Fraud | The Contracting Education Academy

December 12, 2018 By cs

Oversight of U.S. military’s food suppliers called into question after fraud indictment

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.

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.

Keep reading this article at: https://www.washingtonpost.com/business/2018/12/08/oversight-us-militarys-food-suppliers-called-into-question-after-fraud-indictment/

November 16, 2018 By cs

Captain from Georgia is latest Navy officer caught in ‘Fat Leonard’ corruption

The 350-pound Leonard Glenn Francis — known in Navy circles as “Leonard the Legend” for his wild-side lifestyle — spent decades cultivating relationships with Navy officers, many of whom developed a blind spot to his fraudulent ways. In the past three years, 33 defendants have been charged and 22 have pleaded guilty, many admitting to accepting things of value from Francis — also known as “Fat Leonard” — in exchange for helping the contractor win and maintain contracts and overbill the Navy by millions of dollars.

On Tuesday, Nov. 13, 2018, another Navy captain pleaded guilty to criminal conflict of interest charges and a former Navy master chief was sentenced to 17 months in prison today on corruption charges. The defendants are among the latest U.S. Navy officials to plead guilty and be sentenced in the expansive corruption and fraud investigation involving foreign defense contractor “Fat Leonard” Francis and his Singapore-based ship husbanding company, Glenn Defense Marine Asia (GDMA).

Jeffrey Breslau of Cumming, Georgia pleaded guilty to one count of criminal conflict of interest before U.S. District Judge Janis Sammartino of the Southern District of California. Breslau was charged in September 2018. Retired Master Chief Ricarte Icmat David of Concepcion, Tarlac, Philippines, was sentenced by Judge Sammartino, who also ordered him to serve a year of supervised release and pay restitution of $30,000. David was charged in August 2018 and pleaded guilty in September to one count of conspiracy to commit honest services wire fraud.

According to admissions made as part of his guilty plea, from October 2009 until July 2012, Breslau was a captain in the U.S. Navy assigned as director of public affairs for the U.S. Pacific Fleet, headquartered in Pearl Harbor, Hawaii. As part of his duties, Breslau was involved in devising the Navy’s public affairs communications strategy, and provided public affairs guidance to Pacific Fleet components and other Navy commands. From August 2012 until July 2014, Breslau was assigned to the commanding officer for the Joint Public Affairs Support Element in Norfolk, Virginia, where he was responsible for leading joint crisis communications teams.

Breslau admitted that from March 2012 until September 2013, while serving in the Navy, he provided Francis with public relations consulting services, including providing advice on how to respond to issues and controversies related to Francis’s ship husbanding business with the Navy. These included issues related to port visit costs, allegations of malfeasance such as the unauthorized dumping of waste, disputes with competitors, and issues with Pacific Fleet and contracting personnel. During the course of his consulting agreement with Francis, Breslau authored, reviewed or edited at least 33 separate documents; authored at least 135 emails providing advice to Francis; provided at least 14 instances of “talking points” in advance of meetings between Francis and high ranking Navy personnel; and “ghostwrote” numerous emails on Francis’s behalf to be transmitted to Navy personnel. During the course of this consulting agreement, Francis paid Breslau approximately $65,000 without Breslau disclosing the agreement to the Navy, Breslau admitted.

As part of his guilty plea, David admitted that he was assigned various logistics positions with the Navy’s Seventh Fleet, including with the Fleet Industrial Supply Center in Yokosuka, Japan from June 2001 to July 2004; on the USS Essex from July 2004 to August 2007; on the USS Kitty Hawk from September 2007 to August 2008; and on the USS George Washington from September 2008 to July 2010. In these positions, David was responsible for ordering and verifying goods and services for the ships on which he served, including from contractors during port calls. Throughout this period, David received from Francis various things of value, including five star hotel rooms during every port visit, he admitted.

