WhistleblowerSupporter

Reported Recently: Auditors go easy on contractors

This is certainly not the only agency with these types of problems.  Other agencies, which oversee government defense contracting,  have proven to have similar problems and more.  -GFS

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Link to original:

http://seattlepi.nwsource.com/national/1152ap_inside_washington_easy_audits.html

Last updated November 9, 2008 7:00 a.m. PT

INSIDE WASHINGTON: Auditors go easy on contractors

By RICHARD LARDNER
ASSOCIATED PRESS WRITER

	A Bechtel Co. sign is shown on an old streetcar in front of 50 Beale Street in San Francisco, Thursday, Oct. 30, 2008. Instead of seeing red, Pentagon audit managers saw business as usual after being told that Bechtel failed to open all its books for review. (AP Photo/Jeff Chiu)

WASHINGTON -- Instead of seeing red, Pentagon audit managers saw business as usual after being told that a major military contractor failed to open all its books for review.

At a meeting of Defense Contract Audit Agency staff in California last May, auditor Acacia Rodriguez used a 24-page PowerPoint briefing to describe how she and her co-workers struggled with the Bechtel Group's "chronic failure" to provide the financial records required to prove tax dollars were being spent properly.

"Mtn View, we have a problem!!!" said one of Rodriguez's briefing charts, a shorthand reference to the audit agency's branch office in Mountain View, outside San Francisco.

If her bosses were upset over the contractor's foot-dragging, they didn't show it, according to an auditor who attended the meeting, which included Christopher Andrezze, director of the agency's Western region.

Five days later, the agency issued a report rating Bechtel's internal accounting procedures as "adequate," a passing grade that meant defense auditors could ease up on the company. The report made no mention of the records delays.

DCAA is the first line of defense for the public in policing billions of dollars in defense contracts awarded by the government's top-spending department. In theory, the audit agency has extensive powers, including withholding payments and issuing subpoenas, to force contractors to provide the necessary information.

The reality is quite different.

The Bechtel episode illustrates how tolerant the agency can be when defense contractors slow the government's access to paper records and databases. There is no way to know how often DCAA withholds payments because it does not keep track. And it has not used its subpoena power in 20 years.

"We have been basically on the trust system for years," said the auditor who attended the May meeting. "It did not work on Wall Street and it is not working for federal contracts," said the two-decade veteran of the agency who spoke on condition of anonymity because DCAA employees are not allowed to publicly discuss their work.

Negotiation, not confrontation, is the usual method for prying hard-to-get data loose from companies that make weapons or support troops in Iraq and Afghanistan. But the numbers show that approach is too cozy when the need for tough oversight is greater than ever.

In 2007 alone, DCAA performed nearly 34,000 audits covering $391 billion in contractor costs. Of that total, auditors challenged $4.6 billion, or 1.2 percent, as lacking necessary documentation. The question is, how much more could they have caught?

"I start salivating thinking about how much money is involved and the savings that are potentially there," Sen. Claire McCaskill, D-Mo., said at a congressional hearing in September.

Compared with other federal oversight organizations, such as the Government Accountability Office, DCAA's return on investment is weak. For every dollar GAO spends, it saves taxpayers $94. At DCAA, the ratio is $5 saved for every one spent.

DCAA officials declined to be interviewed for this story. In an e-mailed response to questions, Pentagon spokesman Darryn James said contractor delays and refusals to provide records are not extensive problems.

He acknowledged there are times when contractors have to be reminded to provide information. Records disputes are handled at the lowest possible level by the nearly 3,500 defense auditors in the U.S. and overseas, James said. Officials at the agency's headquarters at Fort Belvoir, Va., have had to step in just four times since 2003, he said. All four disagreements were settled without going to court.

"It should be considered a success that DCAA has been able to get the information it needs without having to resort to subpoena authority," James said.

James described the Bechtel situation as an unusual case that was resolved after the agency and the company worked out a way to answer auditor requests for records more promptly.

