Georgia Tech Procurement Assistance Center

Defense agencies continue awarding contracts to suspended firms, report finds

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At least nine major contractors, working primarily for defense-related agencies, have benefited from waivers under a 1981 law that allows federal officials to override the firms’ suspensions for such misconduct as fraud, bribery and theft.

That’s according to a new study of 22 contract decisions released this week by Bloomberg Government. Using a Freedom of Information Act request filed with the General Services Administration, the publication also found that some agencies had failed to forward the required documentation on the waivers to GSA.

Such household names as IBM, BP and Boeing have benefited from the law, wrote reporter Sam Skolnik.

Keep reading this article at: https://www.govexec.com/contracting/2018/08/defense-agencies-continue-awarding-contracts-suspended-firms-report-finds/150424

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

Court grapples with Albany Marine Corps Logistics Base contractor’s bribery conviction

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The owner of a trucking company who was convicted of paying bribes to rake in more than $20 million from military contracts fought for relief last Wednesday at the 11th Circuit.

Arguing before a three-judge panel in Atlanta, attorney Edward Garland said that the evidence showed only that his client, Christopher Whitman, gave gratuities to officials.   “The defense was presented for five weeks … evidence was used on the record for, what we’ll call, ‘buttering up,’” said Garland, a partner with Garland, Samuel and Loeb.

Justice Department attorney Alex Robbins told the panel meanwhile that the proper time to raise such arguments was at trial.  “Timing is everything,” Robbins said. “You need to submit your argument to the jury. … None of that happened here.”

Robbins added: “There is nothing in the record at all that suggested these payments were gratuities.”

Garland’s argument also drew skepticism from at least one judge on the panel.  “But you never argued this, did you?” said U.S. District Judge John Antoon II, sitting by designation from the Middle District of Florida.

Keep reading this article at: https://www.courthousenews.com/court-grapples-with-defense-contractors-bribery-conviction/

See our earlier reports on this case at: http://gtpac.org/?p=10102 and http://gtpac.org/?p=7589. 

Former Atlanta purchasing chief and former MARTA manager convicted of procurement bribery and theft

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The U.S. Attorney’s Office for the Northern District of Georgia announced, in separate cases, two convictions yesterday (Jan. 16, 2018) involving contracting bribes and kick-backs within two different units of metro Atlanta government.

  • Adam L. Smith, the former Chief Procurement Officer for the City of Atlanta, was sentenced to federal prison for conspiring to accept more than $40,000 in bribe payments from a vendor who obtained millions of dollars in city contracts.
  • Joseph J. Erves, former MARTA Senior Director of Operations, was sentenced to two years, nine months in federal prison for orchestrating a false invoicing scheme that resulted in MARTA paying more than $500,000 for maintenance work that was never performed and for then funneling most of that money into his personal bank accounts.

According to U.S. Attorney Byung J. “BJay” Pak, from at least 2015 to January 2017, Smith met privately with a vendor on multiple occasions, frequently at Atlanta-area restaurants. During these meetings, Smith and the vendor discussed Atlanta procurement projects, bids, and solicitations. Often at the time of these meetings, the vendor was actively seeking contracts, projects, and work with Atlanta.  After most of these meetings, the vendor and Smith met in the restaurant’s bathroom, where the vendor paid Smith approximately $1,000 in cash. In return for the bribe payments, the vendor expected Smith to use his position and power to assist the vendor with contracting/procurement with Atlanta and to furnish the vendor with future benefits and favors when needed.

In the case involving the Metropolitan Atlanta Rapid Transit Authority (MARTA), beginning in 2010, according to the U.S. Attorney’s office, Erves retained three different vendors purportedly to perform maintenance projects for MARTA. From approximately June 2010 to December 2016, Erves had fake invoices prepared on behalf of the three vendors for more than 40 maintenance projects for which no work was performed.  Erves then used the false invoices as bases to authorize payments to the three vendors.  In many cases, Erves personally approved payments to the vendors knowing that the vendors had not performed any work for MARTA.  After receiving payment, the three vendors funneled most of the money they received from MARTA into Erves’s personal bank accounts.  Subsequently, Erves used the money deposited into his accounts to pay personal expenses, such as multiple purchases at high-end department stores and the purchase of a Porsche 911.  Based on Erves’s authority and representations, MARTA paid the three vendors more than $500,000 for maintenance projects where no work was actually performed.

