Georgia Tech Procurement Assistance Center

Renewed focus on contractor business system reviews

By

According to a recent U.S. Government Accountability Office (GAO) report, the Defense Contract Audit Agency (DCAA) and the Defense Contract Management Agency (DCMA) have taken certain steps to improve the contractor business system (CBS) review process and are forecasting that CBS reviews will increase significantly over the next four years. Contractor business systems include a contractor’s accounting, earned value management, estimating, purchasing, material management, and property management systems.

These systems require contractors to maintain internal controls that, as GAO noted, “act as the first line of defense against fraud, waste and abuse of federal funding.” Given their importance, the renewed focus on ensuring CBS reviews are conducted in a timely and consistent manner is not surprising, and contractors should prepare for a new wave of audit activity.

Past Challenges to Completing CBS Reviews

In its report, GAO identified persistent challenges that have prevented DCAA and DCMA from performing consistent and timely CBS reviews. One key factor for DCAA is its focus on eliminating the backlog of incurred cost audits, which determine whether contractor costs are allowable prior to closing out the contract. GAO found that as a result of prioritizing incurred cost audits, Contracting Officers maintained CBS determinations as adequate even though the systems had not been audited in many years. GAO further found that lacking a mechanism to track CBS audits, DCMA and DCAA did not always comply with requirements to report CBS deficiencies or did not report the deficiencies within required timeframes.

Keep reading this article at: https://governmentcontractsnavigator.com/2019/03/21/renewed-focus-on-contractor-business-system-reviews/

Former Army colonel pleads guilty to role in Fort Gordon fraud, kickback scheme

By

A former active-duty U.S. Army colonel has pled guilty to accepting bribes in return for helping steer military contracts to a business fraudulently claiming status as a small business.

Anthony R. Williams of Vienna, VA, pled guilty to Conspiracy to Commit Bribery and felony conflict of interest in U.S. District Court, said Bobby L. Christine, U.S. Attorney for the Southern District of Georgia.

Williams faces a sentence of up to five years in prison, and has agreed to forfeit more than $1.2 million in proceeds derived from the scheme.

According to court documents and evidence entered during court proceedings, Williams, while serving as a colonel in the U.S. Army, accepted bribes to steer federal procurement contracts to the CREC Group, a company owned by Calvin Devear Lawyer, a retired U.S. Army colonel. The CREC Group had received Small Business Administration (SBA) status as a small, disadvantaged business based on false representations from Lawyer and from Dwayne Oswald Fulton, then an employee of a defense contractor.

Lawyer previously pled guilty in the case and is serving a 60-month prison sentence, while co-conspirator, Anthony Roper, a former active duty U.S. Army colonel at Fort Gordon, also pled guilty and is serving a 60-month sentence.

The cases were investigated by the United States Army Criminal Investigations Division (CID), the Defense Criminal Investigative Service (DCIS), the Small Business Administration’s Office of Inspector General, and the United States Attorney’s Office.

Source: https://www.justice.gov/usao-sdga/pr/former-army-colonel-pleads-guilty-role-fort-gordon-fraud-kickback-scheme

Bribery, fraud indictment issued for $15 million in set-asides for disabled-veteran and other small businesses

By

Five men have been charged in a 71-count indictment with engaging in conspiracies to defraud several federal agencies by paying bribes and fraudulently obtaining at least $15 million in government contracts they were not entitled to though disabled-veteran set asides and other small business programs.

Indicted are: James A. Clark of Chipley, Florida, who owned several businesses, including Enola Contracting Services, Inc.; Eric L. Hogan of Bonaire, Georgia, who owned P&E Construction, LLC; Kenneth A. Latham of Albany, Georgia, who was employed by the U.S. Navy as a civilian engineering technician; James K. Alford, 55, of Bowling Green, Kentucky, who owned K&S Constructors, Inc., and Harvey Daniels, Jr. of Marianna, Florida, who owned HDJ Security, Inc.

The charges include conspiracy to commit honest services wire fraud, conspiracy to commit wire fraud, wire fraud, conspiracy to submit false claims, false claims and major fraud.

Construction projects detailed in the indictment include contracts at the Marine Corps Logistics Base in Albany, Georgia, the VA Medical Center in Louisville, Kentucky, and the NASA Plum Brook Station near Sandusky, Ohio.

