Energy’s OIG responds to hotline complaint re: Bonneville Power’s procurement system

The Energy Department’s Office of Inspector General (OIG) has substantiated allegations regarding the acquisition of the hiring system acquired by the Bonneville Power Administration as well as general concerns about Bonneville’s procurement office’s operations.

DOE logoThe Department of Energy’s Bonneville Power Administration, which markets wholesale power produced primarily from Federal hydroelectric projects in the Pacific Northwest, operates and maintains about three-fourths of the high voltage transmission in the area.  Bonneville has about 3,000 federal employees, which represents approximately 20 percent of the Department’s total federal workforce.  In support of its various mission activities and human resources needs, Bonneville makes a number of procurements each year.  By statute, Bonneville is exempt from the requirements of the Federal Acquisition Regulation (FAR) and is permitted to acquire goods and services using its own requirements published as the Bonneville Purchasing Instructions.  In an effort to streamline its recruiting and hiring processes, Bonneville acquired the automated Talent Acquisition System (hiring system) in July 2012.

The OIG received a hotline complaint alleging fraud, waste, and abuse related to the acquisition of information technology (IT) systems.  The complaint included specific concerns regarding the acquisition of the hiring system, as well as general concerns about the procurement organization’s operations.  The allegations made in the complaint were, in part, substantiated in an August 3, 2015 report issued by the OIG.  Most prominently, regarding the acquisition of the hiring system, the OIG found that Bonneville spent about $5.2 million for a system that did not meet its needs.  The OIG identified significant weaknesses with the system planning, acquisition, and contract administration.

The issues identified were due, in large part according to the OIG, to the accelerated planning, development, and deployment approach used by Bonneville for this particular project.  Other contributing factors included a lack of adequate due diligence and accountability on the part of key personnel responsible for acquisition and monitoring of the hiring system and insufficient involvement of Bonneville’s IT Project Management Office.  The OIG also noted that Bonneville failed to apply lessons learned from a previous IT system failure, leading to the repeat of past mistakes.

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Husband and wife admit to military contracting fraud and other schemes

Defendants pleaded guilty last week to fraudulently obtaining over $30 million in government service contracts using false representations, embezzling over $1.6 million from employee benefits plans, and evading taxes.

Shaun Tucker (a/k/a “Shawn Turner,” and “Mark Tyler”), age 49, and his wife, Joanne Tucker (a/k/a “Joanne Krcma,” “Jill Swanson,” and “Jocelyn Turner”), age 50, both of Keymar, Maryland, pleaded guilty on July 27, 2015 to the charges in connection with defrauding the United States.

Justice Dept. sealThe guilty pleas were announced by United States Attorney for the District of Maryland, the U.S. Department of Labor’s Office of Inspector General, Office of Labor Racketeering and Fraud Investigations,  the Internal Revenue Service’s Criminal Investigation Field Office, the Labor Department’s Employee Benefits Security Administration, the Defense Department’s Criminal Investigative Service, the Small Business Administration’s Inspector General, and the Air Force Office of Special Investigations.

According to their pleas, the Tuckers were controlling officers and majority shareholders of Quantell, Inc. and Intaset Technologies Corporation from 2007 to 2010.  Quantell and Intaset provided labor services to federal government agencies.  In 2010, the Tuckers sold Intaset, but continued to have influence on the operation of Intaset.

Federal Procurement Fraud

From 2007 to 2013, the Tuckers and their co-conspirators, including Jonathan Mickle, made false representations to the government regarding the eligibility of Quantell and Intaset for small business, Service Disable Veteran Owned Small Business and other set-aside contracts, including the 2007 Camp Lejeune contract, 2007 Battle Creek, Michigan contract, 2008 Andrews Air Force Base contract, 2008 Beale Air Force Base contract, 2011 Langley Air Force Base contract and 2011 Camp Lejuene contract. The Tuckers and co-conspirators falsely represented the past revenues, ownership, controlling officers, distribution of profits, location and other key attributes of Quantell and Intaset to multiple federal agencies.  When bid protests were lodged by competing firms, the Tuckers and co-conspirators prepared and submitted false responses.  The Tuckers’ actions cause other companies, which the government actually meant to support with set-aside contracts, to lose out on valuable opportunities to provide contracting services to the federal government.

The Tuckers used the money from the government contracts for their own personal benefit, including building, purchasing and leasing a 5,000 square foot residence in Swanton, Maryland; additions to the real property in Taneytown, Maryland, including a personal residence, gym, bar and break room equipped with high definition TVs, top of the line weight equipment, video games and combat wrestling equipment; additions to the real property in Keymar; 45 foot sailboat named “Quantell;” 2008 Audi A8; 2011 BMW; and mortgage payments related to real estate, watercraft and vehicles.

The Tuckers and their co-conspirators used aliases and false identities to communicate with the U.S. Department of Defense (DOD) in order to falsely portray the past performance of Quantell.  They created a fake corporate entity name Staff-It with a fake period of performance from 2005 to 2008 involving more than $12 million of work by Quantell for Staff-It, and falsely indicated that Quantell was supplying service workers at military treatment facilities for Staff-It.  Then they created phone lines and had conspirators participate in false phone conversations with DOD representatives so as to deceptively win the 2011 Camp Lejeune contract.  The Tuckers and their co-conspirators carried out similar schemes with respect to other past performances, establishing internet phone lines to spoof the location of businesses, and labeling the phone lines based on the fake company contact person.

