 2001, POGO’s reporting causes military to stop two wasteful weapons projects, saving $49 billion.

In a blistering set of reports sent to the White House in 2001 on the defense weapon acquisition process, POGO exposed how multiple weapon systems wasted taxpayer money and ultimately made us less safe. One example was the Crusader howitzer cannon, which entered into the acquisitions phase before United Defense finished its preliminary design. Our analysis cited a Government Accountability Office report that found the Crusader weighed too much, underwent shortcuts in testing, and was behind schedule. Another example was the RAH-66 Comanche helicopter, which suffered from many of the same problems. While military planners designed the helicopter to be inexpensive, the cost quickly ballooned from $12.1 million to $58.9 million a copy as the development cost increased and the testing schedule was delayed.

POGO investigation into F-35 leads to $21 billion to $40 billion in taxpayer savings.

Multiple POGO investigations have found serious problems in the F-35 program. In one report last year, we discovered that the Air Force wanted to leave several older F-35s unfinished because paying to update them would make it harder to buy new fighters. The Air Force bought the F-35s while still designing and testing the aircraft—a decision POGOand the Government Accountability Office have independently labeled as a major driver of increased cost. After POGO published its report, the Air Force decided to stop the plan, preventing between $21 billion and $40 billion in waste.

POGO investigations help get the Deepwater contract cancelled, saving $24 billion.

In 2007, POGO investigated a $24 billion Lockheed Martin and Northrop Grumman project to update the U.S. Coast Guard’s equipment that resulted in millions of wasted dollars. To save money, the Coast Guard initially allowed the two private contractors to oversee and manage the project. Relying on private contractors to conduct inherently governmental functions ultimately cost the Coast Guard millions, because the contractors made numerous design and technical mistakes. After POGO’s investigation, media attention, and several high-profile disasters, the Coast Guard took back management of the project, and later asked for a $96 million refund.

POGO reporting helps shut down the wasteful Superconducting Super Collider, saving $11 billion.

POGO led the way in campaigning to cancel the Superconducting Super Collider, a grossly over budget project run by contractors that took advantage of weak oversight and permissive spending guidelines to overcharge the federal government. According to invoices obtained by POGO, the principal subcontractor charged the government $21,369 for office plants in a year and $1,107 dollars for Christmas cards, among other waste. POGO’s investigation turned the Super Collider into the largest government project ever cancelled at that time, saving taxpayers roughly $11 billion dollars.

Our investigation into Boston’s “Big Dig” helps save taxpayers roughly $11 billion.

Even before Boston’s Harbor Tunnel Project, known as the Big Dig, became a national embarrassment, POGO investigated the devastating impact of private contractors spending billions of tax dollars to build a highway project with little federal or state oversight. The Big Dig started with a $2.3 billion budget but, with contractors given a free rein, it ballooned to around $24.3 billion as the project suffered from delays, bad planning, and mismanagement. Initially, federal taxpayers were on the hook for 80% of the funding, but POGO’s investigation helped reduce losses by getting Congress to freeze federal spending at $8.6 billion, saving federal taxpayers roughly $11 billion.

POGO helps cancel the F-22, saving $4.268 billion in one year.

Much like the F-35, the F-22 cost much more than advertised and drained resources from other critical Air Force priorities—like training pilots. Also like the F-35, POGO campaigned heavily to end the program. After almost a decade’s worth of reportspress releases, and conversations with Members of Congress and their staff, POGO finally succeeded in helping get the program shut down—thanks in large part to Senators Carl Levin (D-MI) and John McCain (R-AZ). Cancelling the production of 240 F-22s saved taxpayers $4.268 billion that year alone.

POGO helps the government collect over $1 billion in additional oil royalties to date.

