Companies pay millions to settle alleged false billings on GSA Schedule and DoD contracts

At year’s end, the Department of Justice (DOJ) announced multi-million dollar false claims settlements with a pair of large contractors in connection with billing practices on GSA Schedule contracts.

  • Iron Mountain Incorporated and Iron Mountain Information Management LLC (collectively Iron Mountain) has paid $44.5 million to resolve allegations under the False Claims Act that Iron Mountain overcharged federal agencies for record storage services , the DOJ announced Dec. 19, 2014.  Iron Mountain is a records storage company headquartered in Boston.
  • Lockheed Martin Integrated Systems (LMIS) agreed on Dec. 22, 2014 to repay the government $27.5 million to settle over-billing charges brought under the False Claims Act on a contract producing products and services for U.S. troops in Iraq and Afghanistan.

Justice Dept. seal“Protecting the federal procurement process from false claims is central to the mission of the Department of Justice,” Acting Assistant Attorney General Joyce Branda said. “We will continue to ensure that when federal monies are used to purchase commercial services the government receives the prices and services to which it is entitled.”

The settlement with Iron Mountain relates to contracts under which the firm provided record storage services to government entities from 2001 to 2014 through GSA’s Multiple Award Schedule (MAS) program.  The MAS program provides the government with a streamlined process for procurement of commonly used commercial goods and services.  The settlement resolves allegations that Iron Mountain failed to meet its contractual obligations to provide GSA with accurate information about its commercial sales practices during contract negotiations, and failed to comply with the price reduction clause of the GSA contracts by not extending lower prices to government customers during its performance of the contracts.  It also resolves an allegation that Iron Mountain charged the United States for storage meeting National Archives and Records Administration requirements when the storage provided did not meet such requirements.

“Contractors that knowingly bill the government in violation of contract terms will face serious consequences,” Branda said of the Lockheed Martin settlement. “The department will ensure that those who do business with the government, and seek taxpayer funds, do so fairly and in accordance with the applicable rules.”

LMIS is a subsidiary of Lockheed Martin Inc., which is headquartered in Bethesda, Maryland.  The alleged labor mischarging occurred on the Rapid Response (CR2) contract and the Strategic Services Sourcing (S3) contract, both issued by the U.S. Army Communication and Electronics Command (CECOM).  CECOM is located at Fort Monmouth, New Jersey, and at the Aberdeen Proving Group in Maryland.  The purpose of the CR2 and S3 contracts is to provide rapid access to products and services to be provided to the Army in Iraq and Afghanistan. Individual task orders then are separately negotiated, based on these contracts, to quickly meet the needs of CECOM.  LMIS allegedly violated the terms of the contracts by using under-qualified employees who were billed to the United States at the rates of more qualified employees.  The overbilling allegedly resulted in greater profit for LMIS.

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Former security contractor CEO agrees to pay $4.5 million to settle civil claims

Keith Hedman, 55, of Arlington, Virginia, the former chief executive officer of a Virginia-based security contracting firm, Protection Strategies, Inc. has agreed to pay $4.5 million to settle civil claims relating to his involvement in a fraudulent scheme to create a front company to obtain contracts through the Small Business Administration’s Section 8(a) program.  The Section 8(a) program allows qualified small businesses to receive sole-source and competitive-bid contracts set aside for minority-owned and disadvantaged small businesses.

Dana J. Boente, U.S. Attorney for the Eastern District of Virginia, made the announcement after the settlement agreement was signed by both parties. “The civil settlement illustrates the importance of not stopping at a criminal resolution when a defendant has pled guilty to fraud against the government,” said U.S. Attorney Boente.

The settlement resolves civil claims against Hedman relating to the criminal plea entered by him in U.S. v. Hedman,1:13cr74. According to court records, in or about 2001 Hedman formed PSI, which was approved to participate in the 8(a) program based on the 8(a) eligibility of its listed president and CEO, an African-American female. When the listed president and CEO left PSI in 2003, Hedman became its sole owner, and the company was no longer 8(a)-eligible.