But an e-mail exchange between DCAA employees in early 2006 indicates the problems with Bechtel were long-standing. "This is the slowest responding (contractor) that I've been at," reads the message from early 2006, provided to The Associated Press on the condition that the employees not be named. "You would be unnerved to know that some of my data request (sic) here have been outstanding for more than six months!!!"

Based in San Francisco, Bechtel is an engineering and construction company that has won just under $10 billion in Defense Department work since 2000, according to FedSpending.org, a Web site created by the public-interest group OMB Watch to track government contracts.

Bechtel spokesman Francis Canavan said the company has a "long record" of working with DCAA. He said there have been occasional delays in locating older records. "We're not aware of any findings that these delays adversely impacted the audits," Canavan said.

Bechtel is not the only trouble spot, according to internal agency documents.

-In September, two auditors traded e-mail complaints about Raytheon, one of the largest U.S. manufacturers of military weapons. "It is not possible to do quality audits under such an environment," one message said. "It is an endless battle," a second said. Raytheon did not respond to a request for comment from the AP.

-Northrop Grumman, which did more than $20 billion in business with the Pentagon in 2007, has refused to give DCAA access to minutes from meetings of the audit committee that reports to the company's board of directors, according to an internal DCAA memo dated Oct. 29. Randy Belote, a Northrop Grumman spokesman, declined comment, saying the issue "is part of an ongoing legal review within the company."

DCAA, formed in 1965, has long been viewed as a bulwark against waste and fraud. Its reputation took a hit this summer after an investigation by the GAO found that supervisors improperly influenced audits to favor contractors. Auditors also were pressured to close audits early in order to meet productivity goals, the GAO report said.

The report mentioned records access problems only in passing. Boeing, a defense giant, did not give auditors the necessary detail to trace costs on a $1 billion space-launch contract, it said. Boeing spokesman Joe Tedino said the company did nothing improper.

"In the end, contractors are getting away with murder" because they know auditors are pushed to complete audits quickly, Diem Thi Le, a senior auditor at DCAA, said at a Sept. 10 congressional hearing on the GAO report. In November 2005, Le reported allegations of misconduct by managers. Her complaints led to the GAO inquiry.

DCAA Director April Stephenson told lawmakers the agency is taking the report seriously and addressing the shortcomings.

The fault isn't all DCAA's, procurement experts say. The agency doesn't always press contractors hard because its actions may not be backed up at the top levels of the Defense Department.

That's especially true for high-profile contracts supporting operations in Iraq and Afghanistan. In one example, department officials overruled auditors who objected to nearly $1 billion in payments to KBR, the Houston-based contractor that supplies U.S. troops with food and housing.

"DCAA finds few friends," said Richard C. Loeb, an adjunct professor of government contract law at the University of Baltimore Law School. "Their work is not appreciated the way it should be."

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On the Net:

Defense Contract Audit Agency: http://www.dcaa.mil/

 

Obama Calls for Fewer Federal Contractors

Government Contracting has been a fertile ground for creation of whistleblowers and of frustrated federal oversight employees who are not being allowed to do their jobs, and are condemned, harassed and suffer outrageous retribution from their employers and others (OSC for example) if they seek to address the real problems in an ethical manner. 

 

This article gives us something to think about.  I urge all whistleblowers (both industry and federal) to contact your elected politicians, including Obama/Biden with your stories and urge them to support whistleblowers and federal employees by empowering them to do their jobs and address government contracting fraud, waste, abuse and other illegal activities successfully and without a total meltdown of their personal lives.

 

 -GFS

 

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Like Clinton, Obama Calls for Fewer Federal Contractors to Cut Spending

By Robert O'Harrow Jr.
Washington Post Staff Writer
Tuesday, November 11, 2008; 12:00 AM

Link to Original:  http://www.washingtonpost.com/wp-dyn/content/article/2008/11/10/AR2008111002427_pf.html

Like every newly elected president, Barack Obama has spelled out an agenda for how his administration will improve the use of taxpayer money. But as he pushes reforms of the government's $440 billion federal procurement system, he faces tremendous obstacles to success, according to contracting specialists, lawyers and industry officials.

