DOJ finds federal employee’s business ownership fraudulent, fines DBE firm $84,000

A Massachusetts-based transportation consulting  company has been charged by the U.S. Department of Justice  with making a false statement in connection with its certification for favored contracting status.

Justice Dept. sealTransit Safety Management, Inc. (TSM) was charged with one count of making a false statement to a state agency in order to maintain its status as a Disadvantaged Business Enterprise (DBE).

In order to qualify as a DBE, a company’s management must be controlled by a socially or economically disadvantaged individual such as a woman or minority.  The purpose of the program is to give an economic advantage to minorities and women who run their own companies.  However, the manager of the DBE cannot also engage in employment that would prevent her from devoting sufficient attention to the affairs of the DBE.  In this case investigators discovered that TSM’s purported owner was a full-time employee of a federal agency and the business was really operated by her husband making it ineligible for certification as a DBE.

US DOTTSM provided consulting services to the railroad industry, focusing on safety and operations management.  Shortly after it was founded in 1999, TSM’s owner certified the company as a DBE.   As such, TSM was able to take advantage of federal regulations aimed at promoting the participation of minority and disadvantaged businesses in federally-funded public construction contracts.  Under the DBE regulations, a contractor on federally-assisted transportation projects must either subcontract a percentage of its work to a DBE or show that it made a good faith effort to subcontract work to a DBE but was unable to do so.  This requirement makes the DBE status a valuable and potentially lucrative designation.

In order to maintain its DBE certification, TSM had to make yearly affirmations that it was still eligible and that nothing had changed that would affect its eligibility for the favored DBE status.  Despite this, TSM lied about whether it met the criteria for DBE status.  According to court documents, TSM’s owner was hired as a full-time employee with a federal agency in 2005.  As a full-time federal employee, TSM’s purported manager could not control TSM under the regulations.  Nevertheless, TSM failed to disclose this change and continued to make its yearly affirmations to maintain is DBE status.

As part of its plea agreement, TSM has agreed to pay a fine of $84,000 and dissolve its operations.

United States Attorney Carmen M. Ortiz; Todd Damiani, Special Agent in Charge of the U.S. Department of Transportation, Office of Inspector General, Office of Investigations; and Harold H. Shaw, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division, made the announcement of the plea agreement.  The case is being prosecuted by Assistant U.S. Attorney Eugenia M. Carris of Ortiz’s Public Corruption Unit.

The details contained in the Information are allegations.  The defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.


State Department employee indicted in $2 million contract conspiracy

Kenneth Apple, 65, of Beaverton, Oregon, has been indicted by a federal grand jury on charges related to his role in awarding $2 million in micro-dairy contracts from the U.S. government for use in Iraq.

State Dept.According to the indictment, Apple, a former employee with the U.S. Department of State, helped to steer the sole-sourcing of $2 million in micro-dairy contracts to a company in which his son, Jonathan Apple, owned a 50 percent interest.  However, Jonathan Apple and his partner had no technical experience in the industry.  Kenneth Apple conspired to use his official position to pass on non-public information to his son in order to fraudulently award and administer government contracts.  The conspirators further provided false information to, and concealed material details from the U.S. government.

According to the indictment, Kenneth Apple provided templates and technical specifications used in the proposal submitted by Jonathan Apple and his partner to the U.S. government.  In addition, Kenneth Apple caused false and misleading statements to be made to the U.S. government regarding his experience, ownership interest, and the status of the projects.  For example, Kenneth Apple directed a conspirator to keep Jonathan Apple’s name off the company’s website and any ownership documents.  When federal law enforcement agents confronted Kenneth Apple about the scheme, he made false statements, including that he could not recall the owner of the company that won the micro-dairy contracts and that he did not receive any money from the contracts.

Kenneth Apple faces a maximum penalty of 20 years in prison if convicted of wire fraud or obstruction of an official proceeding, and five years in prison if convicted of conspiracy or false statements.  The maximum statutory sentence is prescribed by Congress and is provided here for informational purposes, as the sentencing of the defendant will be determined by the court based on the advisory Sentencing Guidelines and other statutory factors.

A copy of the press release regarding this indictment may be found on the website of the U.S. Attorney’s Office for the Eastern District of Virginia.  Related court documents and information may be found on the website of the District Court for the Eastern District of Virginia or on PACER by searching for Case No. 1:15-cr-363.

An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.

DOJ recovered $1.1 billion in contract fraud settlements in 2015

Government contracts and federal procurement accounted for $1.1 billion in fraud settlements and judgments in fiscal year 2015, bringing procurement fraud totals to nearly $4 billion from January 2009 to the end of the fiscal year. 