During the late 1990s, POGO investigators uncovered how the Interior Department ignored the fact that several oil companies chronically underpaid the Federal Treasuryon royalties they owed for oil they extracted from public lands. In 1997, POGO filed a False Claims Act lawsuit against 16 major oil companies. By 2001, the companies settled the lawsuit. The U.S. Treasury recovered nearly half a billion dollars in unpaid royalty revenue, and began collecting $67 million more per year in royalties owed to the public.

POGO reporting causes Air Force to suspend bad Hamilton Sundstrand contract, saving $664 million.

Every year, POGO warns the government about no-bid contracts fleecing American taxpayers. In 2006, POGO investigators published a previously not-public Department of Defense Inspector General report finding that defense and aviation contractor Hamilton Sundstrand raised the price of several mechanical parts by nearly 900 percent with no reasonable justification. We wrote to Congress showing how contractors were taking advantage of acquisition regulation loopholes to reduce oversight. Our work led the Air Force to suspend the 9-year, $860 million dollar contract, saving taxpayers $664 million dollars.

POGO advocates for bipartisan compromise to reduce contractor compensation, saving $200 million per year.

Prior to 2013, an outdated law that was used to determine contractor compensation packages allowed some companies to receive excessively high executive salaries and benefits—at the expense of taxpayers. This system allowed contractors to receive more money than comparable employees in the federal government. After years of work by POGO, a bipartisan group of legislators voted to reduce the cap from $952,308 to $487,000, saving taxpayers $200 million per year.

POGO investigation helps Air Force save $168 million on C-130J military airlift contract.

The C-130J was a mechanically flawed cargo plane that cost more than expected and the Pentagon didn’t want. A 2005 POGO report highlighted that the Air Force dubiously labeled the C-130J a “commercial” item in order to decrease oversight, a decision that ultimately led to many of the C-130J’s problems. After the Pentagon said they didn’t need the plane, a group of influential military contractors and U.S. Senators lobbied hard to preserve the unnecessary aircraft. POGO worked with Senator McCain and other Members of Congress to restructure the C-130J contract and save taxpayers $168 million.

POGO helps publicize $100 million in fraud by Northrop Grumman.

In 2014, POGO investigators made public a Defense Department Inspector General report that found Northrop Grumman knowingly overcharged the federal government around $100 million for an anti-terrorism program. The U.S. Army contracting agency tasked with overseeing the contract was not conducting proper oversight—until whistleblowers, POGO, and the Defense Department Inspector General got involved. We highlighted how Northrop Grumman and its subcontractor DynCorp defrauded the government in multiple ways. They billed the government for more labor hours than there are in a day and for employees who lacked required education qualifications. They also classified one employee for seven different positions including “depot aircraft mechanic, a senior general engineer, an integrated logistics manager, a quality assurance manager, a program manager, a senior pilot, and a senior technical writer.”

POGO’s investigations into waste, fraud, and abuse of power by the federal government are a core part of the organization’s mission.”

http://www.pogo.org/blog/2018/04/pogos-outsized-tax-day-impact.html

 

 

 

 

 

 

U.S. A Haven for Global Corruption Profits, Panelists Say

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POGO Anti-Corruption

Danielle Brian, POGO Executive Director, speaks at a panel, “Democracy Defenders in Dialogue: Sharing Lessons from Investigative Journalism and Anti-Corruption Advocacy Partnerships Around the World,” December 14, 2017.

 

 

 

 

 

 

 

 

 

 

“THE PROJECT ON GOVERNMENT OVERSIGHT (POGO)”

“Global Witness, an anti-corruption nonprofit that focuses on how corporate secrecy in developed countries facilitates corruption in developing ones, regularly highlights how criminals make use of anonymous American companies.

In one such example, Mexico’s largest drug cartel “used an anonymous Oklahoma company in a scheme to launder millions of dollars of drug money into the United States.” In another, a Russian mobster “allegedly set up a network of anonymous companies stretching from Eastern Pennsylvania to the United Kingdom to cheat the stock market and steal over $150 million from investors.”


