Last issue I mentioned that we would soon be conducting a survey of CMO employees to try to determine the barriers to reporting fraud, waste and abuse by contractors and contractor employees. Issuance has been delayed due to problems with the DCMA survey system, but I'm told that the problems should be fixed sometime in October. When you do see the survey, please give it your attention as the responses will drive many of our efforts during the upcoming year.

Here's a scam that has been verified as true that we are passing on to all of you as an advisory: The "Jury Duty Scam" is being used by thieves to gain access to personal information. The scammer calls the victim pretending to be an employee of a local court and announces that as he/she has failed to report for jury duty, a warrant has been issued for their arrest. After the victim denies ever receiving notice, the scammer will reassure the victim that "this all may be a misunderstanding" that can be straightened out if they can just "verify" their information with a few simple questions. You see where this is going? For further information, see the coverage of the scam at snopes.com. (Geoffrey)

SOME FREQUENTLY ASKED QUESTIONS

CAN I REMAIN ANONYMOUS?

YES. Both the CIC and the investigative agencies attempt to protect the confidentiality of persons making reports to the largest extent possible.

WILL IT SUFFICE IF I REPORT SUSPECTED FRAUD TO MY SUPERIORS?

NO. You are required to report any suspicion of fraud you may have to the DCMA Contract Integrity Center (CIC). Of course, you may also notify your supervisor, but you should not assume that your chain of command will report the allegation. The responsibility to report is yours.

SHOULD I NOTIFY THE CONTRACTOR OF MY SUSPICIONS AND ASK FOR AN EXPLANATION?

NO, DEFINITELY NOT. Alerting the contractor to your suspicions may compromise an investigation. You should not have any discussions with the contractor about fraud allegations and should consult with fraud counsel and investigators if you believe contact is necessary.

HOW MUCH INFORMATION MUST I HAVE, TO MAKE A REPORT?

Very little is required. An initial report is often nothing more than an alert to a suspicious situation.

AM I REQUIRED TO REPORT SUSPECTED FRAUD? IF SO, TO WHOM?

YES. All DCMA employees must promptly report suspected fraud/irregularities, including those reported by DCAA audits, to the cognizant DCMA CIC Fraud Counsel for your respective area.

WHAT MUST I BE ALERT FOR?

You must be alert for and report all situations where you feel that it is possible the Government has been (or is being) defrauded or victimized by some sort of wrongdoing. These situations may be observed by you personally or brought to your attention by another person, frequently, a contractor employee. Here are some examples:

Defective Product or Service
Billing for Non-delivered Supplies
Failure to Conduct All Required Tests
Falsification of Documents
Cost Mischarging
Defective Cost and Pricing Data
Progress Payment Irregularities
Pre-award Survey Irregularities
Payment of Kickbacks Bribes/Gratuities
Improper Solicitations for Employment
Conflicts of Interest
Theft or Misuse of Government Property

Please call your local DCMA Fraud Counsel; use one of the imbedded email links; or, contact us at FraudNet@dcma.mil if you have any questions. (Satagaj)

JAIL TIME FOR THE FLORIDA DUO

A case that started with DoD end item users reporting receipt of nonconforming products has come to closure with the conviction of the men responsible. The U. S. District Judge Timothy Corrigan, Jacksonville, FL sentenced Horace Daughtrey and George Searcy to jail. Both men were involved with companies that shipped thousands of non-working parts for military equipment under almost 1000 contracts awarded by DLA’s Defense Supply Center Columbus (DSCC). The contracts were originally destination acceptance but were later changed to source inspection. Parts involved included replacement components for night-vision goggles and aircraft instruments. At least $4 million in faulty product was provided to the Government (see Focus on Fraud, Issue No. 21 – Raids in Florida Net 2 in Bad Product Scheme). Daughtrey was sentenced to 46 months in prison and ordered to pay $2.2 million in restitution. Searcy received 37 months in prison and was ordered to pay $1.8 million in restitution. The Judge also ordered the forfeiture of many luxury items (cars, boats, jewelry and sports memorabilia) that the two individuals had purchased.

When the Government had identified problems with the products shipped by one company, the pair would use a new company name and continue bidding on contracts. Some of the names of the companies were Tri-Global Defense, Global Tek and Omega Tech. According to the DSCC Quality Assurance Specialist Thomas Kevin Goad, these actions (providing bad parts) impacted mission plans in both Iraq and Afghanistan. Local news coverage of the sentencing reported defense counsel commenting that the DoD needed to toughen the bidding process that had allowed this fraud to occur. Debarment action is being taken by DLA. Thanks to DCIS Special Agent Angel Tucker-Hamiyeh and DSCC Fraud Counsel Susan McKee for their efforts on the case. (Bass)

"BIG 4" ACCOUNTING FIRM RESOLVES ALLEGATIONS OF FRAUDULENT PRACTICES

In July 2005, PriceWaterhouseCoopers LLC (PWC) agreed to pay the Government $41.9 million to resolve allegations that it had fraudulently retained travel related rebates earned on Government contracts over a 13-year period. The allegations were made in a civil lawsuit filed by a Qui Tam Relator. They involved contracts awarded by the Department of Defense, the Department of Justice, the Environmental Protection Agency, and Securities and Exchange Commission, the Peace Corps, the Department of Education, and the Department of Veteran Affairs.

