fraud | The Contracting Education Academy

December 12, 2019 By cs

GAO says DoD’s fraud assessment efforts should include examination of contractor ownership

Some companies doing business with the Defense Department have opaque ownership structures that may conceal who owns, controls, or benefits from the company.

This GAO illustration depicts how DoD’s use of an ineligible foreign manufacturer — that illegally exported sensitive military data and provided defective and nonconforming parts — led to the grounding of at least 47 U.S. fighter aircraft.

The Government Accountability Office (GAO) recently identified fraud and national security risks to DoD from opaque ownership such as ineligible contractors receiving contracts and foreign firms receiving sensitive information through U.S.-based companies.

These risks, identified through GAO’s review of 32 adjudicated cases, include price inflation through multiple companies owned by the same entity to falsely create the appearance of competition, contractors receiving contracts they were not eligible to receive, and a foreign manufacturer receiving sensitive information or producing faulty equipment through a U.S.-based company.

For example, one case involved an ineligible foreign manufacturer that illegally exported sensitive military data and provided defective and nonconforming parts that led to the grounding of at least 47 fighter aircraft.

The GAO reports that DoD has taken some steps that could address some of the risks related to contractor ownership in the procurement process but has not yet assessed these risks across the department. DoD, in coordination with other agencies, revised the Federal Acquisition Regulation (FAR) in 2014 to require contractors to self-report some ownership information. In addition, DoD has taken steps to identify and use ownership information — for example, as part of its supply-chain risk analysis when acquiring critical components. DoD has also begun a department-wide fraud risk management program but, according to GAO, it has neither assessed risks of contractor ownership across the department nor identified risks posed by contractor ownership as a specific area for assessment.

GAO contends that assessing risks arising from contractor ownership would allow DoD to take a strategic approach to identifying and managing these risks, make informed decisions on how to best use its resources, and evaluate its existing control activities to ensure they effectively respond to these risks.

Keep reading this GAO report summary at: https://www.gao.gov/products/GAO-20-106#summary

November 27, 2019 By cs

New York-based company was caught allegedly selling Chinese-made hardware to the DoD

Aventura Technologies, based out of Long Island, New York, was just busted by the government after allegedly having fraudulently sold security gear to the U.S. military for years, racking up millions in federal contract money.

According to Aventura’s website, which as of November 12 is still up and running, the company claimed to be a “true single-source manufacturer providing end-to-end hardware and software solutions.”

Some of these hardware solutions included ground-based radar, turnstiles, and closed-circuit television systems, all of which the company claimed were manufactured in America. Between 2007 and 2018, Aventura reportedly supplied various branches of the U.S. military with over $20 million dollars of said equipment.

From November 2010 to the present day, it’s estimated that Aventura pulled in over $88 million in sales to both the government and the private sector.

The sting that eventually brought down Aventura was a few years in the making, including an anonymous tip in 2017, and the discovery of Chinese lettering on a body camera by Air Force personnel the following year.

Keep reading this article at: https://www.militarytimes.com/off-duty/gearscout/irons/2019/11/14/this-new-york-based-company-was-just-caught-allegedly-selling-chinese-made-hardware-to-the-dod/

November 11, 2019 By cs

DOJ announces ‘strike force’ to combat procurement crimes

The Justice Department announced last week the creation of a new interagency partnership to combat antitrust and procurement crimes.

The Procurement Collusion Strike Force will “deter, detect, investigate, and prosecute antitrust crimes and related criminal schemes,” said Assistant Attorney General Makan Delrahim at a press conference. The strike force will use a “district-based task force organization model” to facilitate cooperation between the Justice Department’s Antitrust Division, 13 Attorneys’ Offices, FBI and inspector general offices for Defense and Justice Departments, General Services Administration and U.S. Postal Service.

“When government contractors collude with each other to rig bids for government contracts at the federal, state, or local level, it leads to artificially higher prices for those goods or services. When the government has to pay those artificially higher prices, all American taxpayers are paying for it,” said Deputy Attorney General Jeffrey Rosen at the press conference. “Strike Force will better inform federal, state, and local government procurement communities about these criminal activities and how to detect and report them.”

Keep reading this article at: https://www.govexec.com/management/2019/11/justice-department-announces-strike-force-combat-procurement-crimes/161103/

October 21, 2019 By cs

The insidious threat of pay to play

The government contracting world is deeply vulnerable to fraud, says a former federal investigator.

News that a former FEMA administrator was arrested recently for taking bribes from a contractor — one who landed $1.8 billion in federal contracts to repair Puerto Rico’s electrical grid after Hurricane Maria — was hardly surprising to those of us who work in fraud risk management.

Why? Because, unfortunately, the government contracting world is deeply vulnerable to fraud. Given the huge amounts of money at stake and the power that federal officials have in deciding winners and losers among contractors, this dynamic can lead to a “pay to play” scenario among the less ethical on both sides of the contracting relationship.

The volume and similarity of government corruption cases are striking. In the most recent FEMA case, the contractor provided the government official with helicopter rides, hotel accommodations, first-class airfare, and the use of a credit card in exchange for choosing his company to repair Puerto Rico’s electrical grid. Last year, charges were brought against the defense contractors who allegedly provided Navy officials with gifts and luxury items that included cash, checks, retail gift cards and flat-screen televisions in return for $6 million in government contracts.

Keep reading this article at: https://www.govexec.com/management/2019/09/insidious-threat-pay-play/159935/

August 21, 2019 By cs

Former State Dept. employee pleads guilty to procurement fraud

The official had a social relationship with a furniture manufacturing executive, with whom she shared confidential contract information.

A former State Department official pleaded guilty last week to disclosing confidential proposal bids in an attempt to help a furniture company executive win a $1.56 million contract.

In December 2016, Patricia DeLaughter, former manager of the department’s Overseas Office Furniture Program, was working to solicit proposals for furnishing a new U.S. embassy when she and another department official knowingly disclosed the confidential bid prices and design plans of competitors to Steven Anstine, vice president of sales for an Overland Park, Kansas, manufacturing company, according to the Justice Department. Multiple news outlets, including The Post and Courier, identified the company as Bernhardt Furniture.

Keep reading this article at: https://www.govexec.com/management/2019/08/former-state-department-employee-pleads-guilty-procurement-fraud/159170/

Some companies doing business with the Defense Department have opaque ownership structures that may conceal who owns, controls, or benefits from the company.

Aventura Technologies, based out of Long Island, New York, was just busted by the government after allegedly having fraudulently sold security gear to the U.S. military for years, racking up millions in federal contract money.

The Justice Department announced last week the creation of a new interagency partnership to combat antitrust and procurement crimes.

The government contracting world is deeply vulnerable to fraud, says a former federal investigator.

The official had a social relationship with a furniture manufacturing executive, with whom she shared confidential contract information.

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