DoD contractor to pay $4.6 million to settle false claims at Fort Benning and Fort Bliss

L-3 Communications Corporation, Vertex Aerospace LLC and L-3 Communications Integrated Systems LP (collectively L-3) have agreed to pay $4.63 million to resolve allegations that they inflated labor hours for time spent by independent contractors at the military’s Continental U.S. Replacement Centers (CRC) in Fort Benning, Georgia, and Fort Bliss, Texas, preparing to deploy to overseas posts to support U.S. military operations abroad.  The CRCs prepare individuals for deployment by providing orientation briefings, training, health screenings, payroll processing and addressing other administrative matters.

Justice Dept. seal“The Justice Department is committed to vigorously pursuing all those who knowingly submit false claims under government contracts,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Contractors that seek taxpayer funds must be scrupulous in their billing, and invoice only for work and amounts permitted by their contracts.”

L-3 performed rotary aviation maintenance and support services for the U.S. Army in Afghanistan, Iraq, Egypt and Kuwait under contracts with the U.S. Air Force.  The United States alleges that from 2006 through November 2011, L-3 knowingly overcharged the government for time their independent contractors spent at the CRCs by billing for each individual not based on the actual time that individual spent at the CRC, but based instead on the earliest arrival or latest departure time of any other individual who also processed through the center that same day.

“Contractors owe a duty to the taxpayers to accurately bill the United States for the actual work performed,” said U.S. Attorney John Horn of the Northern District of Georgia.  “This settlement demonstrates our commitment to hold contractors accountable for false billing and restore wrongfully taken funds to the military.”

“This collaborative investigative effort reflects the Defense Criminal Investigative Service’s commitment to protecting American taxpayers’ interests by ensuring integrity and accountability throughout the Defense contracting system,” said Special Agent in Charge John F. Khin of the Defense Criminal Investigative Service (DCIS) Southeast Field Office.

“Today’s settlement is a testament to the hard work of our special agents and also highlights the importance of the whistleblower provision of the False Claims Act,” said Director Frank Robey of the U.S. Army Criminal Investigation Command’s Major Procurement Fraud Unit.  “In this particular case, a concerned citizen wasn’t afraid to speak up, alerted the proper authorities, and helped save the U.S. government millions of dollars.”

The allegations settled today arose from a lawsuit filed by a whistleblower, Robert A. Martin, a former L-3 independent contractor, under the qui tam provisions of the False Claims Act.  Under the act, private citizens can bring suit on behalf of the government for false claims and share in any recovery.  Mr. Martin will receive $798,675 from the recovery announced today.

This case was handled by the Civil Division’s Commercial Litigation Branch and the U.S. Attorney’s Office of the Northern District of Georgia, with the assistance of DCIS, the U.S. Army Criminal Investigation Command’s Major Procurement Fraud Unit and the Defense Contract Audit Agency.

The lawsuit is captioned United States ex rel. Martin v. L-3 Communications Corp., et al., 1:10-CV-1622-CAP (N.D. Ga.).  The claims resolved by the settlement are allegations only; there has been no determination of liability.


Top DoD acquisition official eases contractor fears about new Better Buying Power rules

Federal contractors shouldn’t worry about the Defense Department ramping up its oversight of independent research funding, said the DoD’s top acquisition official at an event in Arlington, Va. on Wednesday.

Frank Kendall, DoD undersecretary for acquisition, technology and logistics, told an audience at a Professional Service’s Council luncheon that by placing the funding under tighter scrutiny, DoD isn’t trying to dictate the kind of research coming out of the private sector.

Better Buying Power 3.0Contractors have taken issue with a section of the newest iteration of the Better Buying Power 3.0 Initiative which would add time and costs to the review process for DoD contracts participating in independent research and development, or IRAD.

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Former Georgia National Guard employee and two vendors sentenced in corruption scheme

Raytosha Elliott, a former contracting official with the Georgia National Guard, and the owners of two vendor companies have been sentenced to federal prison for a corruption scheme wherein Elliott awarded contracts to the vendors in exchange for illegal kickbacks.

Georgia National Guard“Elliott took advantage of her position with the Georgia National Guard, and awarded no-bid contracts to her friends in exchange for illegal kickbacks,” said U.S. Attorney John Horn.  “She and two of her friends stole over $150,000 in funds that were intended to maintain defense facilities and instead spent the money on themselves.”