David further admitted that he repeatedly facilitated fraud by allowing Francis and GDMA to inflate the husbanding invoices to bill for services never rendered. For example, David instructed Francis to inflate invoices for the USS Essex’s anticipated November 2007 port visit to the Philippines. As David transitioned to a new position aboard the nuclear aircraft carrier USS Kitty Hawk, on or about May 8, 2008, Francis’s company paid approximately 84,637.00 Hong Kong Dollars (HKD) for hotel reservations at the Grand Hyatt Hong Kong for Navy personnel assigned to the USS Kitty Hawk including 10,396 HKD for David’s four-night stay in a Harbor View Room, David admitted.

Francis pleaded guilty in 2015 to bribery and fraud charges, admitting that he presided over a massive, decade-long conspiracy involving “scores” of U.S. Navy officials, tens of millions of dollars in fraud and millions of dollars in bribes and lavish gifts, including luxury travel, airline upgrades, five-star hotel accommodations, top-shelf alcohol, the services of prostitutes, Cuban cigars, Kobe beef and Spanish suckling pigs.

The case was investigated by DCIS, NCIS and the Defense Contract Audit Agency.

For earlier reports on this scandal, see: https://contractingacademy.gatech.edu/?s=fat

Source: https://www.justice.gov/opa/pr/former-us-navy-captain-pleads-guilty-and-former-master-chief-petty-officer-sentenced-sweeping

October 15, 2018 By cs

Two intelligence officials and a business owner indicted for bid rigging

Three individuals have been indicted by a federal grand jury on a variety of charges relating to procurement fraud and unlawfully disclosing and obtaining bid information concerning a contract estimated to be worth almost $1.5 million.

Kevin Kuciapinski was an active duty U.S. Air Force Major working at the National Reconnaissance Office (NRO). Randolph Stimac was an employee of the National Security Agency (NSA). Both were stationed at the Aerospace Data Facility-Colorado on Buckley Air Force Base. The third defendant, Mykhael Kuciapinski was the owner and CEO of Company G, a company that attempted to do business with the U.S. Government. She was also the wife of Kevin Kuciapinski through July 2015.

According to the indictment released by the Justice Department, beginning on August 1, 2013, and continuing through November 24, 2015, the defendants conspired with each other to unlawfully obtain and disclose source selection information prior to the award for services related to a contract for services related to NSA, a category of intelligence that involves the collection, processing, and dissemination of foreign communications in order to obtain foreign intelligence necessary to the national defense, national security, or the conduct of the foreign affairs of the United States. The alleged plan and purpose of the conspiracy was for Kevin Kuciapinski and Randolph Stimac to provide a competitive advantage to defendant Mykhael Kuciapinski’s bid or proposal by providing her information and source selection information for the contract in question.

This case was investigated by the NRO Office of the Inspector General, NSA, Defense Criminal Investigative Services, Air Force Office of Special Investigations, and the IRS-Criminal Investigation.

The charges contained in the indictment are allegations, and the defendants are presumed innocent unless and until proven guilty.

Source: https://www.justice.gov/usao-co/pr/two-intelligence-officials-and-business-owner-indicted-bid-rigging

September 21, 2018 By cs

VA official charged with taking bribes to help associates rig federal contracting process

Three men were arrested in Colorado on Wednesday of this week pursuant to warrants issued in connection with an indictment charging them with conspiring to pay and receive bribes in exchange for creating an opportunity to commit a fraud against the U.S. Department of Veterans Affairs (VA).

The defendants are also charged with paying and receiving bribes, or aiding and abetting the payment of bribes.

Dwane Nevins, a VA contracting official at the time of the alleged crimes, was separately charged in another count with extortion under color of official right and in two counts with violating the federal conflict of interest statute.

The following is alleged in the indictment:

Dwane Nevins — a small business specialist at the VA’s Network Contracting Office in Colorado — agreed to take bribes offered by Robert Revis, Anthony Bueno and an undercover FBI agent to help them manipulate the process for bidding on federal contracts with the VA.
Revis and Bueno, working with Nevins, agreed to submit fraudulent bids from service-disabled-veteran-owned small businesses under contract with their consulting company so that federal contracts would be set aside for only those companies. As Bueno allegedly explained, they would then “own all the dogs on the track.”
Nevins, Bueno and Revis worked to conceal the nature of the bribe payments by either kicking back to Nevins a portion of the payments made to their consulting company, or by asking their consulting company’s clients to pay Nevins for sham training classes related to federal contracting.

