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SDDC PROCUREMENT FRAUD OVERVIEW

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DOJ Creates a Procurement Fraud Task Force ... Overcharging. Failure to Meet Legal Requirements. False Representations. Mail and Wire Fraud ... – PowerPoint PPT presentation

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Title: SDDC PROCUREMENT FRAUD OVERVIEW


1
SDDC PROCUREMENT FRAUD OVERVIEW
2
Agenda
  • Background
  • Government Policy
  • Types of Fraud Irregularities
  • Remedies - Statutory and Common Law
  • Misconceptions
  • Role of the Contracting Officer (KO)
  • Role of the Transportation Officer (TO)
  • New DFARS FAR Cases
  • Technology Protection
  • SDDC Program
  • Problems
  • POCs

3
Background
  • DOJ Creates a Procurement Fraud Task Force
  • Prosecuting Public Corruption is One of DOJs
    Top Priorities
  • When Public Servants Fail To Carry Out Their
    Duties With Integrity, The Public Treasury is
    Wasted, Civil Liberties are Threatened, and ,
    Perhaps Most Profoundly, Public Trust is eroded -
    the Very Trust that Gives Government its
    Legitimacy DAG Paul J. McNulty

4
Policy Prevent, Find, Fight
  • DOD DODD 7050.5 - Requires DOD Activities to
    Monitor, Investigate all Fraud or Corruption,
    Coordinate, Report, Pursue all Remedies and
    Provide Training.
  • All Government Personnel Have a Duty to Fight
    Fraud and Corruption.
  • Prevent, Find and Fight
  • Business Integrity is the Rule Not the Exception

5
Types of Fraud
  • Defective Product or Pricing
  • Product/Service Substitution
  • Anti-Trust - Bid-Rigging
  • Bribery and Public Corruption
  • False Invoices
  • Conflicts of Interests
  • Overcharging
  • Failure to Meet Legal Requirements
  • False Representations
  • Mail and Wire Fraud

6
Remedies
  • Criminal
  • Civil
  • Administrative
  • Contractual

7
Criminal
  • Conspiracy - 18 USC 371
  • Conspiracy to Defraud (claims) 18 USC 286
  • False Claims - 18 USC 287
  • False Statements - 18 USC 1001
  • Fraud and Swindles (Mail) - 18 USC 1341
  • Fraud by Wire, Phone, Television 18 USC 1343
  • Anti-Trust - 15 USC 1
  • Bribery and Gratuity- 18 USC 201
  • Major Fraud Act - 18 USC 1031

8
Civil
  • Civil False Claims Act (FCA) 31 USC 3729
  • Powerful Weapon Against Fraudulent Billings
  • Treble Damages, Fine 6,000 - 11,000 Per Claim
  • Qui Tam Provision - Rewards Whistleblower

9
Qui Tam
  • Big Money
  • Relator Files Complaint and a Statement of
    Evidence
  • Under Seal - Prohibition Against Disclosure
  • DOJ has 60 Days to Join Case
  • If DOJ Joins, Then They Conduct Case and Relator
    Gets a Small Percentage of the Damages
  • DOJ Declines Case - Relator Pursues Case Gets
    25-30

10
Administrative Remedies
  • Suspension Temporary Until Outcome
    Investigation
  • Debarment Usually for a Definite Period Usually
  • Carrier Nonuse (ITO - 90 Days)
  • Carrier Disqualification lt2 Years

11
Contract Remedies
  • Voiding or Rescind Contract
  • Termination for Default
  • Suspending Payments
  • Damages

12
Misconceptions
  • These Fraud Laws do not Apply to Transportation
    Procurements
  • A Transportation Officer (TO) is Not a
    Contracting Official
  • A Bill of Lading is Not a Contract
  • An Invoice Must be a Written Document Submitted
    to the Government for Payment
  • ALL of These are Incorrect

13
Procurement Officials
  • Both Contracting Officer (KO) and TO are
    Procurement Officials
  • They are Both Held to a Higher Standard of
    Conduct A Greater Duty to Prevent Fraud
  • KOs Procurement Authority is Based on the FAR
  • TOs Procurement Authority is Based on the
    Defense Transportation Regulation - Limited to
    Non-FAR Transportation Contracts

14
Contracts
  • A Contract is a Legally Enforceable Agreement
  • FAR Contract is a Government Contract
  • A Bill of Lading is a Government Contract
  • A Purchase or Delivery Order is a Government
    Contract
  • Order Under the Government Commercial Purchase
    Card is a Contract
  • Procurement Fraud is Found in all Types of
    Contracts