The complaint alleged that PWC failed to fully credit their Government contracts with travel commissions, rebates, and incentives earned on airfare, hotel, car rental costs and other travel related expenses charged as direct contract costs. The Qui Tam Relator, Neal Roberts, was a retired PWC partner. He will receive a share of the Government's recovery. In December, PWC agreed to pay $54.5 million to settle its part of a class-action lawsuit brought by commercial clients alleging similar misconduct.

Many thanks to DCMA Virginia ACOs Gloria Person and Terri Gray and DCMA Virginia Counsel, Andy Fechhelm for their support with this investigation and for their cooperation in ensuring that DCMA's efforts to finalize rates and close out contracts did not interfere with the resolution of this matter. (Matsunaga)

FALSE ANCO-TECH CoC FOR TITANIUM TUBING RESULTS IN CRIMINAL PROSECUTION

Anco-Tech, Inc. located in Dearborn Heights, MI manufactured titanium tubing for use in civilian aircraft and the V-22 Osprey tilt-rotor aircraft, a DoD aircraft being made by The Boeing Corporation and Bell Helicopter Textron, Inc. A Criminal Indictment has been filed against Anco-Tech and two quality managers of the company. The Indictment charges that the two former quality managers executed or directed other Anco-Tech employees to execute false certificates of conformance that represented that titanium tubing manufactured for use in the aerospace industry conformed to all applicable specifications. They allegedly knew that the tubing had not been manufactured, inspected and/or tested in conformance with the specifications. The former quality managers directed Anco-Tech employees to skip required tests, ignore certain testing protocols, ignore inspection procedures, and to falsify documents throughout the inspection process. Anco-Tech was a second-tier subcontractor to Boeing; there was no DCMA quality delegation. Titanium tubing manufactured by Anco-Tech was installed in the back-up brake system of a V-22 Osprey and failed a routine test performed by Boeing. Subsequently, Boeing and Bell isolated in-stock Anco-Tech titanium tubing and performed routine tests on a sampling of the tubing. Due to an approximate 25% failure rate, the U. S. Marine Corps, in conjunction with Boeing and Bell, grounded the V-22 Osprey fleet and removed all Anco-Tech tubing installed in flight critical applications in the hydraulic systems. The Department of the Navy has suspended Anco-Tech and the two individuals from contracting with the Government. (Ross)

CONTRACTOR CONVICTED FOR SIGNING DD250

In Focus on Fraud, Issue No. 22, we reported on the conviction of a contractor for signing his own DD250 and submitting it for payment. On July 26, 2005, Michael Murphy, President, Primetech Corporation, Huntington Beach, CA was sentenced to 2 years in prison and ordered to pay $99,560 in restitution for violating Title 18 U.S.C. § 287, False, Fictitious or Fraudulent Claims and 18 U.S.C. § 1001, Statements or Entries Generally (False Statements). In case you didn't catch it earlier, here is the story behind the headlines:

"It all started with a phone call two years ago from Lead Procurement Tech Pat Avina to Team A Supervisor, Tito Valenzuela. Pat had received a faxed DD250 from a new contractor named Primetech. This was nothing special under normal circumstances, except that this DD250 was not filled out properly. All DCMA QARs are aware that block 21a must include the QAR's typed name, address and phone number, just in case DFAS needs to call the QAR directly. The DD250 submitted by Primetech had a name signed in block 21a alright, "Michael Murphy." The problem? Mr. Murphy was not a QAR; he was the President of Primetech!

Tito asked DCMA Santa Ana QAR Joe Oddo to look into this and find out who this contractor was and why they had signed the DD250 instead of an authorized Government representative. Joe did some homework prior to his surprise visit to Primetech. He determined that the contract called for 1,055 turbine vane arms for GE engines installed on the USAF C-5 Cargo aircraft. Failure of these parts could cause severe damage to the aircraft or possible loss of aircrew lives. The contract very explicitly required the contractor to purchase these very critical turbine vane arms only from the OEM, General Electric!

To make a long story short, the contractor lied to the PCO about where it had purchased the parts. Mr. Oddo learned that Primetech had supplied counterfeit parts bought from another contractor, not from GE as required. These very same parts had previously been submitted by that 'other" contractor and promptly rejected by the USAF during a First Article inspection for the very same reason . . . they were not GE parts! To avoid rejection of the parts, Primetech had shipped the parts without the required Government source inspection. DCMA Santa Ana-Irvine quickly notified DCIS and the Defense Supply Center Richmond of the potential fraudulent activity and the parts were recalled from the field before they could be installed and cause any damage to aircraft."

DCMA Santa Ana QAS Joe Oddo and DCMA Santa Ana Lead Procurement Tech Patricia Avina were instrumental in bringing this case to a successful conclusion. DCMA Santa Ana QAS' Sal Franco and Jim Wathen, members of the El Toro Task Force, provided technical support to the investigation. Congratulations and thanks (again) to DCIS Special Agent Craig Wyckoff and AFOSI Special Agent Joseph Cassidy and to Assistant United States Attorneys Thomas McConville and Richard Cutler for this successful prosecution! (Matsunaga, with thanks to Joe Oddo)

Call (310)902-6681 or Email, if you are a PTAC or supplier, ask about our PTAC referral rates. 3/04

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