According to the indictment:

  • Federal departments and agencies, as directed by Congress, work with the Small Business Administration to award portions of contracts to small businesses, with specific goals for small disadvantaged business, including service-disabled veteran-owned small businesses.
  • Businesses must register and meet a number of criteria to be classified as small disadvantaged business – also known as the 8(a) program – such as being at least 51 percent owned and controlled by socially and economically disadvantaged individuals. Businesses must also meet a number of criteria to be classified as a service-disabled veteran-owned small business, such as being at least 51 percent owned by a veteran with a service-connected disability who controls the management and daily operations of the company. Service-disabled veteran-owned small businesses are permitted to enter into joint ventures with other companies but must meet specific requirements to do so.
  • The defendants and others engaged in several criminal schemes designed to deprive the government of its right to honest services of its employees through bribes and kickbacks, and to submit false claims and defraud the United States by obtaining government contracts set aside for qualified companies to which they were otherwise ineligible to obtain by fraudulently using proxy and pass-through companies.
  • P&E, through Hogan and Clark, made false statements, misrepresentations and omissions of facts. Hogan on several occasions certified P&E was a service-disabled veteran-owned small business. It also registered as a joint venture with Enola, with Hogan listed as president and Clark as vice president of the joint venture. HDJ Security was enrolled in the 8(a) program. Daniels self-identified as the president of HDJ, the sole owner of the company and to be socially disadvantaged.

In one scheme, Latham accepted a series of bribes and kickbacks from Hogan and Clark – including cash, meals, a hunting trip,  a fence, and an all-terrain vehicle – in return for Latham using his official position with the Navy to benefit Hogan, Clark and their businesses. These benefits included assistance in finding and securing government contracts, approval of invoices for payments to pass-through companies used by Hogan and Clark to obtain set-aside contracts for which their companies were not otherwise eligible, and concealing Clark and Hogan’s use of pass-through companies to obtain bonding.

Another scheme involved defrauding the VA and the TK by fraudulently representing that P&E and Hogan independently qualified for the service-disabled veteran-owned small business program despite Clark’s involvement in providing bonding for and equity ownership in P&E.

Clark, Hogan, Alford, Daniels and others defrauded the government by using purported service-disabled veteran-owned small businesses and 8(a) businesses as proxies to bid on and obtain set-aside contracts.

Arrow Construction, which was registered in the 8(a) program, was awarded a $2.8 million contract for work at the Marine Corps Logistics Base in Albany, Georgia, in September 2011. Clark and Arrow officials Kent Reynolds and Jennifer Dillard agreed that about 90 percent of the value of the contract was passed through to Clark and Enola, in violation of the 8(a) program.

HDJ was awarded a contract for work at the Marine Corps Logistics Base in Albany, Georgia, in September 2012. HDJ was paid approximately $2.6 million. Clark, Hogan and Daniels agreed to pass through approximately 95 percent of the value of the contract to Clark, Hogan, Enola and P&E, in violation of the terms of the 8(a) program.

The VA in June 2011 awarded a contract to P&E Construction for work at the VA Medical Center in Louisville, Kentucky. The VA paid P&E approximately $4.5 million that the company would not have received if the VA knew P&E was acting as a pass-through for K&S and that it was back-bonded by Clark and Enola.

P&E submitted a winning bid in February 2013 for a contract for construction services at the NASA Plum Brook Station near Sandusky, Ohio. NASA paid P&E approximately $5.6 million that the company would not have received if NASA knew it was acting as a pass-through for K&S and that P&E was back-bonded by Clark and Enola.

If convicted, the defendants’ sentences will be determined by the Court after review of factors unique to this case, including the defendant’s prior criminal record, if any, the defendant’s role in the offense and the characteristics of the violation.  In all cases the sentence will not exceed the statutory maximum and in most cases it will be less than the maximum.

This case was investigated by National Aeronautics and Space Administration’s Office of Inspector General, the Defense Criminal Investigative Service, Naval Criminal Investigative Service, Department of Veterans Affairs’ Office of Inspector General, Small Business Administration’s Office of Inspector General, the Defense Contract Audit Agency, and the Air Force Office of Special Investigations.

Readers are reminded that an indictment is only a charge and is not evidence of guilt.  A defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.

Atlanta businessman indicted on 51 counts including bribery, tax evasion, and money laundering

By

City of Atlanta contractor Lohrasb “Jeff” Jafari has been charged in a 51 count federal indictment with conspiratorial bribery, bribery, tampering with a witness, tax evasion, money laundering, and structuring.

