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Wednesday, May 5, 2010

US Federal funds procurement oversight

With Guam on the precipice of receiving more build up money from the Federal Government than it has seen in its post-WWII history, I want to sound a word of caution. That word is "strings". There is no free lunch.

Indeed, as one legal associate, with long exposure to situations similar to Guam's, told me, "with all this money coming in, some one will most likely go to jail before this is all over".

Many of the funds are already flowing to the island for roads, utilities and port improvements. These have come primarily in the form of grants. Grant money is typically subject to procurement deployment in accordance with local law. But it comes with Federal oversight strings attached.

If you want to look at the extent of overall US government spending on grants and such, go to http://www.usaspending.gov/ and http://www.fedspending.org/
.
One place to begin an understanding of this oversight is the Guide to Grant Oversight and Best
Practices for Combating Grant Fraud
promulgated by the within the US Department of Justice.

The National Procurement Fraud Task Force is alive and kicking, as indicated by the following two recent press releases:

U.S. Intervenes in Suit Against KBR and Panalpina Alleging Kickbacks Under the False Claims Act
The Justice Department has intervened in a whistleblower lawsuit against Kellogg Brown & Root (KBR), Panalpina Inc. and others that alleges that employees of two freight forwarders doing business with the companies provided unlawful kickbacks to KBR transportation department employees. KBR is the prime contractor under the Logistics Civil Augmentation Program (LOGCAP III) contract for logistical support of U.S. military operations in Iraq. The whistleblowers also allege overbilling by a KBR subcontractor in the Balkans, Wesco, under a military contract.

The government will seek damages and penalties under the False Claims Act and common law, as well as penalties under the Anti-Kickback Act.

The lawsuit was filed in U.S. District Court for the Eastern District of Texas under the qui tam or whistleblower provisions of the False Claims Act by David Vavra and Jerry Hyatt who have been active in the air cargo business–the industry relevant to the case. Under the qui tam or whistleblower provisions of the False Claims Act, a private citizen, known as a "relator," can sue on behalf of the United States. If the suit is successful, the relator may share in the recovery.

"Defense contractors cannot take advantage of the ongoing war effort by accepting unlawful kickbacks," said Tony West, Assistant Attorney General of the Civil Division of the Department of Justice. "We are committed to maintaining the integrity of the Department of Defense's procurement process."

Former U.S. Army Colonel Pleads Guilty to Accepting Illegal Gratuities Related to Contracting in Support of Iraq War
A retired colonel in the U.S. Army pleaded guilty today to accepting thousands of dollars in gratuities from a contractor during his deployment to Iraq as a contracting officer’s representative, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division.

According to the court document, Col. Davis served in 2004 as the senior member of the source selection board responsible for the award of a contract valued at nearly $12 million to build and operate several Department of Defense warehouses around Iraq. In the period during and after the solicitation of the warehouse contract, Davis accepted two airplane tickets and $50,000 in cash from the contractor who submitted the successful bid for the contract.

Davis faces up to two years in prison and a fine of $250,000 per charged count. In addition, Davis agreed to pay $62,500 in restitution to the United States.

"Today’s guilty plea by a retired colonel in the U.S. Army is a powerful reminder that fraud can corrupt even those we think of as incorruptible," said Assistant Attorney General Lanny A. Breuer.

"Cleaning up contract fraud in Southwest Asia, to include bribery and gratuities, is the highest priority for DCIS. While we applaud this result today, it also sets forth a good example of conduct that cannot - and will not - be tolerated," said James Burch, Deputy Inspector General for Investigations, DCIS.

The case is being investigated by the Army Criminal Investigations Division, the Defense Criminal Investigative Service, the FBI, the Internal Revenue Service, the Special Inspector General for Iraq Reconstruction (SIGIR), U.S. Immigration and Customs Enforcement at the Department of Homeland Security, and members of the National Procurement Fraud Task Force and the International Contract Corruption Task Force (ICCTF).
Many other instances of actions taken by the DOJ to stamp out procurement abuse can be found in the "Briefing Room" tab on the DOJ's Office of Public Affairs website, the most recent link being here.

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