15
POWERTRACK
  • POWERTRACK - Is Not a Government Payment
    -Incorrect.
  • An Invoice Submitted in POWERTRACK is an Invoice
    Subject to the False Claims Act (ACT)
  • Any Invoice Submitted in Order to Receive
    Government Funds is Potentially Subject to the Act

16
Recent FAR Cases
  • Combating Trafficking in Persons 52.222-50
  • Representations and Certifications Tax
    Delinquency - FAR Case 2006-001, 3/30/07
  • Contractors Code of Ethics and Business Conduct
    Case FAR Case 2006-007, 2/16/07

17
Technology Protection
  • Protect National Security by Preventing
    Technology Transfer
  • Export Control Act 22 USC 2778
  • International Trafficking in Arms Regulations -
    22 CFR 120-130
  • Export Administration Act 50 USC 2401-2420
  • United States Munitions List, 22 CFR Part 121
    https//pmddtc.state.gov/docs/ITAR/2006/ITAR_Part_
    121.pdf
  • Commerce Control List - http//www.access.gpo.g
    ov/bis/ear/pdf/indexccl.pdf
  • Some of the Countries China, Syria, North
    Korea, Iran, Lybia, Former U.S.S.R.

18
Munitions List Items
  • I - Firearms
  • Il - Artillery Projectors
  • Ill - Ammunition
  • IV - Launch Vehicles
  • V - Explosives, Propellants, Incendiary Agents
  • VI - Vessels of War and Special Naval Equipment
  • VII Tanks and Military Vehicles
  • VIII Aircraft and Equipment
  • IX Military Training Equipment
  • X Protective Personnel Equipment

19
Munitions List Items Continued
  • XI Military Electronics
  • XII Fire Control, Range Finder, Optical and
    Guidance and Control Equipment
  • XIII Auxiliary Military Equipment
  • XIV Toxicological Agents and Equipment and
    Radiological Equipment
  • XV Spacecraft Systems and Associated Equipment
  • XVI Nuclear Weapons Design and Related
    Equipment
  • XVII Classified Articles, Technical Data and
    Defense Services Not Otherwise Enumerated
  • XVIII and XIX Reserve
  • XX Submersible Vessels, Oceanographic and Ass.
    Equipment
  • XXI Miscellaneous Articles

20
Technology Protection
  • Become Aware of What is USML Cargo
  • Who is Transporting Your USML Cargo?
  • If You Routinely Ship USML Cargo, Then do You
    Have a Pattern a Terrorist Can Exploit?
  • Have You Address USML Protection With Your Local
    Force Protection Office or Law Enforcement
    Office?
  • Have You Notice Unusual or Specious Behavior
    About USML Items or Shipments?
  • Do You Use the Same Carrier(s)?
  • What Do You do if a MSML Becomes Astray?

21
SDDC PF Program
  • SJA
  • PFA 3
  • CID

22
Cradle To Grave
  • Prevention - Training and Requirements (Contract
    Performance or Regulatory)
  • SDDC Uses PF Indicators to Identified Possible PF
  • Report - Possible Fraud
  • Coordinate Investigations
  • Provide Support to PFB, DOJ, Investigations and
    Other Agencies
  • Monitor Contract Performance
  • Works Closely With TOs, KOs and Shipping
    Activities

23
A Winning Combination
  • Cooperation
  • Coordination
  • Communication
  • Constant Vigilance

24
Team Players
  • Army Procurement Fraud Branch (PFB)
  • Army Material Command (AMC)
  • SDDC
  • Commanders, KOs and TOs
  • Justice - AUSA and FBI
  • DOD - IG, DCIS
  • Investigative - CID, OSI, NCIS
  • Procurement Fraud Advisors (PFA)
  • Technical Experts KO, TO, Operators, Auditors
  • Informants
  • Government Agencies

25
Fraud Indicators
  • Services Continually Obtained From Same Source(s)
  • Requirements Designed to fit one Source or a few
    Source(s)
  • Award(s) to Other Than low Cost Carriers
  • Overriding the GFM to get Non-tender Prices or
    Services not Provided in the Tender
  • Avoiding Normal Contracting Methods
  • Providing Advance Requirement Information
  • Change Bid Price After Competitor Bids are
    Received

26
Fraud Indicators Continued
  • Evidence of Improper Communications or Social
    Contact
  • Discussions of Future Employment
  • Evidence of Collusion or Bid Rigging
  • Substitution of Service or Equipment
  • Favoritism Toward Contractor
  • Invoices for Payment for Services not Provided
  • Failure to Comply With Regulatory or Contractual
    Requirements

27
Active Cases
  • Currently SDDC has Over 60 Active Cases
  • From Investigation to Administrative Remedies
  • Often our Cases Affect More Than one Military
    Activity