“Jeff Jafari allegedly paid multiple bribes to two local officials over a period of years and then attempted to obstruct the federal investigation into his misconduct,” said U.S. Attorney Byung J. “BJay” Pak. “He also failed to pay income taxes on millions of dollars he earned from city contracts.  Instead, he used the funds to live a lavish lifestyle.  Whether you bribe, take a bribe, or otherwise misuse the public’s money to enrich yourself – it’s all corruption. We will vigorously pursue any such cases.”

According to U.S. Attorney Pak, the charges, and other information presented in court on March 6, 2019:

  • Beginning at least in 2014 to January 2017, Jafari allegedly paid thousands of dollars in bribe payments to Adam Smith, the then-Chief Procurement Officer of the City of Atlanta.
  • At the time, Jafari was the Executive Vice-President of PRAD Group and did millions of dollars in work with the City of Atlanta, primarily under the City’s Architectural and Engineering contracts.
  • Jafari and Smith met at Atlanta-area restaurants where they discussed City business, among other things, and Jafari would generally pay Smith $1,000 in cash in the restaurant bathroom.
  • Jafari similarly paid bribes to a local official in DeKalb County in April and August of 2014.

According to the U.S. Attorney’s office, in exchange for Jafari’s payments to Smith, Smith provided Jafari with information and counsel regarding the City of Atlanta’s procurement processes, among other information. When PRAD Group or a joint venture in which PRAD Group was a partner became a successful proponent on a City of Atlanta contract or Request for Proposal, Smith approved and submitted the award of those projects. Smith also approved task and/or purchase orders for those projects.

In February 2017, Jafari became aware of the federal investigation into his payments to Smith, at which time he confronted Smith in an effort to intimidate and persuade Smith to provide false information to federal law enforcement about the payments, instructing Smith to deny taking bribe money from Jafari.

Between 2014 through 2016, Jafari also willfully failed to pay income taxes to the IRS. During those years, Jafari withdrew large amounts of cash from corporate bank accounts and used corporate funds for personal expenses, among other things, to avoid the assessment of income tax. In 2014, Jafari owed at least $150,000; in 2015, at least $300,000; and in 2017, at least $700,000 to the IRS. Jafari is additionally charged with numerous counts of money laundering for engaging in financial transactions with funds earned from City of Atlanta work he obtained while he was paying bribes to Adam Smith.

Members of the public are reminded that the indictment only contains charges.  The defendant is presumed innocent of the charges and it will be the government’s burden to prove the defendant’s guilt beyond a reasonable doubt at trial.  This case is being investigated by the FBI and IRS Criminal Investigation.

Source: https://www.justice.gov/usao-ndga/pr/lohrasb-jeff-jafari-indicted-51-counts-including-bribery-tax-evasion-and-money

See federal indictment here: Jeff Jafari-Indictment-03.06.2019

See September 28, 2017 article about guilty plea by City of Atlanta purchasing chief here: https://gtpac.org/2017/09/28/city-purchasing-head-pleads-guilty-to-conspiracy-charge

Partner of military contractor sentenced to prison for bribery scheme related to contracts in support of Iraq war

By

A former business partner of a U.S. military contractor was sentenced last week to 18 months in prison for his role in a years-long scheme to bribe U.S. Army contracting officials stationed at a U.S. military base in Kuwait during the Iraq War.

Finbar Charles, a citizen of Saint Lucia most recently residing in Baguio City, Philippines, was sentenced by Chief U.S. District Judge Karon O. Bowdre of the Northern District of Alabama.  Chief Judge Bowdre also ordered Charles to forfeit $228,558 in illicit gains.  Charles pleaded guilty in July 2018 to one count of bribery of a federal official.

According to admissions made in connection with his guilty plea, Charles was a business partner of a former U.S. military contractor, Terry Hall.  As Hall’s business partner, Charles admitted that he facilitated Hall and others in providing millions of dollars in bribes in approximately 2005 to 2007 to various U.S. Army officials in exchange for preferential treatment for Hall’s companies in connection with Department of Defense (DoD) contracts to deliver bottled water and construct security fencing to support U.S. troops stationed in Kuwait and Iraq.

As part of his role in this criminal conspiracy, Charles admitted that he managed bank accounts in Kuwait and the Philippines that he used to receive DoD payments and transfer illegal bribes to various U.S. Army contracting officials, including Majors Eddie Pressley, James Momon, and Chris Murray.  All of those individuals, as well as at least 10 other co-conspirators, have pleaded guilty or been convicted of crimes relating to this scheme.  Charles admitted that he falsified loan and consulting agreements to conceal the true nature of the bribe payments to the Army officers, and that he personally received over $228,000 in illicit gains as a result of his participation.