During the campaign, Obama and vice-president elect Joseph Biden pledged to reverse years-long trends, including pork barrel spending by Congress, the tendency of government employees to leave to work for government contractors and a sharp rise in the use of no-bid contracts. Obama also wants to make federal buying systems more efficient and said he would reduce federal spending by $40 billion by using fewer contractors.

Contracting specialists, former federal procurement officials and trade group representatives said that to fulfill those promises, the Obama administration will have to summon the will to effect a huge cultural change inside the government to take procurement more seriously.

Government acquisitions programs have long been plagued by delays and cost increases, but experts say the problems have worsened in recent years as the size of the federal workforce has barely grown even as the amount of spending on services, technology and other goods more than doubled. The Clinton administration cut the number of procurement workers as part of an effort to trim red tape, and the Bush administration accelerated the trend with a philosophical commitment to outsourcing and small government.

The number of officials in five contract-related jobs classifications in 2000 was 57,835; by 2006 the number was 58,723, according to a report by the House Oversight and Government Reform Committee.

An annual Government Accountability Office assessment of Defense Department weapons programs helps illustrate some of the problems. Planned commitments on systems rose from $790 billion in 2000 to $1.6 trillion in fiscal 2007, the report found. At the same time, the amount that programs exceeded cost estimates soared from $42 billion in 2000 to $295 billion last year. Average delays of the programs examined by the GAO increased from 16 months to 21 months.

"They're inheriting an almost broken procurement system" said Charles Tiefer, a contracting law professor at the University of Baltimore Law School. "During the last eight years, a lot of the critical oversight machinery was undercut or neglected."

Some specialists think the Obama administration may have to hire and train tens of thousands of new contracting workers to make up for past reductions.

The Obama campaign promised that his administration would hire more procurement workers and use technology more widely to improve the efficiency of the government. It also has proposed expanding a "Google for Government" initiative already underway, including an improved "user-friendly website with the details of all government spending," according to a campaign policy paper.

To get a handle on contracts awarded without full and open competition, the Obama administration will require federal agencies to justify each one. The amount spent on such contracts rose to more than $207 billion last year from $67.5 billion in 2000.

Alan Chvotkin, executive vice president of the Professional Services Council, a contractor trade group, said the government will always need to rely heavily on the private sector. But he said agencies need many more well-trained procurement workers who can buy goods and services.

"We do need to grow the size of the workforce to fulfill that 21st century mission and find those skills," said Chvotkin, who added that it may take 100,000 or more new workers to properly manage the government's buying needs. "So much has been said about the problems and so little has been done."

Paul Murphy has been tracking data about changes in the procurement system as closely as anybody in recent years, as president of the market research firm Eagle Eye. Murphy said he thinks the Obama administration is stepping into a potential thicket of conflicting policy issues.

He said that if the government embraces ever-larger contracts, as proposed by Obama as a way to seek better deals by leveraging the government's buying power, that could enable agencies to squeeze discounts from vendors. But such an effort might run head-on into efforts to expand opportunities for small businesses. Achieving more transparency in the contracting process will require an about-face in many cases from the opaque market-minded culture of the Bush administration. There's also the problem of a simple lack of information ¿ and technology and training ¿ the procurement workers need to get good value for taxpayers and head off waste and abuse and failed deals, he said.

"With deregulation in the last several years, the government has taken on a lot more risk. And we've seen a lot of very large expensive systems fail," Murphy said.

Angela Styles, former administrator of the Office of Federal Procurement Policy in the Bush administration, said many problems are to blame for the contracting system's ills.

"You have such a small workforce managing such a large dollar amount," said Styles, now a procurement lawyer at Crowell & Moring.