28
Updated Cases
  • Gosselin World Moving - Convicted of Violating
    the Sherman Anti-Trust Act and for Conspiracy
  • Paid 6 Million Dollars in Criminal Penalties
  • Paid 865,000 Restitution - Joint and Severable
    With Pasha and Paid 800 Assessment
  • Civil Cases Still Pending
  • Operating Under an Army Compliance Agreement

29
Updated Cases
  • Pasha Group - Convicted of Violating the Sherman
    Anti-Trust Act and for Conspiracy
  • Paid 4.6 Million Dollars in Criminal Penalties
  • Paid 865,000 Dollars in Restitution - Joint and
    Severable with Pasha and Paid 800 Assessment
  • Civil Case Still Pending
  • Operating Under an Army Compliance Agreement

30
Update Cases
  • Allied Freight Forwarders, Inc. on 24 February
    2006 Pleaded Guilty of Violating the Sherman
    Anti-Trust Act. Pay 1,043,000 dollars. Awaiting
    Sentencing - Pending Administrative Remedies.
    Civil False Claim Case Pending
  • Cartwright Settled Their Related Civil Case for
    150,000
  • Gossilen, Pasha, Allied and Cartwright and Others
    Part of an Illegal Carte.

31
Updated Cases
  • Norfolk Conspiracy Cases - Improper Gifts
  • Thomas A. Perry - AIT Representative Convicted
    Sentence to 8 Months Imprisonment, 6 Months Home
    Detention, 3 Years Probation and Ordered to pay
    Over 540,000 in Restitution. Settle Civil False
    Claim Act Case Against Perry and his Company for
    543,055.36.
  • AIT - Civil Case Settle 4 Million
  • Gene Boyce, Navy Employee Convicted Sentenced to
    44 Months Imprisonment, pay Over 540,000 in
    Restitution.

32
Updated Cases
  • Teresa Stranigan - Criminal Conviction, 5 Months
    Imprisonment, 5 Years Probation, pay Restitution
    44,000
  • Allison R. Broda - Criminal Conviction, 12 Months
    Imprisonment and Probation
  • Christine Walker - Navy Employee 3 Years
    Probation

33
Updated Cases
  • Stephen Wiley, Rep. of Team Air Express (TAIF)
    Convicted and Sentenced to 6 Months Home
    Detention, 3 Years Probation and Order to pay
    Restitution. Wiley Settled Civil Case by Paying
    75,000.
  • Barbara Speller - Convicted Sentenced to 21
    Months Incarceration, 3 Years Probation and to
    pay 254,203.33 in Restitution.
  • Team Air - Settles Civil Case for 350,000.
    Entered Into a Compliance Agreement With Navy.

34
Transportation Cases
  • Eagle Global Logistics (EGL), Civil Case Settled
    by EGL Paying 4,000,000 and Entered Into a
    Compliance Agreement With the Army
  • Ryans World - Convicted Making False Statements,
    Required to pay 120,000 and Entered Into a
    Compliance Agreement
  • Emery Worldwide Airways - Settle False Claim Case
    (False Billings) for 10,000,000

35
Cases From the News
  • Kellogg Brown and Root (KBR) - Settle False Claim
    Case (Improper Billing and Non-conforming Goods)
    8,000,000
  • Congressman Randy Duke Cunningham -Convicted,
    Sentence to 100 Months Imprisonment and to pay
    1.8 Million in Restitution.
  • Jack Abramoff - Lobbyist Convicted - Conspiracy,
    Mail Fraud and tax Evasion. 70 Months
    Imprisonment, Restitution 21.7 Million and pay
    1.7 in Back Taxes.

36
How Do We Find Out
  • Employee (Government or Carrier)
  • Competitor
  • Relator - Files a Complaint
  • SDDC or DOD Audits - Looking for Fraud Indicators
  • Data Mining - Researching GFM and Other Database
    for Fraud Indicators
  • DOD Cargo Sold on E-bay and Other Venues
  • Missing Cargo Reported
  • Paper Trail - Review of Company Records
  • Vehicles - Out of Gas

37
Team Effort
  • Procurement Fraud Corrupts the Procurement
    Process, Waste Valuable Resources, and Reduces
    Military Readiness and Effectiveness
  • We all Need to Work Together to Prevent
    Procurement Fraud.
  • If You Suspect It, Then Report It.
  • Need to Promote Business Integrity and Ethics

38
Report To
  • DOD Hot Line (800-424-9098 or
  • Hotline_at_dodig.mil)
  • DOD Criminal Investigative Service (DCIS)
  • Federal Bureau of Investigation (FBI)
  • Naval Criminal Investigation Service (NCIS)
  • USA, Criminal Investigation Command (USACIDC)
  • Air Force Office of Special Investigations
    (AFOSI)
  • Local Commander

39
End
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