This case was investigated by the Defense Criminal Investigative Service (DCIS), the U.S. Army Criminal Investigation Command, the FBI, and the Special Inspector General for Iraq Reconstruction.  The Criminal Division’s Office of International Affairs provided substantial assistance in this matter.

Source: https://www.justice.gov/opa/pr/former-business-partner-us-military-contractor-sentenced-prison-bribery-scheme-related

Government contractors found guilty in $11 million veteran set-aside fraud scheme

By

A federal jury has convicted Andrew Otero and his company, A&D General Contracting, Inc. (A&D), on charges that they fraudulently obtained $11 million in federal contracts specifically set aside for service-disabled veteran-owned businesses.  The jury’s decision was rendered on Nov. 21, 2018.

The evidence demonstrated that Otero had no military experience.  Yet Otero and veteran Roger Ramsey participated in a conspiracy to defraud the government by forming a joint venture (JV) – and falsely representing that Ramsey’s firm and the JV qualified as service-disabled veteran-owned small businesses (SDVOSB).  Based on the false claim to SDVOSB eligibility, the conspirators fraudulently obtained approximately $11 million in federal government construction contracts or task orders with the Department of Veterans Affairs (VA) and the Army Corps of Engineers (ACE).

As proven at trial, the fraudulent conspiracy involved set-aside contracts that could only be bid upon by legitimate service-disabled veteran-owned small businesses – a designation that did not apply to Otero or A&D.  To appear qualified, Otero and Ramsey initially executed an agreement to create the JV, which stated that Ramsey’s company would be the managing venturer, employ a project manager for each of the set-aside contracts, and receive the majority of the JV’s profits.

However, as proved at trial, six months later, Otero and Ramsey signed a secret side agreement that made clear the JV was ineligible under the SDVOSB program. For example, the side agreement said the parties created the JV so that A&D could simply use the disabled veteran status of Ramsey’s firm to bid on contracts.  The side agreement also stated that A&D – not Ramsey – would run the construction jobs.  They also agreed that A&D would keep 98 percent of every payment.

In addition to the secret side agreement, the evidence demonstrated several ways in which the JV did not operate as a legitimate SDVOSB, but was essentially controlled by Otero and A&D.  For example, although Ramsey (a service-disabled veteran) nominally served as president of his firm and the JV, he actually worked full-time for a telecommunications company.  Otero and A&D, not Ramsey, controlled the day-to-day management, daily operation and long-term decision making of the JV. Among other things, Otero and A&D appointed an A&D employee as the project manager for every contract and task order.

“Our nation strives to repay the debt of gratitude we owe to our veterans by setting aside some government contracts for veterans with service-related disabilities,” said United States Attorney Adam Braverman.  “These unscrupulous contractors abused this program through a cynical and illegal ‘rent-a-vet’ scheme.  They are now being held fully accountable for robbing truly deserving vets of important economic opportunities.”

The defendants are also facing civil charges consisting of alleged violations of the false claims act based on the similar misconduct.  The defendants have been ordered to appear in U.S. District Court for sentencing on February 19, 2019.

Source: https://www.justice.gov/usao-sdca/pr/government-contractors-found-guilty-11-million-veteran-set-aside-fraud-scheme

Division of N.C. company pays $3.5 million to settle False Claims Act allegations

By

Indal Technologies, Inc. has agreed to pay $3.5 million to resolve allegations that it knowingly sold defective helicopter landing systems designed for U.S. Navy destroyers.  Indal, of Ontario, Canada, is a division within Curtiss-Wright Corporation of Charlotte, North Carolina.

Since the 1970s, Indal has produced the Recovery, Assist, Secure, and Traverse (RAST) system attached to U.S. Navy’s Arleigh-Burke class destroyers.  RAST systems allow helicopters to land on destroyers.

The RAST system includes a device that locks a hovering helicopter onto a trolley.  Once locked in place, the helicopter moves along a series of steel track plates into a shipboard hangar.  The trolley must remain securely connected to the track plates, because the helicopter may be required to land during rough seas and high winds.  The Navy’s contracts for RAST systems expressly required track plates made of HY100 steel due to the material’s increased strength, combat ruggedness, and protection from corrosion.

The settlement announced last week resolves allegations that Indal, without informing the Navy, knowingly substituted a different, less expensive type of steel in numerous RAST system track plates delivered to the Navy.

