Georgia Tech Procurement Assistance Center

South Carolina ‘mastermind’ pleads guilty to cheating government for million-dollar contracts

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He betrayed his wife. He used friends as pawns in illegal schemes.

For years, he bilked the federal government out of tens of millions of dollars in fat federal military construction contracts meant for disabled veterans, women and African-Americans.

And on Tuesday of last week, Thomas Brock of Camden faced his reckoning.

“I find you guilty,” U.S. District Judge Michelle Childs told Brock, 61, in a sparsely attended hearing at the U.S. federal courthouse in Columbia, SC.

Brock will be sentenced in December and is free on bond until then. He could be sentenced to up to nine years in prison, assistant U.S. Attorney DeWayne Pearson said August 28th.

Keep reading this article at: https://www.thestate.com/news/local/crime/article217449050.html

Federal contractor sentenced for removing and transmitting classified materials

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Reality Winner was sentenced yesterday to five years and three months in prison for removing classified national defense material from a government facility and mailing it to a news outlet.

Winner was arrested by the FBI at her home in Augusta, Georgia on June 3, 2017.  The parties filed a plea agreement on June 21, in which Winner agreed to plead guilty to the one-count indictment charging her with unlawful retention and transmission of national defense information.  The parties agreed that a sentence of imprisonment for 63 months followed by a three-year term of supervised release is the appropriate disposition of the case.  The Court accepted the plea agreement at sentencing.

Winner was a contractor assigned to a unit of Fort Gordon in Georgia. She had been employed at the facility since on or about Feb. 13, 2017, and held a TOP SECRET//Sensitive Compartmented (SCI) clearance during that time.  Prior to that position, Winner had served in the U.S. Air Force from 2010-2016 and held a TOP SECRET//SCI security clearance.

  • Evidence presented at the change of plea hearing established that on or about May 9, 2017, Winner printed an intelligence report that was classified at the TOP SECRET//SCI level, and she removed it from the facility where she worked.  Information may be classified as TOP SECRET if its unauthorized disclosure can reasonably be expected to cause exceptionally grave damage to the national security of the United States.
  • Later on May 9, Winner unlawfully transmitted a hard copy of the intelligence report to an online news outlet. The intelligence report revealed the sources and methods used to acquire the information contained in the report, which, if disclosed, would be harmful to the United States and valuable to our adversaries.

Indeed, Winner, in an interview with the FBI on June 3, 2017, admitted knowing at the time she stole and transmitted the intelligence report that it contained information about intelligence sources and methods, which information she knew was valuable to adversaries of the United States.  Further, the information contained in the intelligence report had not been released to the public at the time Winner retained it and transmitted it to the online news outlet.  Winner, who had received training regarding the proper handling, marking, transportation, and storage of classified information, knew that she was not permitted to remove the intelligence report from the facility where she worked, retain it, or transmit it to the news outlet.

The investigation of this case was conducted by the FBI.

Source: https://www.justice.gov/opa/pr/federal-government-contractor-sentenced-removing-and-transmitting-classified-materials-news

See earlier article on this subject at: https://gtpac.org/2018/06/30/contractor-employee-pleads-guilty-to-espionage-in-connection-with-nsa-data-leak/

Former company president settles False Claims Act case related to defective bullet proof vests

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Richard C. Davis, the founder and former president and CEO of Michigan-based Second Chance Body Armor, Inc., recently agreed to resolve claims under the False Claims Act in connection with his role in the sale of defective Zylon bullet-proof vests purchased by the United States for federal, state, local and tribal law enforcement agencies, the Justice Department has announced.

Mr. Davis will relinquish his interest in $1.2 million in assets previously frozen by the United States and will pay an additional $125,000 to the United States.  This settlement is based on Mr. Davis’ ability to pay.

Background

Second Chance sold body armor to state, local and tribal law enforcement agencies reimbursed by the Department of Justice’s Bulletproof Vest Partnership (BVP) program and to federal agencies under contracts with the General Services Administration. The United States alleged that Second Chance’s vests were defective due to the loss of their ballistic capability when exposed to heat and humidity. The United States also alleged that by 2001, Davis was aware that Second Chance’s Zylon body armor was degrading at what he described as a “disappointing” rate.