She also blamed procurement reforms of the 1990s. Though good in theory, those market-oriented reforms assumed the government could act like a private-sector entity when buying things. But the reforms did not include adequate measures to judge whether that was so. Those assumptions have led to inefficiencies and confusion over the years, as the government bought more with less accountability, she said. Overcoming that confusion will be a tall task for the Obama administration, she said.

"The right management, the metrics, were not put into place to make sure it was working as effectively as it could," she said.

Robert Burton, a former deputy administrator at the procurement policy office, agreed that addressing the procurement workforce will be crucial to the success of Obama's efforts. But he is skeptical about the ability of the government to hire its way out of the problem. That's in part, he said, because many people seem uninterested in taking on the demand of a procurement work.

"Even when the money is there and the need is there, they're finding it difficult to attract top talent to the government," Burton said, adding that he thinks the key is training. "That's where the emphasis has to be, is the quality of the workforce, not the necessarily the size. Because that's not going to happen. We need to be realistic."

Steve Kelman, the architect of procurement reforms during the Clinton administration, said the Obama team really has no choice other than following through on its promises. While he does not agree the system is near-broken, he said there's room for much improvement. Contracting has become a core endeavor of the federal government, he said.

"It's a challenging agenda. Difficult," he said. "Contracting is a key way the government does its business. If you want a high performance government, you need high performance contracting."

ICO Seeks $949 Million Punitive Damages From Boeing

From Bloomberg.com:

 

 

By Elizabeth Amon- Oct. 29 (Bloomberg)

ICO Seeks $949 Million Punitive Damages From Boeing

 

 

ICO Global Communications Holdings Ltd., which last week won a $370.6 million verdict against Boeing Co. over a failed agreement to build a satellite network, asked a jury for an additional $949 million in punitive damages.

 

Lawyers for ICO yesterday asked jurors in Los Angeles Superior Court to award $477 million against the Boeing Satellite Systems unit and $472 million against the parent company. The jurors last week found Boeing acted with malice, oppression or fraud, allowing ICO to seek punitive damages.

 

The amount should be substantial enough to ``punish Boeing and Boeing Satellite Systems and deter future misconduct,'' ICO lawyer Barry Lee told the jury. ``It shouldn't be a routine cost of business that can be passed on with little or no discomfort.''

 

The jurors on Oct. 21 agreed with ICO's arguments that Boeing unfairly demanded additional money to finish and launch the satellites, which Reston, Virginia-based ICO ordered to create mobile-phone connections to remote locations worldwide. The verdict was the fourth-largest in the U.S. this year, according to Bloomberg data.

Boeing Slapped Silly.... Again

Here's yet another one...   I hear there are more cases coming down the pike, just not public yet.  The fraud and corruption just keep getting worse.  Wish I had better news.  -GFS

ICO Awarded $371 Million In Fraud Case Against Boeing
By Tricia Duryee - Wed 22 Oct 2008 02:47 PM PST
ICO Global Communications, which is working on building a satellite and land-based wireless network that aims to provide interactive media services, such as navigation, roadside assistance and the mobile video, was awarded $371 million in damages in a fraud case against Boeing. A jury late yesterday found in favor of ICO. The award includes $279 million for breach of contract and fraud with regard to satellite pricing by Boeing Satellite Systems International and another $91.6 million for fraud related to satellite launches, Barron’s reports. The jury will decide on Oct. 28 whether to decide whether to award any punitive damages.

Many Are Caught, but Few Suffer for U.S. Military Contract Fraud

Link to Original:  http://query.nytimes.com/gst/fullpage.html?res=9C0CE3D81E38F931A25752C1A966958260&sec=&spon=&pagewanted=all

 

By RICHARD W. STEVENSON

Published: November 12, 1990

Twenty-five of the 100 largest Pentagon contractors have been found guilty of procurement fraud in the last seven years, some more than once. Yet not one has been barred from Government contracting, and the renewed debate over how to discourage such fraud has produced no easy solutions.