The Tuckers admit that as a result of the procurement fraud conspiracy, the full value of the contracts awarded to Quantell and Intaset based on false representations was at least $30 million.

Employee Benefit Fraud

Moreover, the service contracts awarded by the United States to Quantell and Intaset, as well as the McNamara-O’Hara Service Contract Act (SCA), required Quantell and Intaset to provide bona-fide health and welfare benefits to the service contract employees of Quantell and Intaset hired to do the work for the federal government.  From 2008 to at least 2012, however, the Tuckers stopped contributing the SCA funds to any bona-fide health and welfare plan.  Instead, the Tuckers lied to employees of Quantell and Intaset, and to multiple federal agencies, regarding the compliance of Quantell and Intaset with the SCA, so that the Tuckers and their co-conspirators, including Jonathan Mickle, could divert at least $1.6 million in SCA monies paid by the government to Quantell and Intaset under service contracts for their own personal benefit.  The Tuckers and their co-conspirators used shell companies and companies that they were associated with to conceal the diversion of SCA funds to them.  The Tuckers falsely told employees that they would be receiving health and welfare benefits, when they knew in fact that the money was being diverted to buy luxury vehicles, make improvements on the Tuckers’ residences.

The Tuckers admit that as a result of the fraud involving employee benefits, more than $1.6 million of the SCA funds were fraudulently diverted for the co-conspirators’ benefit from at least 350 individual employees.

Tax Fraud

Finally, the Tuckers attempted to evade income tax due of $492,961 for tax years 2009, 2010 and 2011.

The Tuckers and the government have agreed that if the Court accepts the plea agreements, Shaun Tucker will be sentenced to eight years in prison and Joanna Tucker will be sentenced to between six and 18 months in prison.  Shaun Tucker further agrees to pay forfeiture of at least $30 million and Joanne further agrees to pay forfeiture of at least $20 million, and that their residence in Keymar is subject to forfeiture.  Both Tuckers also agree to pay restitution of at least $1.6 million in connection with the employee benefit fraud, and pay restitution to the IRS of $492,961 for tax evasion.  U.S. District Judge J. Frederick Motz has scheduled sentencing for both Tuckers for November 20, 2015, at 12:00 p.m.

In a related case, co-conspirator Jonathan Mickle, age 43, of Asheville, North Carolina, formerly of Taneytown, Maryland, pleaded guilty on June 25, 2015 to conspiracy to commit wire fraud and tax fraud in connection with the fraud schemes.  Judge Motz has scheduled sentencing for November 3, 2015, at 2:15 p.m.

The National Procurement Fraud Task Force was formed in October 2006 to promote the early detection, identification, prevention and prosecution of procurement fraud associated with the increase in government contracting activity for national security and other government programs.  The Procurement Fraud Task Force includes the United States Attorneys’ Offices, the FBI, the U.S. Inspectors General community and a number of other federal law enforcement agencies. This and other cases brought by members of the Task Force demonstrate the Department of Justice’s commitment to helping ensure the integrity of the government procurement process.


GAO lays out ways agencies can combat program fraud

Federal agencies could reduce the risk of fraud through new detection processes laid out by the Government Accountability Office in a July 28, 2015 report.

GAO-GovernmentAccountabilityOffice-Seal“Effective fraud risk management helps to ensure that federal programs’ services fulfill their intended purpose, funds are spent effectively, and assets are safeguarded,” GAO says in the report.

The GAO outlined steps for federal managers to ensure a reduction in fraud among agency programs.

Agencies must first take preventative measures by creating an organizational culture and structure which is conducive to fraud risk management, the report says. Demonstrating a senior-level commitment to integrity and combating fraud will help that kind of thinking permeate an agency and get other to commit as well, GAO says.

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Three U.S. naval officers censured in ‘Fat Leonard’ corruption probe

Three U.S. admirals were censured for dining at “extravagant” banquets in Hong Kong, Malaysia and Singapore and accepting other gifts from an Asian defense contractor at the center of a bribery scandal that continues to rattle the highest ranks of the Navy, according to documents released late Friday.

Navy logoOne dinner alone cost $23,061, or about $768.72 for each of the 30 people who attended. To get around ethics rules, the admirals reimbursed the contractor — a Malaysian national known in Navy circles as “Fat Leonard” — but only for a fraction of the expense, writing personal checks for between $50 and $70 each, the documents show.

The incidents occurred nearly a decade ago, while all three officers — Vice Adm. Michael H. Miller, Rear Adm. Terry B. Kraft and Rear Adm. David R. Pimpo — were assigned to the USS Ronald Reagan aircraft carrier strike group. Each was forced to retire this summer.

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DoD fails to comply with rules to curb contractor estimate deficiencies

The Defense Department’s contracting component hasn’t observed new rules meant to address deficiencies in the way contractors estimate prices for DoD, says a June 29 DoD inspector general report.

DOD IGContractor estimating systems encompass the policies, procedures and practices used by the contractor for generating estimates of costs and other data that are included in proposals submitted to the government.

And it’s important that those systems are accurate, the report says.

“Contractor business systems and related internal controls, including the estimating system, are the first line of defense against waste, fraud, and abuse,” GAO says.

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