This settlement was the result of a coordinated effort among the Civil Division’s Commercial Litigation Branch and the U.S. Attorney’s Office for the District of New Jersey.  The investigation was conducted by the Naval Criminal Investigative Service and the Defense Contract Audit Agency.

The claims resolved by the settlement are allegations only; there has been no determination of liability.

Source: https://www.justice.gov/opa/pr/indal-technologies-agrees-pay-35-million-settle-false-claims-act-allegations

Fort Stewart contractor that posed as small business forfeits $7.8 million

By

A company that rents tents and other outdoor structures for events agreed to pay the government $7.8 million to settle charges that it wrongly won Defense Department set-aside contracts reserved for small businesses.

Arena Americas, which does business from multiple locations as Arena Event Services, settled after a False Claims Act investigation conducted by the Army Criminal Investigation Command, the Defense Criminal Investigative Service and the inspector general of the Small Business Administration.

The agreement details how Arena Americas worked with Military Training Solutions LLC to obtain small business defense contracts that were represented as being performed by Military Training Solutions, but were actually performed by Arena Americas.

“As a result of this scheme, which was perpetuated at Fort Stewart, Ga., and at other military installations across the United States, millions of dollars in defense contracts wrongfully were awarded to Arena Americas instead of legitimate small businesses,” said Bobby Christine, U.S. Attorney for the Southern District of Georgia, in a statement. “The U.S. Attorney’s Office will not tolerate any attempts to illegally exploit the system for a company’s personal advantage” in obtaining the set-asides that Congress intended as a tool to help grow small businesses.

Keep reading this article at: https://m.govexec.com/contracting/2018/10/defense-contractor-who-posed-small-business-forfeits-78-million/151951

See statement by U.S. Attorney’s Office for the Southern District of Georgia at: https://www.justice.gov/usao-sdga/pr/defense-contractor-agrees-pay-united-states-78-million-settle-false-claims-act

How contractor fraud is reported shouldn’t affect how it gets investigated

By

While the vast majority of federal contractors are dedicated to their craft and their country, a very few wrongdoers occasionally cast a shadow on the industry as a whole. Unfortunately, the way that the government resolves fraud allegations is often dictated not by the egregiousness of the fraud but rather by how the government learns of suspected wrongdoing.

Given this inconsistency, we suggest a more uniform approach to addressing whistleblower allegations.

As many defense contractors have painfully learned over the years, the world of federal procurement regulations is complicated, evolving, and perilous. Even technical violations of procurement regulations can bring stiff consequences. And, more and more, employees at federal contractors are speaking up when they see wrongdoing. We applaud these employees for taking their job responsibilities seriously. And, when an employee sees wrongdoing, he or she should report it.

The traditional way to blow the whistle is to report internally up the chain and—if that does not work—the whistleblower could report suspected wrongdoing to federal contracting officers or to Defense Department hotline numbers.

Keep reading this article at: https://www.govexec.com/contracting/2018/10/how-contractor-fraud-reported-shouldnt-affect-how-it-gets-investigated/151771

Suspicious contract activity proliferates — watch out!

By

The Georgia Tech Procurement Assistance Center (GTPAC) continues to become aware of apparent contracting scams designed to trick unsuspecting vendors to deliver products for which they will receive no payment.

(You can view a compendium of articles about previously-identified scams at: https://gtpac.org/?s=scam.)

The latest example that’s come to our attention involves an email sent to vendors asking for a quote on some computer equipment.  The email is supposedly from a contracting representative with the Securities and Exchange Commission.

Vendors are asked to quote on name-brand portable hard drives and two brands of laptop computers.  The solicitation document appears to be a version of the federal Standard Form 1449.  But there are several suspicious elements associated with the solicitation:

  • While the email purportedly is from the SEC’s headquarters, the document indicates that the SEC office is in Germany.
  • Place of delivery is not listed.
  • The solicitation is pre-signed by the contracting officer.
  • The solicitation number is not consistent with standard numbering.
  • The phone number provided could be a cell phone number.

We have seen suspicious documents like this before.  What can result is that a vendor will respond with pricing.  Then, the scam artist will respond by saying that the quote has been accepted and directing that the products be shipped to a particular address.  After that, all communication ceases.  The vendor is cheated out of products (plus the cost of shipping), and receives no payment.

Be alert to scams like this.  If you receive something that looks suspicious, call it to our attention.  We’ll help you figure out what to do.

Contracting News

Read More

Contracting Tips

Read More

GTPAC News

Read More

Georgia Tech News

Read More