The number of convictions and guilty pleas has accelerated in the last two years, with 16 cases involving 14 of the largest weapons makers. They include Boeing, Grumman and Teledyne, which made payoffs to obtain confidential Pentagon documents; Rockwell International and Emerson Electric, which overcharged the Government, and Fairchild Industries and Northrop, which failed to test certain weapons components or falsified the test results.

Prosecutors, members of Congress and Pentagon officials have long wrestled with how to punish contractors guilty of wrongdoing, trying to balance the extreme difficulty of cutting all ties to companies that build the nation's most sophisticated weapons against the need to find an effective deterrent to fraud. The recent cases have focused more attention than ever on the topic, setting off a debate over whether the contractors should be permitted to continue doing business with the Government and whether there might be effective alternative sanctions. 'Need to Find a Middle Ground'

"Debarment is such a draconian penalty that it's almost never used," said Representative Charles E. Schumer, the Democrat of Brooklyn who is chairman of the House subcommittee on criminal justice. "We need to find a middle ground so that thousands of jobs and the national security won't be jeopardized but strong enough that it will serve as a deterrent."

Spurred by the increase in fraud cases, Congressional committees have held numerous hearings in the last several months, and lawmakers are considering several proposals. One would ban a contractor from all Government business, a process known as debarment, for several years after a second fraud conviction. Another would prohibit companies from earning any profit on their Government work for a specified period. A third would call for a court-appointed "special master" to oversee all of a contractor's operations. Congress adjourned without taking action on the proposals, but legislators said they plan to address the subject in the next term.

"Congress has allowed this issue to fester for too long," said Representative Christopher Shays, the Connecticut Republican who is a member of the House subcommittee on legislation and national security. "We're going to be bulldogs on this now, and there's no question there's bipartisan support." Fines and Penalties for Fraud

In fraud cases contractors already face court-imposed criminal and civil fines and penalties, sometimes of millions of dollars. In some cases, the Pentagon has tried to discipline contractors through behind-the-scenes pressure to make management changes. Pentagon officials have long argued that it is impractical to go further, because in many cases a company is the sole builder of a weapon and it could take years, and enormous expense, to find alternative suppliers.

Many members of Congress and some prosecutors, however, are increasingly arguing that only the threat of being barred from Pentagon contracts for several years, or similar sanctions, is a sufficient deterrent.

Mr. Schumer has proposed what he says is a realistic middle ground. Under his proposal, the courts would be required to appoint an outside representative to oversee the activities of a contractor convicted of fraud twice within a specified period. The special master would have broad authority to insure the company was operating ethically and that it made full restitution for past crimes.

Mr. Shays said another alternative that deserves consideration in Congress is allowing existing contracts to be completed but barring any new contract awards for a period of several years if a company is convicted or found not to be cooperating fully with a Government investigation.

Small contractors are often barred by the Pentagon from doing business with the Government for several years. But the large contractors, on which the Pentagon relies most heavily, have never faced anything but temporary suspensions of their right to compete for contracts. The suspensions usually last a few months and inflict little, if any, financial pain. Suspensions are almost always limited to a specific company division.

The Pentagon, when faced with a big procurement scandal and pressure from Congress and the public to act against a contractor, sometimes quietly presses a company to make changes in its operations or in its management. After a series of scandals involving the General Dynamics Corporation during the late 1970's and early 1980's, the Pentagon put pressure on the company in various ways, including a brief suspension. The company brought in an outsider, Stanley C. Pace, as its new chief executive with a mandate to clean up its operations and image. Pentagon Policy

The Pentagon says its policy is to use suspension and debarment only to protect the Government and the taxpayer from further fraud, and not as punishment. Punitive action, it adds, is properly limited to the judiciary.

"The current system is working," said Eleanor Spector, the Deputy Assistant Secretary of Defense for Procurement. "We have the tools to suspend or debar the companies involved, and anything that smacks of punishment should be the role of the courts."

While the fines imposed in court cases are often substantial, many legislators and experts contend they do little to insure that contractors will not continue to cheat.

