Georgia Tech Procurement Assistance Center

Government contractor pleads guilty to fraud for paying drivers as independent contractors

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Paying workers as independent contractors instead of as employees may land a former executive in jail for criminal wire fraud.  On June 12, 2019, the former operations manager and vice president of a Florida-based mail transportation contractor pled guilty to two counts of wire fraud related to such treatment.  The Government’s case was based on pricing estimates for employee-related costs that the contractor later did not incur because it instead used independent contractors.

In the June 1, 2018 indictment of Alexei Rivero, the Government contended that Rivero purposely misclassified the drivers it hired as independent contractors.  According to the indictment, this allowed the contractor to “misappropriate” $1.5 million in USPS contract payments “designated” for fringe benefits and $1.2 million designated for payroll taxes.

Continue reading at:  Husch Blackwell’s The Contractor’s Perspective

Retired colonel sentenced in Fort Gordon bid-rigging scheme

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A retired Army colonel involved in a $20 million bribery and bid-rigging scheme in government contracts at Fort Gordon was sentenced to five years in prison Friday.

Anthony Williams, 59, pleaded guilty to conspiracy in March for his role in the scheme that was in effect from 2008 to 2014 as the building and modernization of communications networks at Fort Gordon took place.  Williams took $1.2 million in bribes while on active duty in Washington and in charge of the billion-dollar battle command budget.

Williams conspired with retired Col. Calvin Lawyer, who left his position overseeing the fort’s building and modernization of networks to start his own business to obtain government contracts.  Col. Anthony Roper took Lawyer’s former position and steered government contracts valued at $20 million to Lawyer’s company and a second company, a subcontractor owned by Williams’ good friend, identified only as “J.D.Y.” in court documents.

It was at J.D.Y.‘s company that a no-show job was set up for Williams’ wife, who was paid $963,000.  The subcontractor was paid $13 million, a sum not included in the formal conspiracy, Senior Judge Dudley H. Bowen Jr. noted Friday.

Continue reading at:  The Augusta Chronicle

Procurement fraud is alive and well, and being punished

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The recent guilty plea of a furniture company sales executive provides a timely reminder that contractors continue to engage in procurement shenanigans–and continue to get caught.  In such circumstances, crime definitely does not pay.

On June 10, 2019, the Department of Justice announced that Steven Anstine of Overland Park, Kansas, pled guilty in federal District Court in South Carolina to one count of illegally obtaining contractor bid and proposal information in an effort to win a State Department contract to provide furniture to a U.S. embassy abroad.

Continue reading at:  Government Contracting Matters

Government settles alleged False Claims Act violations against Statesboro business

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The Sesolinc Group has agreed pay up to $2.4 million to settle allegations that they supplied defective products and submitted false claims to the Army, Department of Veterans Affairs and General Services Administration.

Based on the allegations of the unsealed complaint, Sesolinc is alleged to have violated the False Claims Act when it sold products to the United States that were not in compliance with required electrical and structural standards, said Bobby L. Christine, U.S. Attorney for the Southern District of Georgia.  After concerns were raised internally, Sesolinc, which manufactures its products in Statesboro, is alleged to have continued to deliver defective products to government customers.  As part of the settlement, Sesolinc has agreed to repair goods previously supplied to the United States and pay an additional penalty.

“If a contractor represents to the United States that it will provide products consistent with basic requirements of the government customers, this office will hold them to those promises,” said Christine.  “We will continue to vigorously pursue any contractors who try to cut corners at the taxpayers’ expense.”

“This settlement sends a clear message that defective products sold to our military will not be tolerated,” said Special Agent in Charge Cynthia A. Bruce, Defense Criminal Investigative Service (DCIS), Southeast Field Office.

Continue reading at:  Savannah Now

Former Virginia state delegate gets prison time for $80 million contracting fraud

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A former member of the Virginia General Assembly was sentenced Tuesday to 2½ years in prison for taking part in an $80 million government contracting fraud conspiracy.

Ronald Villanueva, 49, a former Republican delegate from Virginia Beach, pleaded guilty to one conspiracy charge this year and agreed to pay more than half a million dollars in restitution.

Villanueva served in the House of Delegates from 2010 until 2018; he lost his seat to a Democratic challenger in 2017.

For much of that time, Villanueva admitted, he and a partner in the tactical-gear supply business used other people as figureheads to get preferential treatment designed to help minority contractors.  They also relaunched the company at one point, changing its name from SEK to Karda, so it would qualify for contracts aimed at newer firms.

Continue reading at:  Washington Post

FinCEN reports spike in email scams

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The Financial Crimes Enforcement Network (“FinCEN”) issued an advisory and trend analysis alerting financial institutions to a recent surge in business email compromise (“BEC”) incidents, as reported in suspicious activity reports.  According to FinCEN, these reported attacks climbed from 500 per month in 2016 to over 1,100 per month in 2018, with attempted BEC thefts increasing from $110 million per month in 2016 to $301 million monthly in 2018.

According to the advisory and analysis, a BEC scam typically involves a cyber criminal emailing false invoices or payment instructions to an individual or business while impersonating a supervisor, vendor or other legitimate third party.  Once payment is made, the proceeds are fraudulently directed to a criminal-controlled account.  Sometimes the emails originate from hacked accounts, while at other times, they are made to appear as communications from trusted sources.  Victims can include businesses, government agencies, universities and non-profits, often those that make frequent wire transfers.  Most BEC incidents reportedly involve transfers to domestic accounts in the United States, likely controlled by “money mules.”