The United States further alleged that, rather than using a $6 million payment from Toyobo Co. Ltd., the manufacturer of Zylon fiber, to fix the degradation problem, Second Chance pocketed the money and Davis and other Second Chance owners began meeting with various investment bankers in an effort to sell Second Chance. These efforts to sell the company allegedly stopped after a Forest Hills, Pennsylvania police officer was shot through his Second Chance Zylon vest in June 2003. Second Chance filed for bankruptcy in 2004 and was liquidated.

Subsequent tests by the National Institute of Justice (NIJ) of Zylon-containing vests found that more than 50 percent of used vests could not stop bullets that they had been certified to stop. The performance of Second Chance Zylon vests were reported to be among the worst.  The NIJ removed all Zylon-containing vests from its list of compliant products, and Zylon is no longer used in ballistic vests.

Settlement

“The Department of Justice will pursue those who attempt to fraudulently profit at the expense of the United States, particularly when the stakes are life or death,” said Acting Associate Attorney General Jesse Panuccio.  “Bullet proof vests protect the brave men and women of our nation’s law enforcement community, and those who manufacture and sell these products have a solemn duty to ensure their safety and efficacy.”

The settlement resolves, in part, allegations filed in a lawsuit by Aaron Westrick, Ph.D., a former employee of Second Chance, under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery. The Act also allows the government to intervene and take over the action, as it did in this case as to the allegations against Davis. Dr. Westrick will receive $28,750 plus a share of whatever the government ultimately recovers from the previously frozen funds.

This settlement is part of a larger investigation of the body armor industry’s use of Zylon.  The United States has previously recovered over $132 million from 18 corporations and individuals who participated in the sale of Zylon body armor. The Civil Division has transferred over $22 million of these recovered funds to the BVP program to replace BVP funds which had been used to purchase Zylon vests. The funds transferred to the BVP program will be used to fund the purchase of additional ballistic-resistant vests for state, local and tribal law enforcement officers. The United States is continuing to pursue claims against Honeywell International Inc., which allegedly sold a laminated version of Zylon for use in police armor.

The investigation and litigation of this matter were handled by the Civil Division’s Commercial Litigation Branch; the General Services Administration, Office of the Inspector General; the Department of Commerce, Office of Inspector General; the Defense Criminal Investigative Service; the U.S. Army Criminal Investigative Command; the Department of the Treasury, Office of Inspector General for Tax Administration; the Air Force Office of Special Investigations; the Department of Energy, Office of the Inspector General; and the Defense Contracting Audit Agency.

The claims settled by this agreement are allegations only, and there has been no determination of liability.  The lawsuit partially resolved by the settlement is captioned United States ex rel. Westrick v. Second Chance Body Armor, et al., No. 04-0280 (PLF) (D.D.C.).

Source: https://www.justice.gov/opa/pr/former-second-chance-body-armor-president-settles-false-claims-act-case-related-defective

Small business advocate wins $475,000 in legal fees after 4-year fight with federal government

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After four years and expenses of more than $700,000, a California-based small business advocate on Thursday won an agreement from the Justice and Defense departments to pay his legal fees for litigation forcing the government to release confidential contracting data.

Lloyd Chapman, the outspoken founder of the Petaluma-based American Small Business League, declared victory in what he called an “historic” move by Judge William Alsup of the U.S. District Court for the Northern District of California to require the government to pay Chapman $475,000.

Neither Justice nor the Pentagon would comment on the case to Government Executive, but Chapman’s award was confirmed by his Washington attorney, Jon Cuneo of Cuneo, Gilbert & Laduca.

Keep reading this article at: https://www.govexec.com/contracting/2018/08/small-business-advocate-wins-475k-legal-fees-after-4-year-fight-government/150280/

Government contractor found guilty of theft of government property

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A former government contractor has been found guilty for his role in a scheme to unlawfully convert U.S. government property from the U.S military base at Kandahar Airfield, Afghanistan, shipping items to his home in Arizona for resale.

After a three day trial, Michael Dale Gilbert of Arizona was convicted of three counts of theft and unauthorized sale of government property and one count of interstate transportation of stolen property.  Gilbert’s sentencing is scheduled for Oct. 9, 2018 before U.S. District Judge G. Murray Snow of the District of Arizona, who presided over the trial.

According to the evidence admitted at trial, Gilbert worked at PAE Government Services, a government contractor that provides logistics and other support to the U.S. Department of State (DOS) and the U.S. Department of Defense around the globe, including Afghanistan.