“The sentencing of these individuals to federal prison will not only hold them accountable for their greed based criminal conduct, but will also send a clear message to others that might consider a similar scheme.  The FBI will continue to work with its various law enforcement partners to ensure that those individuals engaged in these types of activities are identified, investigated and presented for federal prosecution,” said J. Britt Johnson, Special Agent in Charge, FBI Atlanta Field Office.

FBI Seal“Corruption at any level diminishes the hard work and dedication of the thousands of government employees who are dedicated to providing honest services to the American public,” stated Veronica F. Hyman-Pillot, Acting Special Agent in Charge. “IRS Criminal Investigation stands committed to weed out individuals who misuse their job as a path to financial success by using greed and corruption.”

“This is a prime example of our determination, along with our fellow law enforcement agencies, to investigate allegations of criminal activity and corruption involving the National Guard and other DOD entities,” said Frank Robey, Director of the U.S. Army Criminal Investigation Command’s Major Procurement Fraud Unit.   “Regardless of the ‘scope and size’ of the allegations, our CID Special Agents are committed to working side-by-side with other agencies to help eradicate this type of activity.”

“The Defense Criminal Investigative Service is committed to protecting the integrity of the DOD contracting process, including the GA National Guard,” said John F. Khin, Special Agent in Charge, Southeast Field Office, Defense Criminal Investigative Service. “This sentencing sends a message to individuals who fail to follow the rules that along with our other law enforcement partners, violators will be brought to justice.”

“Accountability of violators is paramount when dealing with public corruption.  GBI’s partnership with the FBI in the Public Corruption Task Force is essential for continued public trust in Georgia.  When those who violate the law and violate public trust are held accountable, and go to jail – if this occurs, it sends a clear message that public corruption is not acceptable in this state,” said Vernon Keenan, Director, Georgia Bureau of Investigation.

“We hope these sentences serve as a deterrent to those who desire to pilfer the state and federal governments’ coffers. We also believe this case exemplifies how multiple agencies can work together to achieve a common goal: to serve the public who depends on us to defend the integrity of government programs. As in this case, our office will remain dedicated to protecting taxpayers’ money by continuously pursuing fraud, waste, abuse and corruption within the executive branch of state government,” said Deb Wallace, State Inspector General, Georgia Office of the Inspector General.

According to U.S. Attorney Horn, the charges and other information presented in court:  From May 2007 through April 2012, Elliott worked for the Georgia Department of Defense, the state agency charged with coordinating and supervising all agencies and functions of the Georgia National Guard.  Elliott worked as an Engineering Operations Manager at the Clay National Guard Center, located at Dobbins Air Reserve Base, in Marietta, Georgia.

In that position, Elliott worked with engineering firms to develop bid-ready construction projects, prepared bid documents, and oversaw no-bid purchase orders.  Under the rules governing the contracting process that Elliott oversaw, projects that cost less than $5,000 did not need to go through a competitive bidding process, allowing Elliott to award the contracts.  She certified that the work had been completed for those projects, and facilitated payment to the vendors who allegedly completed such projects.

Elliott awarded numerous contracts under $5,000 to vendor companies created by her friends and associates, including co-defendants Lakeysha Ellis and Angela Thicklin (f/k/a Angela Stanback Kinlaw).  In return, Ellis and Thicklin paid Elliott kickbacks, equal to 50% of the value of the contracts, for steering contracts to Ellis’ vendor company, Total Source Solution, LLC, and to Thicklin’s vendor company, 3M Construction LLC.

Elliott awarded Total Source Solution 17 contracts with a total value of approximately $75,000.  Elliott awarded 3M Construction 18 contracts with a total value of approximately $78,000.  The contracts were for a variety of services supposedly to be performed by the two companies, including electrical work, landscaping, and HVAC work.  But the work was never done.  Instead, the defendants split the money awarded under the contracts and spent it on personal items, including travel, meals, and merchandise.  As part of the scheme, Elliott owned a company named Tech Group Investments, LLC.  Ellis and Thicklin took money they received from the Georgia National Guard contracts, and paid kickbacks to Elliott through that company.  Elliott falsely certified that the work had been completed to facilitate payment by the Georgia National Guard.

Elliott and Ellis engaged in a similar fraud scheme from January 2009, through May 2011, when Ellis was an accountant at Baumueller-Nuermont Corporation, an industrial equipment company with offices in Atlanta.  Her job responsibilities included payroll and paying vendors.