Smith, 53, of Atlanta, GA, was sentenced to two years, three months in prison, three years of supervised release, ordered to pay $44,000 in restitution, and a $25,000 fine.  On September 25, 2017, Smith pleaded guilty to conspiratorial bribery.  According to press reports, there is an ongoing investigation of matters related to the Smith case by the U.S. Attorney’s Office, the Federal Bureau of Investigation,  and the Internal Revenue Service.

Erves, 53, of Lithonia, GA, was sentenced to two years, nine months in federal prison, and ordered to pay $522,825.45 in restitution.  Erves also previously pleaded guilty (on August 24, 2017) to one count of Federal Program Theft.  The Federal Bureau of Investigation and the MARTA Police Department are continuing an investigation of this case.

Sources:

Statement from the U.S. Attorney’s Office regarding the Smith case: https://www.justice.gov/usao-ndga/pr/city-atlanta-s-former-chief-procurement-officer-adam-smith-sentenced-federal-prison 

Statement from the U.S. Attorney’s Office regarding the Erves case: https://www.justice.gov/usao-ndga/pr/senior-marta-executive-sentenced-federal-prison-causing-marta-pay-500000-work-never

Former public transit executive charged with taking $500,000 in contract kickbacks

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A former senior manager of the Metropolitan Atlanta Rapid Transit Authority (MARTA) has been charged with conducting a false invoice scheme that resulted in MARTA paying more than $500,000 for maintenance work that was never performed and for funneling most of the money back into his personal bank accounts.

According to U.S. Attorney John A. Horn, the former MARTA executive, Joseph J. Erves “was entrusted to safeguard the taxpayer funds used to run our public transportation authority, and instead he is charged with stealing a half million dollars to buy a Porsche and other high-end purchases. This is a classic case where a public official’s short-term gain in stealing from taxpayers comes crashing down and ends with criminal charges.”

“The federal investigation and resulting federal charges against Mr. Erves will hopefully send a message to others that such ill-conceived schemes to redirect corporate or public funds to their own accounts is a criminal act with tough consequences. The FBI would like to thank the MARTA Police and their investigators for their invaluable assistance in getting this matter advanced for prosecution,” said David J. LeValley, Special Agent in Charge, FBI Atlanta Field Office.

MARTA is the principal public transportation operator in the Atlanta metropolitan area, providing fixed rail and bus service to more than 500,000 passengers per weekday. Formed in 1965, MARTA is a multi-county governmental agency with a 2016 annual budget of more than $880 million.

From 1993 to 2017, Erves worked for MARTA, ultimately serving as its Senior Director of Operations. In that position, Erves oversaw the maintenance of all of MARTA’s buses and rail cars and had the authority to approve payments up to $10,000 to vendors for work performed on behalf of MARTA.

Beginning in or about 2010, Erves retained three different vendors purportedly to perform maintenance projects for MARTA, including repairing brake testing equipment and fixing various MARTA tools and equipment. From approximately June 2010 to December 2016, Erves had fake invoices prepared on behalf of the three vendors for more than 40 maintenance projects for which no work was performed.

Erves then used the false invoices as bases to authorize payments to the three vendors. In many cases, Erves personally approved payments to the vendors knowing that the vendors had not performed any work for MARTA.

After being paid, the three vendors funneled most of the money received from MARTA into Erves’s personal bank accounts. Subsequently, Erves used the money deposited into his accounts to pay personal expenses, such as multiple purchases at high-end department stores and the purchase of a Porsche 911. Based on Erves’s authority and representations, MARTA paid the three vendors more than $500,000 for maintenance projects where no worked was actually performed.