  • From 2012 to 2015, Gilbert was deployed to Kandahar Airfield (KAF), where he assisted DOS with the Foreign Excess Personal Property (FEPP) program.
  • Once equipment, including computer equipment, heavy construction items and work tools, was requested through the FEPP program at KAF, Gilbert was assigned to arrange for its transfer for use or for its destruction, to prevent the items from falling into the hands of insurgents.
  • While in that role, in or around April and December of 2014, instead of facilitating the transportation or destruction of U.S government property, Gilbert shipped FEPP to the United States and transported the items to his residence in Arizona.
  • Gilbert stole FEPP items worth at least $48,900, including items recovered from his residence in Arizona valued at approximately $16,700, approximately $3,700 in sales through eBay, and goods valued at approximately $28,500 that Gilbert sold through other means, the evidence showed.

This case was investigated by the DOS Office of the Inspector General and the Special Inspector General for Afghanistan Reconstruction.

Source: https://www.justice.gov/opa/pr/government-contractor-found-guilty-theft-government-property

Augusta man sentenced for theft of government funds

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U.S. Attorney Sherri A. Lydon states that Phillip Thompson of Augusta, GA was sentenced for conspiracy involving theft of government funds, a violation of Title 18, United States Code, § 371.

U.S. District Judge J. Michelle Childs, of Columbia, SC sentenced Thompson to 23 months in jail after a sentencing hearing. The judge further ordered that Thompson repay $4,580,469.83 in restitution and, after his release from the Bureau of Prisons, that he serve three years on supervised release.

Facts presented in court established that Thompson worked at the Savannah River Site for Wise Services, and that, beginning in September of 2009 and continuing for several years, Thompson was involved in a scheme in which he and a co-defendant stole money using false and fraudulent invoices. An investigation by the U. S. Dept. of Energy’s Office of the Inspector General (OIG) and the Federal Bureau of Investigation (FBI) revealed that Thompson and his co-defendant stole more than six million dollars.

April G. Stephenson, Acting Inspector General for the Dept. of Energy, states: “The Office of Inspector General remains committed to ensuring the integrity of our contractors and subcontractors. Those who choose to abuse their positions of trust while hiding behind sophisticated embezzlement and fraud schemes, will be held accountable.”

The Energy Department’s OIG and the FBI investigated the case.  Assistant U.S. Attorney John C. Potterfield of the Columbia, SC office prosecuted the case.

Source: https://www.justice.gov/usao-sc/pr/augusta-man-sentenced-theft-government-funds

Read The Augusta Chronicle’s account of this story at: http://www.augustachronicle.com/news/20180703/columbia-county-man-gets-23-months-in-prison-in-mox-fraud-case

Military bought thousands of boots labeled ‘Made In the USA’ — but they were from China

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Five executives with a former leading manufacturer of U.S. military boots have been sentenced in federal court for saying the boots were made in Tennessee when they were actually produced in China.

According to an indictment filed in U.S. District Court, the actual Chinese manufacturer of the boots was told to include “USA” on the label of Wellco boot uppers that were then shipped to the U.S. The “Made in China” tags were removed, the indictment says. Soles were affixed to the boots at Wellco’s plant in Morristown, Tennessee, and elsewhere, according to the document.

From 2006 through 2012, the U.S. Department of Defense paid at least $138 million to Wellco for military footwear, according to the indictment.

Keep reading this article at: https://taskandpurpose.com/wellco-execs-military-boots-china/

See earlier articles at:

 

Company and officers to pay $1.9 million to settle False Claims Act SBIR allegations

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Maryland-based MassTech, Inc., its former Chief Executive Officer, Arnold Lee, and its former Chief Financial Officer, Richard Lee, have agreed to pay the United States $1.9 million to resolve allegations that MassTech falsely certified it was a small business concern in order to obtain Small Business Innovation Research (SBIR) awards.

The settlement agreement was announced on May 3, 2018.

 

The SBIR program is a set-aside program for small businesses.  The purpose of the SBIR program is to strengthen the role of small business concerns in federally funded research and development and to increase private sector commercialization.  To receive SBIR funds, each awardee of an SBIR Phase I or II award must qualify as a small business at the time of the award as well as throughout the duration of the award.  To be eligible, the small business and its affiliates collectively must have fewer than 500 employees.  According to the settlement agreement, the government alleged that MassTech, Arnold Lee, and Richard Lee falsely represented to the National Science Foundation (NSF), to NASA, and to the Dept. of Health & Human Services (HHS) that MassTech was an eligible small business concern at the time of the SBIR application as well as throughout the lifecycle of the award.  As a result, NSF, NASA, and HHS approved and funded SBIR awards to MassTech that MassTech otherwise would not have received.  MassTech, Arnold Lee, and Richard Lee denied the United States’ allegations.

