Newly Unveiled Pentagon Fraud Report Names 9 Debarred Contractors

It took a transparency advocate using a Freedom of Information Act request, but the Defense Department last week released a congressionally mandated report on the extent of criminal contractor fraud, naming nine firms that were suspended or debarred.

The four-page report covering fiscal year 2013 through 2017 was sent to lawmakers in December, as required under the 2018 National Defense Authorization Act, but was released to FOIA requester Steven Aftergood, who writes the Secrecy News blog for the Federation of American Scientists.

Investigators at the Defense Criminal Investigative Service and the Defense Department Office of Inspector General found that during the five-year period, there were 1,059 cases resulting in criminal convictions of 1,087 defendants. “The cases reported involved 678 defendants as individual persons and 409 defendants as business entities,” the Pentagon said. “As a result of the criminal convictions, a total of $368,670,055 was recovered in fines and penalties; $370,194,702 was recovered through restitution; and $53,361,358 was recovered through forfeiture of property.”

There were 443 cases resulting in civil judgments or settlements involving 546 defendants or respondents. The cases involved 111 individuals and 435 business entities subject to civil judgments or settlements that totaled $5,858,180,290.

The nine contractor entities whose employees faced criminal conviction are: Advanced Solutions for Tomorrow, Inc.; B&J Multi Service Corporation; Matthews Manufacturing, Inc.; Nova Datacom, LLC; NP Precision, Inc.; Quantell, Inc.; Tab Construction Company, Inc.; Megabite Electronics, Inc.; and Skedco, Inc.

In total, 168 entities or individual contractors were indicted, fined or convicted of procurement fraud.

The newly released report was reviewed for technical issues by the Defense-wide Procurement Fraud Working Group.

The IG, which produced an updated summary of specific procurement fraud cases in its most recent semi-annual report, wrote, “Procurement fraud includes, but is not limited to, cost and labor mischarging, defective pricing, price fixing, bid rigging, and defective and counterfeit parts. The potential damage from procurement fraud extends well beyond financial losses. This crime poses a serious threat to the DoD’s ability to achieve its objectives and can undermine the safety and operational readiness of the warfighter.”

As Aftergood noted, a similar report was released in 2011 at the request of Sen. Bernie Sanders, I-Vt.

Neil Gordon, an investigator with the nonprofit Project on Government Oversight, which has long tracked contractor fraud, told Government Executive “POGO was disappointed that this fraud report was much less detailed than the one the Inspector General released in 2011. This one lacks the detailed charts and tables, names fewer contractors, and just generally lacks any descriptive detail. Overall, it once again serves to remind that there are no consequences for defense contractors who commit fraud. It boggles the mind how willing the Defense Department is to award taxpayer dollars to the same bad actors again and again.”