Erves, 52, of Lithonia, Georgia, has been charged in a criminal information with one count of Federal Program Theft. Erves is expected to plead guilty to the charge shortly after arraignment.

This case is being investigated by the Federal Bureau of Investigation and the MARTA Police Department.  Assistant U.S. Attorneys Jeffrey W. Davis and Alison Prout are prosecuting the case.

For further information please contact the U.S. Attorney’s Public Affairs Office at USAGAN.PressEmails@usdoj.gov(link sends e-mail) or (404) 581-6016. The Internet address for the U.S. Attorney’s Office for the Northern District of Georgia is http://www.justice.gov/usao-ndga.

Source: https://www.justice.gov/usao-ndga/pr/senior-marta-executive-charged-false-invoice-scam-causing-marta-pay-500000-work-never

Contractor sentenced to prison for providing bribes in a contract fraud scheme

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Michael Allen Braun has been sentenced to 18 months in prison and $126,300 in restitution for “conspiracy to commit theft of honest services and wire fraud” and bribery of a public official.

In connection with the same case, co-conspirator Air Force Master Sergeant Cody Boone Covert was previously sentenced in February to 23 months in prison for conspiracy and bribery of a public official.

In January 2014, MSgt. Covert, 901st Aircraft Maintenance Squadron located at Hurlburt Field in Florida, was tasked by the Air Force with procuring specialized equipment in support of C-130 Special Operations Aircraft. Braun, who owned the company Trans Global Storage Solutions, conspired with Covert to obtain a contract from the Air Force. Prior to the solicitation of the contract, Braun agreed to provide Covert 45% of the profit from the contract proceeds, if Covert ensured that Trans Global won the contract. Covert submitted a request to purchase the specialized equipment. Because Covert was the requester of the equipment, he was chosen to evaluate each proposal for technical acceptance. Subsequently, Covert recommended the Trans Global proposal be accepted. After Trans Global was fraudulently awarded the $126,300 contract from the Air Force via Covert’s inside influence, Covert and Braun split the proceeds. Covert pled guilty on October 28, 2016, and Braun pled guilty on January 12, 2017.

“Corruption in the government procurement process damages the public trust and ultimately degrades the warfighting mission of the Department of Defense,” commented Special Agent-in-Charge John F. Khin, Southeast Field Office, Defense Criminal Investigative Service. “DCIS, with our investigative partners and the U.S. Attorney’s Office, continues to pursue and bring to justice those contractors who defraud military programs, especially when it jeopardizes the safety of our brave men and women in uniform.”

The case was investigated by the Air Force Office of Special Investigations, the Defense Criminal Investigative Service, and the Defense Contract Audit Agency.

Source: https://www.justice.gov/usao-ndfl/pr/federal-government-contractor-sentenced-prison-providing-bribes-government-contract

Florida and Mississippi men sentenced for bribing public officials at Albany’s Marine Corps Logistics Base

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A former agent and a former driver for a large national trucking company have been sentenced to prison for paying bribes to officials at the Marine Corps Logistics Base (MCLB) in Albany, Georgia, in order to obtain lucrative freight-hauling business, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Acting U.S. Attorney G.F. Peterman III of the Middle District of Georgia.

Ivan Dwight Brannan, 61, of Jupiter, Florida, and David R. Nelson, 55, of Lucedale, Mississippi, were sentenced to 48 months and 24 months in prison, respectively, by U.S. District Judge W. Louis Sands of the Middle District of Georgia, who also ordered each man to serve three years of supervised release.  Brannan was additionally ordered to forfeit $120,000, and Nelson was ordered to pay a $10,000 fine.