NSF’s Office of Inspector General, the NASA Office of Inspector General, and the HHS Office of Inspector General worked in the investigation.  The settlement agreement was announced by the U.S. Attorney for the District of Maryland.

Source: https://www.justice.gov/usao-md/pr/masstech-richard-lee-and-arnold-lee-pay-us-19-million-settle-false-claims-act-allegations

U.S. Attorney for Southern District of GA announces results of recent procurement fraud prosecutions

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As part of a new emphasis on procurement fraud enforcement within the Southern District of Georgia, the U.S. Attorney’s Office for the Southern District of Georgia has announced the results of a series of recent procurement fraud prosecutions.

Over the past several months, the strike force’s efforts resulted in five guilty pleas and twelve civil settlements, including the following publically available actions:

  1. United States of America v. Dwayne Fulton (1:17-CR-35)
  2. United States of America v. Calvin Lawyer (1:17-CR-35)
  3. United States of America v. Anthony Roper (1:17-CR-35)
  4. United States of America v. Audra Roper (1:17-CR-35)
  5. United States ex rel. Major Contracting Services, Inc. v. Military Training Solutions, LLC and ADCO Holdings, Inc., et al. (4:16-cv-115)
  6. United States of America v. Robert Obradovich (4:18-CR-47)

These prosecutions and civil settlements with the named individuals and entities, as well as others, stemmed from a wide variety of fraudulent conduct, including bribery of public officials, illegal kickbacks, illegal arrangements between large contracting companies and certified small or 8(a) businesses acting as “front” companies, and billing for services not rendered.  Each of the individuals who has pled guilty awaits sentencing.  The total financial recovery for the United States thus far has exceeded $7.4 million.  Several of these investigations remain ongoing.

“The Southern District of Georgia is the proud home of several major military installations that serve a vital role both in our national defense and the district’s local economy,” said United States Attorney Bobby L. Christine.  “Those who do business with these installations should be on notice – ripping off the United States will not be tolerated! This office will bring to bear the full weight of our resources to hold fraudsters accountable.”

The joint strike force that led to these convictions and settlements involved agents, investigators, and auditors from the Department of Justice, Defense Criminal Investigative Service, Army Criminal Investigation Command (Major Procurement Fraud Unit), Naval Criminal Investigative Service, the Small Business Administration Office of Inspector General.  Significant and critical assistance was also provided by civilian and military personnel from the Army, Navy, and Air Force stationed at affected military installations.

“The American public expects the Department of Defense (DoD) to spend limited taxpayer funds efficiently and economically.  Bribery and other corrupt behavior by public officials and defense contractors diverts and wastes precious dollars intended to provide critical products and services for our Warfighters.  These results demonstrate the effectiveness of investigative efforts by the Defense Criminal Investigative Service to protect the integrity of all DoD programs,” said Special Agent in Charge John F. Khin, Southeast Field Office.

“These settlements stand as proof of the tenacity of our special agents,” said Frank Robey, director of the U.S. Army Criminal Investigation Command’s Major Procurement Fraud Unit. “It is important for those who conspired to profit from illegal payments take responsibility for their actions. The settlements hold the defendants accountable and send a message to others that these violations will be taken seriously.”

“Our partnership with the joint procurement fraud strike force ensures fair and open competition for U.S. Government contracts which support the training and readiness of Marine Corps personnel,” said H. Andrew Goodridge, Special Agent in Charge, NCIS Carolinas Field Office.

“SBA OIG will aggressively investigate allegations of fraud involving SBA’s preferential contracting programs, to include false statements made to gain access to contracting opportunities set aside for small businesses,” said SBA OIG Eastern Region Special Agent-in-Charge Kevin Kupperbusch.  “SBA’s preferential contracting programs are intended to promote the economy and grow and develop small businesses across the nation.  I want to thank the U.S Attorney’s Office and our law enforcement partners for their dedication and hard work throughout these investigations.”

SBA’s General Counsel, Christopher Pilkerton said, “These successful prosecutions demonstrate the tremendous results achieved through the combined efforts of federal agencies to uncover and forcefully respond to procurement fraud.  SBA is strongly committed to identifying and aggressively pursuing instances of fraud perpetrated by those participating in SBA’s procurement programs.”