Keep reading this article at: http://www.alexandrianews.org/former-security-contractor-ceo-agrees-to-pay-4-5-million-to-settle-civil-claims/

 

Corruption, bribery rampant in government contracting, key witness in case says

Even before he competed for his first government job, the key witness in the largest bribery case in federal contracting history said an associate warned him that he’d have to “pay to play,” according to a recent jailhouse letter.

Alex Cho said he began work as a contractor because he thought doing business with the U.S. government would be an honest way to make a living — a notion he quickly abandoned.

“In planning to get into this field, I actually thought I would be getting away from dishonesty,” Cho told U.S. District Judge Emmet G. Sullivan in a lengthy letter from the D.C. Jail — his first public remarks on the historic $30 million corruption scam that has resulted in 20 guilty pleas.

The ringleader, Army Corps program manager Kerry Khan, extracted millions of dollars in kickbacks from corrupt contractors for years. But Cho said Khan also made other “absurd demands.”

Keep reading this article at: http://www.washingtontimes.com/news/2014/dec/14/corruption-rampant-government-contracting-key-witn/

GAO partially upholds bid protest against embattled security clearance contractor

Security clearance contractor USIS suffered another in a series of setbacks Monday when the Government Accountability Office partially upheld a bid protest that removes the company from a contract it was given by the Homeland Security Department.

DHS had awarded a $210 million Field Office Support Services contract to USIS in July after the Office of Personnel Management said it wouldn’t do business with the company anymore.

The OPM decision was prompted by claims by the Justice Department that say the Falls Church, Va.-based security contractor took shortcuts and submitted files to the government that had not undergone a full review.

Keep reading this article at: http://www.fiercegovernment.com/story/gao-partially-upholds-bid-protest-against-embattled-security-clearance-cont/2014-10-22

7 agencies where contract spending sped up despite the sequester

Overall, the federal government’s spending on contracts was down 11 percent last year, Bloomberg reported April 22, 2014.

The sequester, other budget cuts, and the drawdown in Iraq and Afghanistan took a toll on spending at 12 of 19 major agencies, with Defense Department spending down nearly 15 percent  over fiscal 2012 and business with the U.S. Agency for International Development down 17 percent.

But seven departments managed to buck the general downward trend. They are:

1)      Homeland Security (2.1 percent increase over fiscal 2012)

2)      Health and Human Services (4.6 percent increase)

3)      Veterans Affairs (5.3 percent increase)

4)      Justice (7 percent increase)

5)      Housing and Urban Development (9.5 percent increase)

6)      Treasury (16.4 percent increase)

7)      Education (27 percent increase)

This article may be found at:  http://www.govexec.com/contracting/2014/04/7-agencies-where-contract-spending-sped-despite-sequester/82987

Major departments seek continuous monitoring acquisition independence from DHS

Some federal agencies are choosing to buy continuous monitoring tools independently of the Homeland Security Department’s Continuous Diagnostics and Mitigation Program despite forfeiting DHS procurement money for those tools when doing so.

Those agencies have sought and received a “delegation of procurement authority” from the CDM program. That means they are able to use the blanket purchase agreements for security tools set up by GSA for the CDM program. But, if they exercise the delegation by buying tools themselves rather than through program office, they do it “with their own money,” said Jim Piché, a GSA acquisition manager newly appointed to overseeing the blanket purchase agreements.

A GSA spokeswoman said the agency won’t release a list of the agencies that received a delegation.Piché spoke Wednesday during a Washington, D.C. industry-sponsored panel on the program.

An industry source says agencies with a delegation include the departments of Agriculture, Homeland Security, Justice and Veterans Affairs.

Keep reading this article at: http://www.fiercegovernmentit.com/story/major-departments-seek-continuous-monitoring-acquisition-independence-dhs/2014-03-19

OPM: Contractors will no longer review their own background checks

The federal government will no longer use contractors to review the quality of their own background checks, instead relying on its own employees to do the audits.