Justice Dept. sealAll totaled, the Department of Justice obtained more than $3.5 billion in settlements and judgments from civil cases involving fraud and false claims against the government in the fiscal year ending Sept. 30, 2015.  This is the fourth year in a row that the department has exceeded $3.5 billion in cases under the False Claims Act, and brings total recoveries from January 2009 to the end of the fiscal year to $26.4 billion.

Significant cases involving federal contracts include a $146 million settlement with Supreme Group B.V. and several of its subsidiaries for alleged false claims to the Department of Defense (DoD) for food, water, fuel, and transportation of cargo for American soldiers in Afghanistan.  Supreme Group is based in Dubai, United Arab Emirates (UAE).  In addition, Supreme Group affiliates Supreme Foodservice GmbH, a privately held Swiss company, and Supreme Foodservice FZE, a privately-held UAE company, pleaded guilty to related criminal violations and paid more than $288 million in criminal fines.

In two other defense contract settlements, Lockheed Martin Integrated Systems, a subsidiary of aerospace giant Lockheed Martin Inc., paid $27.5 million and DRS Technical Services Inc. paid $13.7 million to resolve allegations that their employees lacked required job qualifications while the companies charged for the higher level, qualified employees required under contracts with U.S. Army Communication and Electronics Command (CECOM).  The CECOM contracts were designed to give the Army rapid access to products and services for operations in Iraq and Afghanistan.

In a pair of cases involving contracts with the General Services Administration, VMware Inc. and Carahsoft Technology Corporation paid the United States $75.5 million and Iron Mountain Companies paid $44.5 million to settle their respective liability under the False Claims Act.  The government alleged that California-based VMware and Virginia-based Carahsoft misrepresented their commercial sales practices, which resulted in overcharging government agencies for their software products and services sold through GSA’s Multiple Award Schedule.  Similarly, Iron Mountain, a records storage company headquartered in Massachusetts, misrepresented its commercial sales practices to GSA and failed to give certain discounts given to its commercial customers, as required to gain access to the vast federal marketplace available to contractors through the Multiple Award Schedule.

The Justice Department also settled allegations that private contractor U.S. Investigations Services Inc. (USIS) violated the False Claims Act in performing a contract with the Office of Personnel Management (OPM) to perform background investigations of federal employees and those applying for federal service.  The government alleged that USIS took shortcuts that compromised its contractually-required quality review and that, had the government known, it would not have paid for the services.  USIS agreed to forego at least $30 million in payments legitimately owed to the company to settle the government’s allegations.


Military contractor sentenced to prison for bribery during Iraq war

The former president of a defense contractor providing services to the U.S. military in Iraq has been sentenced to 12 months and one day in prison for his role in a scheme to pay more than $1.2 million in bribes to U.S. Army contracting personnel in exchange for being awarded lucrative defense contracts.

Justice Dept. sealEarlier this month, U.S. District Judge Joel H. Slomsky in the Eastern District of Pennsylvania sentenced Justin W. Lee, 37, of Philadelphia, the former president of Lee Dynamics International (LDI), who pleaded guilty in July 2011 to one count of conspiracy to commit bribery and four substantive counts of bribery.

In connection with his guilty plea, Lee admitted that as the president of LDI and previously as an officer of American Logistics Services (ALS), a Kuwaiti company providing supplies to the U.S. military in Iraq, he paid multiple bribes in the form of cash, airline tickets, trips and hotel stays, among other things, to military contracting personnel in exchange for their agreement to take official action to award lucrative contracts to both LDI and ALS.

Lee’s father and co-defendant, George Lee, who was the CEO of both companies, was earlier sentenced to 54 months in prison for one count of bribery.

This marks the end of a long-running investigation, which began in 2006, that led to the conviction of seven other defendants, including several high-ranking contracting officers.

The U.S. Army Criminal Investigation Command, the Defense Criminal Investigative Service, and the U.S. Department of Homeland Security’s Immigration and Customs Enforcement investigated the case.  The Office of the Special Inspector General for Iraq Reconstruction, the FBI, and the Internal Revenue Service contributed to the investigation.  The Justice Department’s Criminal Division’s Public Integrity Section and the U.S. Attorney’s Office of the Eastern District of Pennsylvania prosecuted the case.  The U.S. Attorney’s Office of the Southern District of California previously provided substantial assistance.


GTRI supports adaptable, accessible information sharing for Justice Dept. and other agencies

Today, a far-reaching information sharing environment (ISE) is gaining momentum and allowing U.S. justice agencies – law, law enforcement, criminal and counter-drug intelligence, courts, corrections, and others – to exchange information with one another securely and seamlessly over the Internet.

Other security- and safety-related agencies – including homeland security and disaster response entities – participate in this ISE also. The result has been unprecedented opportunities for inter-agency cooperation. Today, this ISE is employed by all 50 states.