The United States was represented by Assistant United States Attorneys Brian T. Rafferty, Shannon H. Statkus, J. Thomas Clarkson, Matthew A. Josephson, and Jonathan A. Porter.  Any claims resolved by the civil settlement agreements are allegations only and there has been no determination of liability.

Each of the civil settlements resolved potential liability under the False Claims Act.  Under the False Claims Act, whistleblowers can be entitled to a portion of the amount recovered by the United States.  The United States Attorney’s Office also reminds contractors that businesses and individuals that self-disclose potential violations can be eligible for significantly reduced penalties.

If you have any information regarding potential procurement fraud, please contact Assistant United States Attorney J. Thomas Clarkson at (912) 201-2601.

Source: https://www.justice.gov/usao-sdga/pr/southern-district-georgia-announces-results-recent-criminal-and-civil-procurement-fraud

3 charged in fraud scheme involving small business contracts

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Last week in Wisconsin, three defendants agreed to plead guilty to federal crimes related to a long-term fraud scheme led by Brian L. Ganos involving government-funded contracts intended to benefit small businesses.

The three defendants are James E. Hubbell of Sussex, WI, Jorge Lopez of Worthington, Minnesota, and Telemachos Agoudemos  of Big Bend, WI.

According to the charges, the scheme involved Ganos, Hubbell, and others operating construction companies with straw owners who qualified as a disadvantaged individual or as a service-disabled veteran, but who did not actually control the companies.  The scheme participants fraudulently obtained small business program certifications to win millions of dollars in government-funded contracts to which they were not entitled.  Specifically, the following is alleged:

  • Nuvo Construction Company, Inc. (Nuvo”) was misrepresented to be majority-owned and controlled by Lopez to obtain certifications as a Small Disadvantaged Business from the U.S. Small Business Administration and as a Disadvantaged Business Enterprise from Milwaukee County.  In reality, Lopez worked full-time for a different entity in Minnesota and did not actually control Nuvo.
  • C3T, Inc. was misrepresented to be majority owned and controlled by Agoudemos to obtain verification as a Service-Disabled Veteran-Owned Small Business.  In reality, for long stretches, Agoudemos had virtually no involvement in C3T.

Hubbell and Lopez agreed to plead guilty to conspiring to defraud the United States by virtue of the scheme in violation of 18 U.S.C. § 371.  Agoudemos agreed to plead guilty to making false statements to federal agents in order to conceal that C3T, Inc. did not qualify as a Service-Disabled Veteran-Owned Small Business in violation of 18 U.S.C. § 1001.  The maximum penalties for these offenses is five years in prison and a $250,000 fine.

Earlier this month, on April 3, 2018, charges were filed against four defendants in two cases that are related to the April 18 charges.  (See: http://gtpac.org/?p=14290.) 

  • First, in Case No. 18-CR-62, an indictment was filed charging Brian L. Ganos of Muskego and Mark F. Spindler of Menomonee Falls, and the business Sonag Company, Inc. with crimes related to the fraud scheme.  The indictment also alleged that Ganos engaged in money laundering with proceeds from the scheme. The indictment included a forfeiture notice indicating that the United States seeks to forfeit a condominium located in Winter Park, Colorado; the office building used by the companies at 5500-5510 West Florist Avenue, Milwaukee, Wisconsin; a 2014 Chevrolet Corvette Stingray Convertible; and more than $2.2 million seized from two bank accounts.  Each of those assets is subject to civil forfeiture actions filed by the United States.
  • Second, in Case No. 18-CR-64, Nicholas Rivecca agreed to plead guilty to an Information charging him with conspiring with Ganos and others to use Nuvo’s DBE status to win government-funded concrete orders.  Rivecca and Ganos were the co-owners of Sonag Ready Mix, LLC, which is alleged to have filled the concrete orders in Nuvo’s name.

The following agencies are participating in the investigation that led to these charges: the Federal Bureau of Investigation; U.S. General Services Administration, Office of Inspector General; Department of Veterans Affairs, Office of Inspector General; Department of Defense, Office of the Inspector General, Defense Criminal Investigative Service; U.S. Department of Transportation, Office of Inspector General; U.S. Small Business Administration, Office of Inspector General, Investigations Division; Defense Contract Audit Agency; and U.S. Army Criminal Investigations Command Major Procurement Fraud Unit.

Source: https://www.justice.gov/usao-edwi/pr/three-more-defendants-charged-fraud-scheme-involving-small-business-contracts

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