While employed as Baumueller-Nuermont’s accountant, Ellis fraudulently funneled money to the defendants’ two sham companies, Total Source Solution and Tech Group Investments.  Ellis wrote corporate checks to Total Source Solution, signed her name on the checks, and forged the signature of the Vice President on the checks, to ensure that the checks could be negotiated.  Ellis recorded these payments in the check registry to reflect falsely that the checks had been issued to true vendors (such as American Express) when in fact they went to Ellis’ company.

As part of the scheme, Ellis also falsified employee records in the corporation’s payroll system to disguise payments to the defendants’ two companies.  Ellis created phantom employees by altering the names of real employees (by switching their first and last names) and slightly changing their Social Security numbers.  She then caused the payroll system to make fraudulent salary payments to Total Source Solution and Tech Group Investments for these new, non-existent employees.

Baumueller-Nuermont lost about $85,000 from this scheme.

Raytosha Elliott, 35, of Atlanta, Georgia, was sentenced yesterday to two years, ten months in prison and three years of supervised release, and ordered to pay $115,902 in restitution to the Georgia National Guard and $26,500 in restitution to Baumueller-Nuermont Corporation by U.S. District Judge Amy Totenberg.  Elliott was also ordered to pay $20,000 in restitution to WebBank based on a fraudulent loan application she submitted to the bank in September 2013.  In that application, Elliott falsely inflated Tech Group Investments’ sales and gross receipts, and provided a fraudulent federal tax return in support of those figures, to obtain the loan. She was also ordered to perform 60 hours community service.

Lakeysha Ellis, 37, of Decatur, Georgia, was sentenced to nine months in prison and three years of supervised release, and three months of home confinement.  She was also ordered to pay $74,902 in restitution to the Georgia National Guard and $81,487.88 in restitution to Baumueller-Nuermont Corporation.  Both defendants previously pleaded guilty to two counts of conspiracy.

Today, Angela Thicklin, 45, of Atlanta, Georgia, was sentenced to one year, nine months in prison and three years of supervised release including ordered to pay $78,640 in restitution to the Georgia National Guard by Judge Totenberg.  Thicklin previously pleaded guilty to one count of conspiracy.

This case was investigated by the Federal Bureau of Investigation; the Georgia Bureau of Investigation; the U.S. Department of Defense, Office of Inspector General, Defense Criminal Investigative Service; Internal Revenue Service Criminal Investigation; the U.S. Army Criminal Investigation Command; and Deputy Inspectors General of the State of Georgia Office of the Inspector General.

Assistant U.S. Attorney Stephen H. McClain prosecuted the case.


Pentagon unveils new rules requiring contractors to disclose data breaches

New sweeping defense contractor rules on hack notifications took effect August 26, 2015, adding to a flurry of Pentagon IT security policies issued in recent years.

ombThe Office of Management and Budget proposed guidelines to homogenize the way vendors secure data government-wide. The Defense Department had already released three other policies that dictate how military vendors are supposed to handle sensitive IT.

Now, industry, which is already concerned about overlapping and burdensome cyber rules, worries the Pentagon will go back and retroactively change contracts, after the White House draft is finalized.

pentagon-sealThe new Pentagon regulations for “Network Penetration Reporting and Contracting for Cloud Services” cover more types of incidents and more kinds of information than past policies. The guidelines also apply to a broader swath of the contracting community.

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A look at the numbers: 2015 government contracting annual report

Some very interesting data, trends, and analysis of government contracting, which should be of interest to government contractors, was published in a recent report by the National Contract Management Association (NCMA) and Bloomberg Government (Bloomberg).

NCMA logoSome of the data should come as no surprise to firms seeing how U.S. government contracting dollars continue to be declining. According to the report, titled “Annual Review of Government Contracting, 2015 Edition,” contract spending will likely continue to fall due to budget caps and the continuing military drawdown in Afghanistan.

The report contains some other interesting data. Of all of the states in the country, Virginia has experienced the most federal contract spending, increasing to nearly $1 billion in 2014 over 2013, despite the decrease in federal procurement dollars. California, Texas, Maryland and the District of Columbia were second, third, fourth and fifth, respectively. On the contractor side, Lockheed Martin remains the number one contractor, followed by Boeing, General Dynamics, Raytheon, and Northrop Grumman. Nine of the top ten are DOD contractors, according to NCMA/Bloomberg.

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View the “Annual Review of Government Contracting, 2015 Edition” at:—ncma-annual-review-of-government-contracting-2015-edition 

DoD Inspector General publishes list of post-award fraud indicators

On July 29, 2015, the Office of the Inspector General for the Department of Defense (OIG DoD) published on its website new “Contract Audit Fraud Scenario and Indicators for Material Pricing Deficiencies in a Postaward Audit.”   While this tool – and several others posted on the Defense IG’s website – is designed to be used primarily by Defense Contract Audit Agency (DCAA) auditors to identify possible fraud, it also provides valuable insight for government contractors subject to DCAA audits.