John Wandelt, a principal research scientist who directs the Information Exchange and Architecture Division of the Georgia Tech Research Institute (GTRI), has been helping agencies share data for more than 20 years. (Photo credit: Rob Felt, Georgia Tech)
John Wandelt, a principal research scientist who directs the Information Exchange and Architecture Division of the Georgia Tech Research Institute (GTRI), has been helping agencies share data for more than 20 years. (Photo credit: Rob Felt, Georgia Tech)

“Government justice agencies have faced challenging problems in exchanging their data online,” said John Wandelt, a principal research scientist who directs the Information Exchange and Architecture Division of the Georgia Tech Research Institute (GTRI). “It’s taken about two decades, and the involvement of many different groups, to get to where we are today. And there is still much to do. We generally move at the speed of agreement, and reaching consensus at this scale can move slowly.”

The challenges have been two-fold, Wandelt explained. One problem has involved major technical issues: By the time World Wide Web technology made the Internet widely accessible in the early 1990s, U.S. justice groups were already committed to many diverse software systems that had trouble communicating. The other problem centered on trust issues: Justice information is extremely sensitive, and any approach to data exchange must be unquestionably secure on every level.

A Global Strategy

By the mid-1990s, a federal advisory committee called the Global Justice Information Sharing Initiative (or “Global”, a “group of groups” representing more than 30 independent bodies, was meeting to discuss ways to address the issues.

Perhaps the most important strategy developed by Global involved building a broad-based consensus for addressing both the technical and the trust challenges. Soon, committees were busy developing data, policy, and technology standards, as well as best practices, based on members’ requirements.

Another key Global strategy involved finding ways to make the new standards work in the real world. Jointly with the DHS logoU.S. Department of Homeland Security, Global commissioned GTRI to develop a National Information Exchange Model (NIEM), a flexible information exchange framework aimed at the multi-domain challenge of linking many agencies at all levels of government.

“Standards are at the heart of any information sharing solution, especially one that serves as many groups and technologies as the justice information system does,” said Wandelt, who leads GTRI’s NIEM team. “And good standards are community-driven – they’re developed by community members working together on behalf of all the stakeholders.”

The NIEM framework is based on an important industry standard – Extensible Markup Language (XML) – that’s been in use for years. But NIEM adds extra capabilities to XML, providing novel information exchange characteristics that increase interoperability and understandability, allowing translation among justice and homeland security agencies’ many disparate software systems and databases.

Today, any government agency that wants to share data or expand its system capabilities can do so by going to to access a wide range of NIEM-based information sharing building blocks. These tools facilitate development of exchange standards that are tailored to a specific group, yet can conform to and interoperate with other systems created using the NIEM framework and specifications.

Starting from Scratch

Initial efforts aimed at developing justice information sharing technology go back more than two decades. In 1992, for instance, four southwestern border states approached GTRI about sharing counter-drug intelligence information with one another.

At that time, neither XML nor World Wide Web technology was yet available, and the potential technical problems were daunting, recalled Wandelt, who attended the early meetings.

Worse, there were no policies, procedures, technical standards, or best practices in place to guide how law enforcement systems should share this sensitive information.

“GTRI was trying to provide not just the technology piece for the Southwestern initiative, but also ways to bring people to the table and get cooperation among the parties,” Wandelt said.

Despite the challenges, by 1995, a GTRI team led by Wandelt and senior research engineer Kirk Pennywitt had built the first version of the Southwest Border States Anti-Drug Information System, linking key drug enforcement entities in the four states.

NIEM: Taking the Data

The powerful Extensible Markup Language made its debut in the mid-1990s. In combination with the Internet and rapidly expanding Web technologies, XML began to change the justice information sharing landscape.

XML offers a set of rules for encoding documents in ways that make them readable to both humans and computers. It is a broadly applicable, one-size-fits-all structure, Wandelt said. It contains no specific semantics – words and their meanings – to let it serve as a translation layer between the many different legacy systems that government agencies had independently developed over the years.

Justice Dept. sealIn 2002, at the recommendation of Global, the U.S. Department of Justice sponsored a team of GTRI engineers led by Wandelt to develop an XML-based information exchange vocabulary and data model based on justice data sharing requirements.

Known as the Global Justice XML Data Model, it was specifically designed for sharing information across the justice community, and it became highly successful. Driven by the events of 9/11, other government agencies began searching for a similar solution.

It was in 2005 that the U.S. Department of Homeland Security approached the Justice Department/Global, and struck an agreement to jointly sponsor the development of NIEM, the new technology that was an outgrowth of and leveraged the Global Justice XML Data Model.