Office of Personnel Management Director Katherine Archuleta said in a statement on Thursday that she would make the process ”fully federalized” starting on Feb. 24. “This decision acts as an internal quality control preventing any contractor from performing the final quality review of its own work,” she said.

Keep reading this article at: http://www.washingtonpost.com/blogs/federal-eye/wp/2014/02/07/opm-contractors-will-no-longer-review-their-own-background-checks/?wpisrc=nl_fed 

Audit planned in fraud case as Navy reinstates shipper

The Navy has quietly lifted the suspension of a shipping contractor under investigation for possible fraud, allowing the company to compete for new work. In exchange, the company has agreed to pay for an independent audit that could help the Justice Department determine how much it may have overcharged the government.

Records show that the Navy recently decided to reinstate Inchcape Shipping Services, a company based in Dubai in the United Arab Emirates. The move came after a federal judge questioned whether the service had presented enough evidence to justify the suspension.

Contracting experts said it was unusual for the government to turn to an outside auditor in this type of case, and some questioned whether an independent firm could do as thorough a job.

The auditing firm must be approved by the Justice Department, which is conducting a civil fraud inquiry into whether the company systematically overcharged the Navy in providing provisions and sewage-removal services for warships in the Middle East and Africa. Officials said the audit could help spur settlement talks between Inchcape and the Justice Department.

Keep reading this article at: http://www.nytimes.com/2014/02/01/us/navy-contractor.html?_r=0 

Top contractor for background checks charged with fraud

The contractor that performed federal background checks on such headline personalities as National Security Agency leaker Edward Snowden and Navy Yard shooter Aaron Alexis has been accused of fraud by the Justice Department.

Falls Church, Va.,-based USIS, which had already been the subject of a False Claims Act suit filed by former employee Blake Percival, drew the intervention from Justice’s Civil Division because it “failed to perform quality control reviews in connection with its background investigations for the U.S. Office of Personnel Management,” Justice said in a complaint filed Wednesday.

Under the False Claims Act’s qui tam, or whistleblower provisions, a private party is eligible to sue on the government’s behalf and may receive a financial settlement. After a preliminary investigation of Percival’s claims, the department asked a U.S. District Court in Alabama to allow it to file its own complaint against USIS by Jan. 22, 2014.

“We will not tolerate shortcuts taken by companies that we have entrusted with vetting individuals to be given access to our country’s sensitive and secret information,” Assistant Attorney General Stuart Delery said in the complaint, which was prepared last fall. “The Justice Department will take action against those who charge the taxpayers for services they failed to provide, especially when their nonperformance could place our country’s security at risk.”

Keep reading this article at: http://www.govexec.com/contracting/2014/01/top-contractor-background-checks-charged-fraud/77453/?oref=govexec_today_nl

Expect sequestration to hit much harder in 2014, report says

Less severe cuts, deferred costs and temporary solutions mitigated sequestration’s effect in its inaugural year, but will not help lessen the impact in 2014, according to a new report.

The Center for American Progress, a liberal think tank, said the tactics federal agencies used to reduce furloughs in fiscal 2013 are, in many cases, no longer available. In fact, they will largely accentuate the severity of the cuts this time around.

For example, Congress allowed the Federal Aviation Administration to move funds from an account meant to provide maintenance to airports nationwide to avoid furloughs of air traffic controllers that would have delayed flights. Similar budgetary “gimmicks” were employed at the Agriculture Department to stave off furloughs of meat inspectors and by the Justice Department, which has already announced plans of 10 furlough days for FBI agents in 2014.

Every major federal agency reduced its furlough projections in fiscal 2013, though that will likely be impossible this year, the report found.

Keep reading this article at: http://www.govexec.com/management/2013/11/expect-sequestration-hit-much-harder-2014-report-says/74366