"Corporate executives who persistently engage in this kind of theft from taxpayers ought to know they will not just pay a fine that often doesn't cover the cost of correcting the fraud, or throw an underling to the prosecutors," said Representative George Miller, a California Democrat who has proposed legislation that calls for debarment for a company after two convictions in five years.

Mr. Miller and other supporters of stricter sanctions point to a recent case involving the Northrop Corporation. Northrop's False Test Results

Northrop was indicted last year on charges of falsifying test results on missile and aircraft components. The Pentagon suspended the division of the company responsible for the tests. But because the suspension applied only to direct purchases by the Government, it did not interrupt the division's work supplying a component to the companies that assemble the Harrier jet for the Marine Corps.

Although Northrop pleaded guilty to the test-fraud charges earlier this year, the Pentagon is now considering rescinding the ban altogether. Record of the Last Two Years

In half of the 16 cases involving large contractors in the last two years, the Pentagon took no action against the company. In the other cases, companies or their divisions were suspended for a period of months from receiving new contracts while the Pentagon sought assurances that they were operating responsibly.

In some cases, the companies lost a chance to win large new contracts during their suspensions.

As often as not, however, the suspensions had little effect. Teledyne Inc.'s electronics division was suspended last year for six months, after it was implicated in a Pentagon bribery scandal. Despite the suspension, the company was allowed to continue making its products and shipping them to the Government under existing contracts. Suspension's Effect on Boeing

After admitting to trafficking in confidential Government documents, the Boeing Company's office near Washington was suspended for three months starting last November, and personnel from that office were barred from dealing directly with the Pentagon.

Boeing assigned people from other offices to deal with the Pentagon, and, since the suspension did not affect any manufacturing plants or specific programs, there was no direct impact, a Boeing spokesman said.

Some companies do not even suffer the inconvenience of a suspension. The Emerson Electric Company pleaded guilty in May to four felony counts related to overcharging the Pentagon for some electronics components. The company paid a $40,000 criminal fine and a $14 million civil settlement but was not suspended.

Correction: November 16, 1990, Monday, Late Edition - Final

A front-page article on Monday about military contract fraud misstated the charges to which the Boeing Company pleaded guilty this year. Boeing admitted having illegally obtained two classified Pentagon budget documents, but the company did not admit having made payoffs to obtain them, and prosecutors said during the case that there was no evidence of monetary payoffs.

Boeing Bombs On ID Fraud Prevention

Link to Original: 

http://www.securitypronews.com/news/securitynews/spn-45-20051121BoeingBombsOnIDFraudPrevention.html

John Stith
Staff Writer
2005-11-21

Security News RSS Feed

Every time you turn around, you hear another story on ID fraud. There's another one today. Aircraft manufacturer Boeing happened to lose a laptop computer. A number of questions come up about why all those names would be on a laptop but then another question comes up. Doesn't Boeing have some kind of government contract?

There are two issues here to consider. First is the obvious ID fraud problem. The laptop computer had 161,000 names of current and former employees stored on it, including social security numbers, birth dates, banking information and other useful data. Apparently, someone had taken the unsuspecting laptop off of Boeing's property and elected not to pay enough attention to it.

Boeing did issue a statement on Friday discussing the incident. In the statement, they suggested someone was probably just after the laptop maybe to get $50 or so out of it.

While they maintain there was no "classified, supplier, customer, engineering or material financial information" on the disc, the point is companies like Boeing must be more careful and secure in not just protecting the data but also in allowing the data to be taken.

This problem has happened at multiple companies and none of them seem willing to take precautions to protect the data in-house. Multiple protection methods for the user don't work if someone swipes a company computer with all the information needed to start a major phishing scam with access to all the information. The companies say it hasn't really happened yet but they don't have to tell you if it does in most states.

The worst part about Boeing is that they're also a major government contractor. While they say nothing significant was taken they guarantee that. This company works for NASA, the U.S. military, and other nations' military. Can they guarantee employee information theft won't happen again? Doubtful.