The indictment also alleges that, after complaining about not being paid by Revis and Bueno for his participation in the scheme, Nevins used his official position at the VA to extort approximately $10,000 from an undercover FBI agent, telling the agent that “the train don’t go without me. You know what I mean? I’m the engine. I’m the caboose. I’m the engine room.” Nevins also allegedly told the undercover FBI agent: “This is a business and businessmen need to get paid . . . . so I can have my Christmas, you know what I’m saying?”

The indictment alleges that the conspirators attempted to rig the process related to two particular contracts, both of which related to medical equipment and not to the construction of any VA facilities. The first contract related to the procurement of LC bead particle embolization products by a VA hospital in Salt Lake City, and the second contract related to the procurement of durable medical equipment for VA facilities located throughout the region.

The case was jointly investigated by the Federal Bureau of Investigation, the U.S. Department of Veterans Affairs Office of Inspector General, and the U.S. Small Business Administration Office of Inspector General.

Readers are reminded that the defendants are presumed innocent unless and until proven guilty in a court of law.

September 17, 2018 By cs

Men indicted for providing falsely-labeled body armor

Two Florida executives made their initial appearance in federal court on Sept. 7, 2018 on charges related to falsely-labeled hard body armor plates they provided to the United States government.

According to allegations in the indictment, Dan Thomas Lounsbury, Jr., of South Palm Beach, is the founder, sole owner, and CEO of Tactical Products Group, LLC (TPG), a Florida-based manufacturer and re-seller of various products to military, law enforcement, and private security clients. Andres Lopez-Munoz, 34, of Boynton Beach, is TPG’s Vice President for Sales and Federal Contracting.

In 2012, TPG was selected as a sub-contractor on a contract to provide certain goods, including ten sets of hard body armor plates, to the United States government.

The government had requested a specific type of plate, and Lounsbury and Lopez-Munoz both knew that no substitutions were allowed.
Furthermore, Lounsbury and Lopez-Munoz both knew that these plates would be used to protect government personnel. The consequence of a failure of body armor is death or serious bodily injury.
Nevertheless, Lounsbury and Lopez-Munoz worked together to procure cheaper substitute plates, and then to put fraudulent labels on these substitute plates falsely stating that they were the type of plates that the government had required.
Some of these cheaper substitute plates were far outside their warranty period, were not as protective as the false labels claimed, and had the potential to “delaminate,” meaning that the adhesive binding the layers of the body armor plate could fail, under certain conditions.

Lounsbury and Lopez-Munoz are both charged with conspiracy to defraud the government with respect to claims and wire fraud. Lounsbury is additionally charged with false, fictitious, or fraudulent claims. If convicted, they face a maximum penalty of 20 years in prison. Actual sentences for federal crimes are typically less than the maximum penalties. A federal district court judge will determine any sentence after taking into account the U.S. Sentencing Guidelines and other statutory factors.

Readers are reminded that 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.

Source: https://www.justice.gov/usao-edva/pr/men-indicted-providing-falsely-labeled-body-armor

Three individuals have been indicted by a federal grand jury on a variety of charges relating to procurement fraud and unlawfully disclosing and obtaining bid information concerning a contract estimated to be worth almost $1.5 million.

Three men were arrested in Colorado on Wednesday of this week pursuant to warrants issued in connection with an indictment charging them with conspiring to pay and receive bribes in exchange for creating an opportunity to commit a fraud against the U.S. Department of Veterans Affairs (VA).

Two Florida executives made their initial appearance in federal court on Sept. 7, 2018 on charges related to falsely-labeled hard body armor plates they provided to the United States government.

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