But NIEM was different. The new NIEM architecture allowed for scaling and expansion to different kinds of agencies and lines of business, as well as justice. Furthermore, it made it easy to set up specialized governance bodies that could work together to maintain respective specialized parts of the model.

“NIEM’s objective was to extend the Global Justice model so that federal, state, and municipal justice, security, emergency management, or other kinds of agencies would have a consistently structured and semantically precise way of communicating with one another electronically,” explained Wandelt.

To create NIEM, the GTRI team worked closely with and facilitated detailed reviews with many subject matter experts.

At the same time, they painstakingly built an extended semantic vocabulary into the existing Global Justice XML framework and expanded it to accommodate information representations in multiple business lines.

Finding Universal Terms

Those additions enabled NIEM to tackle a complex real-world problem – the fact that the hundreds of justice, homeland security, and other programs in the U.S. use many different terms for the same thing.

For example, one agency might use the term “police officer,” another might favor “law enforcement officer,” and another might say “deputy.” NIEM can address many different synonyms and yet identify them with a single universal term that all the systems understand.

Another NIEM strength: It offers software tools that agencies can use to build customized information exchanges. The NIEM website provides a reference to a GTRI-built tool that lets users specify their exact information exchange requirements and build their own NIEM-based standard.

“Developers can literally type in their own requirements – give me one of these and one of those,” Wandelt said. “So you’re able to build your own information exchange without starting from scratch, and it will work with the other information exchanges that use the NIEM framework and specifications.”

And as members of the agency community come up with new information requirements to represent, the groups that oversee NIEM can add them to upgraded versions of the model, extending its capabilities. NIEM is also self-documenting, meaning that its XML representation is easier to understand because it uses extensive descriptive phrases that basically label and define each component in the model.

“You could represent a piece of information in 10 possible ways, but NIEM tells you to represent it this way,” Wandelt said. “Many different stakeholders worked together with the GTRI team to identify the best way to represent each piece of information in NIEM.”

NIEF: Building Secure Access

The developers also faced another concern: how to keep the new information sharing system safe from unauthorized users. The key problem was how to offer ready but secure data access to people from many decentralized agencies.

The winning concept – federated identity – established a totally separate user-identity provider. Beginning in 2005, and working closely with the Global Security Working Group, GTRI formally defined the standard specifications for this approach, referred to as Global Federated Identity and Privilege Management (GFIPM). By 2008, GTRI had implemented an operational pilot for GFIPM, known as the National Identity Exchange Federation (NIEF).

“NIEF provides for a trust framework that supports federated identity, and credential and access management; it serves as a trusted third party that performs the necessary due diligence and conformance testing to support trusted interoperable exchange of identity and authorization information among agencies,” explained Wandelt, who serves today as NIEF’s executive director.

The GTRI GFIPM team built the NIEF trust framework using Security Assertion Markup Language (SAML), an XML-based open-standard tool for exchanging authentication and authorization data. GTRI and the pilot partners established a NIEF Center at Georgia Tech, where it continues to support justice and other government agencies.

Developing Trustmarks

To facilitate interoperability between NIEF and other government trust frameworks – such as Federal Identity, Credential and Access Management (FICAM) and GFIPM – GTRI also developed Trustmarks technology.

NISTTrustmarks was initiated as a NIST National Strategy Trusted Identities in Cyberspace (NSTIC) pilot project for Scaling Interoperable Trust in a Trustmark Marketplace. The goal was to address the fundamental “inter-federation problem” that was beginning to emerge across the country.

Before establishment of the FICAM program, identities were locked in application silos. Now, digital identities are increasingly locked in independent trust framework or federation silos.

The objective of the GTRI-developed Trustmark framework is to break down these silos and to bridge wide-scale trust. Today, the Trustmark framework is fully deployed in NIEF.

Trustmarks uses XML to make the documents that list the specifications for each framework machine-readable. That capability facilitates pinpointing and resolving the differences between these complex frameworks.

GSA logoRecently, the U.S. General Services Administration (GSA), which oversees the FICAM program, approved NIEF as a trust framework provider for FICAM, establishing NIEF as a FICAM TFS. This means that NIEF, which has been primarily focused on serving justice, security, and public safety groups, can now act as a qualified trust framework provider for any government agency.

“Thanks to past and present efforts by Global members and others, we’ve established a robust, secure, trusted information sharing environment that allows all agencies needing to share information to communicate readily with one another,” Wandelt said.

Research projects mentioned in this article are supported by sponsors that include the Bureau of Justice Assistance (BJA), the Department of Homeland Security (DHS), the National Institute of Standards and Technology (NIST), and the Program Manager for the Information Sharing Environment (PM-ISE). Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the principal investigators and do not necessarily reflect the views of BJA, DHS, NIST, or PM-ISE.