“Last fall, the Miami Herald and a freelance journalist who works for Transparency International’s Russian chapter worked together to reveal how a Russian bureaucrat, ostensibly making the equivalent of $75,000 a year, was secretly buying multi-million dollar condos in South Florida. While Transparency International brought the individual’s corruption to the attention of the Russian government, the Miami Herald was able to focus its stories on the systemic problem of corrupt Russians (and others) using American real estate to hide and launder money.

The case is a prime example of how American journalists and advocates can work with their peers overseas to highlight the systemic problems that allow corruption to flourish and to help bring the individuals to justice in their own country. By working together and sharing information with international civil society groups, journalists can significantly amplify the impact of their stories. American regulatory, law enforcement, and intelligence agencies are better at their jobs because they regularly work with other countries. Journalists and advocates should do the same.

Danielle Brian, the Project On Government Oversight’s executive director, participated in a panel discussion in December examining how American journalists and anti-corruption nonprofits can partner with other groups around the world to more effectively address international corruption.

Panelists shared numerous instances when the impact of a story was amplified around the world as a direct result of organizations working together. The competitive media environment in the United States, however, means that such cooperation is rare here despite the potential benefits. With everybody looking to distinguish themselves, journalists are unlikely to share valuable records and risk having someone else publish the story first. International cooperation has also been hampered by technological barriers, although new platforms and tools are making it far easier to manage those partnerships. Despite the barriers, American journalists are beginning to take advantage of opportunities for cooperation.

Panelist Marina Walker Guevara, deputy director of DC-based International Consortium of Investigative Journalists, pointed to the Panama Papers and the more recent Paradise Papers projects to highlight the benefits of cooperation. The projects were based on massive leaks of information from firms that facilitate tax evasion and avoidance by the rich and powerful. The original recipient of the leaks, a German newspaper, decided that the sheer volume of records and the global scope required a global investigation. By partnering with a global consortium of trusted journalists, investigators were able to share access to records and help each other put various pieces of the puzzle together. All of the participating organizations had time to make sense of the records, and they then broke the news on the same day, creating a massive media wave that grabbed the world’s attention. As a result, approximately 80 countries have launched a total of nearly 150 audits, investigations, prosecutions, and arrests. One such investigation in India encompasses over four hundred entities. Iceland’s Prime Minister resigned, Pakistan’s former Prime Minister has been indicted, and the founders of the law firm whose records were leaked have been arrested.

Another organization that was featured on the panel is the Organized Crime and Corruption Reporting Program, led by Drew Sullivan and Paul Radu. Organized crime, they say, can only be defeated by an organized opposition. When that crime crosses national borders, the opposition must do so as well. Their organization is dedicated to conducting cross-border investigations, and they help teach other organizations how to maximize their impact through international reporting.

As international corruption increasingly crosses America’s borders, the oversight community needs to play catch-up.

“While the rest of the world provides the transparency that the U.S. demanded, the U.S. is rapidly becoming the new Switzerland,” the Bloomberg Editorial Board wrote in December. Despite requests from the previous administration, Congressional inaction on the issue has prevented the reporting of information like account balances and the names of beneficial owners—the same information that other countries provide to us. “A Russian billionaire, for example, can put real-estate assets in a U.S. trust and rest assured that neither the U.S. tax authorities nor his home-country government will will know anything about it.”

Corporation secrecy laws in Delaware, Nevada, Wyoming, and other states facilitate transnational crime, according to a Transparency International report from January 2016. Complex webs of anonymous shell companies can make law enforcement’s job much more difficult and allow foreign organizations to get away with defrauding Americans and committing crimes.

The bad news is that too many investigations into international corruption lead to American companies. The good news is that while corruption can transcend borders, the work of watchdogs can too. POGO is looking forward to working more closely with international groups in the months and years to come.”

http://www.pogo.org/blog/2018/01/us-a-haven-for-global-corruption-profits-panelists-say.html