In connection with their guilty pleas, Brannan, the former agent, and Nelson, the former driver, admitted that from 2006 to 2012, they provided cash and other items of value to Mitchell Potts, a former traffic office supervisor for the Defense Logistics Agency (DLA) at MCLB-Albany, and Jeffrey Philpot, another official in the DLA traffic office, to ensure that their trucking company client was awarded millions of dollars in business at MCLB-Albany.

From 2006 to 2012, Brannan and Nelson paid at least $120,000 in bribes to Potts and Philpot.

Potts and Philpot both previously pleaded guilty to two counts of bribery of a public official for their roles in this scheme and another similar one.  Potts and Philpot were previously sentenced to 10 years and seven years in prison, respectively.

ACIS DCIS NCISThe U.S. Army Criminal Investigation Command, the Naval Criminal Investigative Service and the Defense Criminal Investigative Service investigated the case.  Trial Attorney John Keller of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney K. Alan Dasher of the Middle District of Georgia prosecuted the case.

Source: https://www.justice.gov/opa/pr/florida-and-mississippi-men-sentenced-bribing-public-officials-georgia-military-base

See earlier articles on this matter at:

Three-quarters of construction-related companies affected by fraud in the past year

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Three quarters (75%) of construction, engineering and infrastructure companies have experienced a fraud incident in the past year, according to the 2015 Kroll Global Fraud Report.

The findings reveal the most common type of fraud experienced in the sector was theft of physical assets or stock, experienced by 36% of construction companies, followed by vendor, supplier or procurement fraud (24%). These are some of the highest incidence rates of any sector surveyed and are second only to levels experienced by the retail industry. Respondents in this sector also reported the highest level of regulatory or compliance breach fraud (18%) of any sector surveyed.

Nine in ten (92%) respondents in the construction industry say their exposure to fraud has increased in the last year, the highest increase in fraud exposure of any sector. The biggest drivers of this are high staff turnover (49%) and entry to new, riskier markets (21%). In terms of responsibility, a senior executive or middle manager was involved in a fraud against the company at just under a third (32%) of all construction firms surveyed.

Despite problems caused by high staff turnover, only 30% of construction companies are looking to invest in background screening in the coming year and just 25% plan to spend on management controls – less than the survey average.

Percentage of construction, engineering and infrastructure companies affected by different types of fraud
Percentage of construction, engineering and infrastructure companies affected by different types of fraud

Daniel Karson, Chairman of Kroll, observed:

“One of the most telling results from this year’s report is how vulnerable to fraud companies are feeling. In one form or another, the specter of fraud arises in virtually every business relationship. What our report drives home is that fraud is often an “inside job” and that companies must address both internal and external relationships if they are to most effectively protect their money, property and private data.

“While technology has enabled new ways to perpetrate fraud, our daily work with clients confirms what the report also reveals — that old fashioned theft, bribery and kickbacks are still amazingly effective and pervasive. Human nature being what it is, fraud will always be with us, whether it occurs in a company’s corner office or a world away in its supply chain. However, there are numerous strategies, resources and best practices available to companies that can go a long way toward helping them protect themselves and their investments.”

The Kroll Global Fraud Report 2015 includes a full detailed industry analysis across a range of fraud categories and regions. To obtain a copy, visit http://www.kroll.com/global-fraud-report.

Contractors and former civilian employee sentenced in bribery scheme at Albany Marine Corps base

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A former civilian employee and a former contractor of the Marine Corps Logistics Base (MCLB) in Albany, Georgia, as well as one outside contractor were sentenced on Thursday, September 10, 2015 to prison terms for bribery and fraud arising from their handling of military trucking contracts and theft of surplus military equipment.

Justice Dept. sealAssistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Michael J. Moore of the Middle District of Georgia made the announcement.