Continue reading at:  Mondaq.com

GTPAC Special Fraud Alert

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Dear GTPAC Clients:

Recently, we have seen a substantial increase in fraudulent schemes aimed at harming GTPAC clients and other government contractors in Georgia and around the nation.  Specifically, we’ve seen a large increase in incidents, where criminals impersonate government procurement officials and send out fake Request for Quotes (“RFQ”) and fake purchase orders in order to acquire equipment and other goods that they then sell on the black market.

Often, the fake RFQs / purchase orders at issue use the name of legitimate government officials but include phone and fax numbers that are associated with the fraudsters.  These fraud schemes have become more sophisticated lately, because the fraudsters also use hacked government accounts and spoofed U.S. government agency domain names in order to trick our clients into thinking the RFQ or Purchase Order is from a legitimate government source.

Fraudsters also use domain names they purchase, which are similar to real government domain names, but which are controlled by the fraudsters (such as rrb-gov.us).  While the email header may display a legitimate government email address (.gov address), the Reply-To header is often slightly different, or from a non-government email address.  Sometimes the fraudsters avoid email and insist on communicating by fax.

Vendors who respond to these fraudulent RFQs/Purchase Orders are instructed to ship products to addresses that are chosen by the fraudsters, frequently abandoned commercial properties.  When the fraudsters receive the shipment, the ringleader decides whether to sell the equipment in the United States or ship it to Nigeria for resale.

The equipment enters the black market and the government vendor never receives payment for the goods.  Please review this alert that has been recently issued by the U.S. Department of Homeland Security: https://www.oig.dhs.gov/sites/default/files/assets/pr/2019/oigpr-071619-fraud-alert-transnational-fraud-ring-targets-us-government-procurement-offices-and-vendors.pdf

Prevention Measures

If you receive an RFQ or purchase order for equipment that appears to come from the U.S. Government, take the following precautions:

  • Do as much due diligence as you can to ensure that the RFQ or purchase order is from a legitimate government source;
  • Independently obtain the phone number for the listed procurement official and call them to confirm the RFQ is legitimate before responding to any RFQs received by fax;
  • Respond to RFQs received by email only when the sender’s domain and the Reply To header end in “.gov”;
  • Independently verify that the shipping address is a legitimate government address or facility before shipping equipment;
  • Beware of typographical errors, unusual language, and distorted U.S. government seals and other graphics;
  • Be suspicious of any purported procurement officials who refuse to communicate by email;
  • Clearly indicate on the outside of all boxes that the contents are the property of the United States Government (in at least one case, a buyer refused to purchase the stolen goods from the fraudster when he saw “U.S. Department of Homeland Security” on the boxes); and
  • Take any and all other precautions necessary to ensure you are dealing with a legitimate government customer;

Anyone who believes they may have been a victim of this fraud scheme is urged to call the DHS OIG Hotline (1-800-323-8603) or file a complaint online via the DHS OIG website, www.oig.dhs.gov

OIG: Beware of fraud ring scamming equipment by posing as federal buyers

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A transnational fraud ring is specifically targeting America’s federal procurement offices and vendors, according to an alert the Homeland Security Department’s Office of Inspector General issued this week.

Last July, the OIG discovered that members of a ring based in Atlanta, Georgia had posed as a Homeland Security procurement official to get their hands on computer equipment supplied by private vendors.  Diving deeper into the case, the IG found that the fraudsters were also stealing electronic equipment from other agencies including but not limited to the Commerce, Defense, Labor, Justice and Transportation departments.

“Some of the purchase orders identified were for hundreds of thousands of dollars each,” the OIG said.

In their scheme, the phony actors find federal government solicitations for equipment such as hard drives or smartphones, and send fraudulent requests for quotations to federal vendors from across the nation.  Though the RFQs use the legitimate names of procurement officials, the schemers use their own phone and fax numbers and they are also known to spoof government agency email addresses, using domain names such as “rrb-gov.us.”

Continue reading at:  Nextgov

Recent indictments demonstrate increased focus on bid-rigging

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Companies involved in the government contracting industry should take note that the government is honing in on anticompetitive conduct affecting government procurements.  The federal government has demonstrated an increased interest in this area, and companies should refresh and audit their compliance programs to avoid hefty civil and criminal penalties and potential prison terms for implicated employees.

In the last month, the United States Department of Justice (DOJ) has announced three sets of indictments in recent months relating to bid-rigging of various government procurements and solicitations, evidencing an increased focus on anticompetitive conduct targeting federal, state and local governments.

Continue reading at:  McDermott Will & Emery

Small businesses: Why and how to set-up or enhance your ethics and compliance program

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It’s been ten years since the Federal Acquisition Regulation (FAR) was amended to require government contractors to have a business ethics and compliance program – that’s right, it’s a requirement in every government contract and in most subcontracts!  Aside from being a requirement in every contract and a core component of a small business’ “present responsibility” (i.e. eligibility to be a contractor at all), recent developments have made it essential for small business to address compliance now.

In particular, the Department of Justice has issued guidance as to what it expects from an organization’s ethics and compliance programs, and has reiterated that it will not tolerate companies that lack an effective program.  In other words: get caught without one, and that may be the end of your company.  See Holland & Knight’s post about the DOJ Guidance.  The good news is there has been a lull in new FAR and other regulatory requirements under this Administration, so this is a good time to play some catch up.

But let’s face it, many small businesses are not where they should be, and some others are not even close.  So why aren’t small businesses better prepared and how do small businesses move ethics and compliance programs from a perennial back burner issue to the forefront?

Continue reading at:  Holland & Knight’s Government Contracts Blog

 

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