DoD OIGBy knowing the indicators of fraud that government auditors are looking for, contractors can be better prepared for further inquiry and investigation if the facts and circumstances of their postaward audit raise these types of “red flags.” Further, many of the fraud scenarios and indicators that DoD IG identifies are of a general nature and could be found in any type of audit.

In a postaward audit to determine if materials were DoD Fraud Hotlinedefectively priced, the government’s auditors are alert to circumstances that might indicate fraud, thus requiring them to make a referral to a criminal investigator. The result could be further investigation that exposes the company to criminal, civil and/or administrative liability. The IG identifies 11 fraud indicators that DCAA auditors should be on the lookout for in defective pricing audits.

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DoD CIO to industry: Do your homework

Defense Department Chief Information Officer Terry Halvorsen said that a recent trip to Silicon Valley reinforced the fact that the department will be looking to industry to drive innovation for the nation’s military. Not only will a closer partnership require DoD to move more quickly, it will require vendors to better understand DoD’s needs, he said.

US DoD logoHalvorsen said DoD will have to speed up acquisitions if it wants to work with some of the up-and-coming companies that work in a venture capital environment.

“Six months is a really long time for them,” said Halvorsen July 9 at the DoD CIO Mobility Industry Day, hosted by AFCEA’s Washington, D.C. chapter

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Can small, innovative companies break into D.C. contracting scene?

Sharath Mekala’s two-person tech startup isn’t a textbook government contractor.

Village Defense, spawned through a startup incubator called 1776, develops a free app that lets neighbors send real-time alerts to one another if they notice suspicious activity. A premium version, which costs $125 a month, is designed for homeowners associations.

technologyA Washington area native, Mekala recently uprooted from Atlanta and returned to D.C., in part to market Village Defense to behemoth potential customers: the Defense Department, the Federal Emergency Management Agency, and the Education Department. He says President Obama’s public safety initiative, which includes a blueprint for improved community policing, creates an opportunity for apps like Village Defense.

“I think the government is trying to keep up with [technology]… earlier on you’d have to push your way in,” Mekala says.

Federal procurement, once largely unapproachable by startups, could be transforming to let small, creative tech companies in.

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This story appears in the July-August issue of Government Executive magazine. 

Wife of DoD employee and subcontractor conspire to fraudulently obtain over $750,000 in Aberdeen Proving Ground contracts

Sandra Nixon, a/k/a “Lisa Hart,” age 52, of Silver Spring, Maryland, and Kenneth Dawson, age 52, of Niceville, Florida, pleaded guilty on Tuesday, June 30, 2015, to conspiring to defraud the United States.

The guilty pleas were announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Frank Robey, Director of the U.S. Army Criminal Investigation Command’s Major Procurement Fraud Unit; Special Agent in Charge Robert Craig of the Defense Criminal Investigative Service – Mid-Atlantic Field Office; and Special Agent in Charge Stephen E. Vogt of the Federal Bureau of Investigation.

DCIS“Ms. Nixon and Mr. Dawson unlawfully manipulated the federal contracting process, a system the public expects to be fair and transparent, and that the Defense Department relies upon to support our men and women in uniform,” said Robert Craig, Special Agent in Charge for the DCIS, Mid-Atlantic Field Office.  “The Defense Criminal Investigative Service, its law enforcement partners, and the U.S. Attorney’s Office are committed to maintaining the integrity of the contracting process through the identification and investigation of those alleged to have abused it.”

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Military contractor banned over claims of sexual exploitation

Navy logoThe U.S. Navy banned a longtime military contractor this week — two years after authorities were alerted to problems and three months after the Virginia Board of Medicine accused the company’s president of using drugs, alcohol and macabre medical procedures to sexually exploit personnel in his classes.

In March, the board suspended the medical license of John Hagmann, president of Deployment Medicine International, concluding that he had used students “for personal gain and sexual gratification.”

The board found that while teaching battlefield medicine in Virginia, Maryland, North Carolina and the United Kingdom, Hagmann allegedly conducted unnecessary and invasive procedures. It also concluded that he had directed students to drink large quantities of alcohol, injected them with the hallucinogen ketamine and other drugs, and conducted “shock labs,” which involved taking blood from students, monitoring them for shock and then transfusing the blood back into them.

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