Christopher Whitman, 48, of Sylvester, Georgia, co-owner of United Logistics, an Albany-based trucking company and freight transportation broker, was sentenced to 22 years in prison for his conviction of 43 counts of honest services wire fraud, five counts of bribery, five counts of obstructing justice and one count of theft of government property.  Shawn McCarty, 36, of Albany, Georgia, a former employee at the MCLB-Albany, was sentenced to 10 years in prison for his conviction of 15 counts of honest services wire fraud, one count of bribery and one count of obstructing justice.  Bradford Newell, 43, of Sylvester, a former contractor at the MCLB-Albany, was sentenced to five years in prison for his conviction of 13 counts of honest services wire fraud, one count of bribery, and one count of theft of government property.  All three were found guilty by a jury in the Middle District of Georgia on March 3, 2015, following a five-week trial.

In addition to imposing the prison terms, the court ordered each defendant to forfeit assets reflecting losses to the government attributable to the bribery and fraud schemes.  Whitman was ordered to forfeit $18,860,313.75; McCarty was ordered to forfeit $15,410,151.55; and Newell was ordered to forfeit $513,600.  Whitman was specifically ordered to surrender assets derived from the schemes, including more than 100 parcels of real property, several boats and vehicles, and rental income estimated to be worth more than $14 million.

DLAAccording to the evidence presented at trial, between 2008 and 2012, Whitman paid more than $800,000 in bribes to three former officials of the Defense Logistics Agency (DLA) at the MCLB-Albany, including McCarty, to obtain commercial trucking contracts from the base.  The evidence showed that contracts included unnecessary costly provisions, such as expedited service, expensive trailers and exclusive use (i.e., a requirement that freight be shipped separately from other equipment).  Evidence presented at trial and in a post-trial forfeiture hearing established that Whitman’s company grossed more than $37 million, and resulted in government losses and an improper benefit to Whitman of more than $20 million.

The evidence further demonstrated that Whitman paid nearly $200,000 in bribes to Newell and the former inventory control manager of the Distribution Management Center at MCLB-Albany, both of whom used their official positions to help Whitman steal from the base more than $1 million in surplus military equipment, including bulldozers, cranes and front-end loaders.  According to the trial evidence, in exchange for the bribe payments, Newell and the inventory control manager removed the surplus items from Marine Corps inventory and arranged to have them transported off the base by Whitman’s company.  The evidence showed that, after having the equipment refurbished, Whitman sold it to private purchasers.

Five other individuals have pleaded guilty to their roles in the corruption and fraud schemes.  In October 2013, Kelli Durham, the former manager of Whitman’s company, pleaded guilty to conspiracy to commit wire fraud, admitting to intentionally overbilling the United States for services the company did not perform, resulting in losses ranging from $7 million to $20 million.  In May 2013, Mitchell Potts and Jeffrey Philpot pleaded guilty to bribery for collectively accepting more than $700,000 in bribes from Whitman.  In February 2013, Shelby Janes pleaded guilty to bribery for receiving nearly $100,000 in bribes from Whitman.  These defendants have not yet been sentenced.  In February 2014, C.W. Smith, a Whitman associate who helped arrange the sale of the surplus military equipment Whitman stole from the base, pleaded guilty to theft of government property.

NCISThe case was investigated by the Naval Criminal Investigative Service, with assistance from the Dougherty County, Georgia, District Attorney’s Office; Defense Criminal Investigative Service; DLA Office of the Inspector General; and the Department of Labor Office of the Inspector General.  The case is being prosecuted by Deputy Chief J.P. Cooney and Trial Attorney Richard B. Evans of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney K. Alan Dasher of the Middle District of Georgia.  The forfeiture is being handled by Assistant Deputy Chief Darrin McCullough of the Asset Forfeiture and Money Laundering Section and the U.S. Attorney’s Office of the Middle District of Georgia.

Source: http://www.justice.gov/opa/pr/two-contractors-and-one-former-civilian-employee-sentenced-bribery-scheme-georgia-military

Georgia men charged in contracting corruption schemes at Albany Marine Corps base

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Three Georgia men have been charged in a 51-count indictment for their alleged participation in fraud and corruption schemes at the Marine Corps Logistics Base (MCLB) in Albany, Ga., resulting in the loss of millions of dollars to the United States government.

Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division and U.S. Attorney Michael J. Moore for the Middle District of Georgia made the announcement after the indictment was unsealed in the Middle District of Georgia today.

Christopher Whitman, 48, co-owner of United Industrial of Georgia Inc. (also known as ULOC), an Albany-based trucking company and freight transportation broker , was indicted on 43 counts of money, property and honest services wire fraud, five counts of bribery and one count of theft of government property.  Shawn McCarty, 36, of Albany, a former employee at the MCLB-Albany, was charged with 30 counts of money, property and honest services wire fraud and one count of bribery; and Bradford Newell, 43, of Sylvester, Ga., also a former employee at the MCLB-Albany, was charged with 13 counts of money, property and honest services wire fraud, one count of bribery, and one count of theft of government property.

The three men were arrested earlier today and appeared before U.S. Magistrate Judge Thomas Q. Langstaff.   Judge Langstaff ordered the three men detained pending further hearings next week.

According to the indictment, Whitman paid nearly $1 million in bribes to Mitchell Potts, the former traffic office supervisor for the Defense Logistics Agency (DLA) at MCLB-Albany, Jeff Philpot, the former lead transportation assistant in the traffic office, and Shawn McCarty, another transportation assistant in the traffic office, to obtain commercial trucking business from the DLA.   The indictment alleges that Potts, Philpot and McCarty used their official positions to defraud the government and benefit ULOC by helping ULOC obtain transportation contracts loaded with unnecessary premium-priced requirements – including expedited service; removable gooseneck trailers, which do not require a loading dock and are therefore more expensive than standard trailers; and exclusive use, which requires that freight be shipped separately from other equipment – even if that results in a truck not being filled to capacity.  The indictment alleges that Whitman and ULOC brokered these shipments for service without the premium specifications and on fewer trucks than requisitioned by DLA, but they billed the government at rates approved by the corrupt officials.   These actions are alleged to have resulted in ULOC profits grossing more than $20 million over less than four years.

Whitman is accused of orchestrating a scheme to steal and sell surplus equipment from MCLB-Albany worth more than $1 million.   Whitman allegedly paid approximately $200,000 in total bribes to Shelby Janes, the former inventory control manager of the Distribution Management Center (DMC) at MCLB-Albany, and Newell, an assistant to Janes, who used their official positions to help Whitman steal surplus equipment from the base, including bulldozers, cranes and front-end loaders.   The indictment alleges that Whitman improved and painted the stolen equipment.

An indictment is merely a charge and the defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

If convicted, the defendants face up to 20 years in prison for each wire fraud count and 15 years in prison for each bribery count.   The theft count carries a maximum prison term of 10 years.  Each charged count carries a maximum fine of $250,000 or twice the gross gain.

Prior to this indictment, one former ULOC employee and three DLA officials pleaded guilty in connection with the fraud and corruption schemes alleged in the indictment.   On Oct. 10, 2013, Kelli Durham, ULOC’s former manager, pleaded guilty to conspiracy to commit wire fraud, admitting to intentionally overbilling the United States for services ULOC did not perform, resulting in losses ranging from $7 million to $20 million, and for receiving $905,685 for her role.   She faces a maximum penalty of five years in prison.   In May 2013, Potts and Philpot pleaded guilty to bribery for collectively accepting more than $700,000 in bribes; and in February 2013, Janes pleaded guilty to bribery for receiving nearly $100,000 in bribes.   The three former officials each face up to 15 years in prison.

The case is being investigated by the Naval Criminal Investigative Service, with assistance from the Dougherty County District Attorney’s Office Economic Crime Unit, Defense Criminal Investigative Service, DLA Office of the Inspector General, and the Department of Labor Office of the Inspector General.   The case is being prosecuted by Trial Attorneys Richard B. Evans and J.P. Cooney of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney K. Alan Dasher of the Middle District of Georgia.

Source: http://www.justice.gov/opa/pr/2014/January/14-crm-066.html 

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