Until companies start taking this thing entirely more seriously, this problem will continue to grow. Besides, if they don't care enough about their employees to protect their records vigorously, how can a company like Boeing be trusted with the development of rockets and passenger jets. I wonder if Airbus has this problem.

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About the Author:
John is a staff writer for SecurityProNews covering cyber security.

A couple of old, but interesting articles regarding how Boeing was caught in acts of corporate espionage against their rival, Lockheed Martin, and more.  –GFS

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Anatomy of a corporate espionage scandal
Series of Boeing Co. employee miscues tipped off rival Lockheed Martin Co. to misconduct

January 23, 2005

Link to Original Article:  http://legacy.decaturdaily.com/decaturdaily/news/050123/anatomy.shtml

By Eric Fleischauer
DAILY Staff Writer
eric@decaturdaily.com · 340-2435

A series of miscues by employees of The Boeing Co. were the clues that implicated it in a corporate espionage scandal, according to a competitor.

The penalty for that scandal will cost 100 Decatur-based Boeing employees their jobs, Boeing announced Jan. 14. More layoffs could follow.

Among the actions that clued Lockheed Martin Co. into the cloak-and-dagger scandal: A Boeing lawyer who filed Lockheed documents he was not supposed to have in an employment case, an admission of fraudulent conduct made in front of a Boeing employee whose wife worked at Lockheed, and the presence of a Boeing engineer at a bid conference that his former employer, Lockheed, also attended.

Boeing explained that the Decatur downsizing was necessary because of a July 2003 Air Force order that bars Boeing from bidding on military satellite launch vehicles. As the manufacturer of Boeing's Delta rockets, the plant here was hit first.

Former Lockheed employee

Sitting in the center of the debacle is Kenneth Branch, an engineer Boeing hired away from Lockheed.

Branch had worked in Lockheed's Evolved Expendable Launch Vehicle program since 1995. According to Lockheed, his workstation was near the confidential files detailing all aspects of the program.

Even during his Lockheed employment, Lockheed claims, Branch in August 1996 had a clandestine meeting with William Erskine and other Boeing EELV officials in California. Boeing paid for the plane ticket. Shortly after that meeting, according to Lockheed, a Boeing official said to Erskine that, if Boeing won the EELV contract, it should "give that man a job."

As later stated in the criminal complaint filed by federal officials, Boeing hired Branch while he was still working at Lockheed because Branch proposed to Erskine "an 'under-the-table' offer to hand over the entire Lockheed Martin EELV proposal presentation to aid in Erskine's proposal work in exchange for a position at Boeing if Boeing won the Air Force EELV contract award."

A separate Air Force investigation resulted in Boeing's bidding suspension. That suspension has already lasted 18 months and Boeing officials do not know when it will end.

Boeing and Lockheed officials refused comment on the investigations because of the ongoing litigation.

Branch left Lockheed in January 1997, the same year Boeing built the Delta IV plant in Decatur, but Lockheed did not realize he was working for Boeing.

In March 1997, Boeing sent Branch to a joint meeting that included teams from Boeing, Lockheed and the Air Force. Lockheed officials recognized him and, for the first time, became suspicious.

The next miscue came in 1997, when another Boeing employee saw Branch with a binder full of materials labeled as proprietary Lockheed information. She reported the incident to her supervisor.

In October 1998, Boeing won 19 of 28 possible Air Force contracts for its Delta IV satellite launch vehicles. Lockheed's Atlas series picked up the remaining nine. The skewed result, according to court documents filed by Lockheed and the Air Force, stemmed in part from Boeing's successful efforts to gain confidential bidding and technical information from former Lockheed employees.

Steep penalty

The Air Force ultimately stripped Boeing of seven of those contracts, worth $700 million, and awarded them to Lockheed.

From Lockheed's perspective, Boeing should never have been in the running for the EELV contract. Boeing lost to Lockheed and McDonnell Douglas Corp. in the first round of bidding. Boeing stayed in the game by purchasing McDonnell Douglas.

In June 1999, Erskine, a Delta IV manager, allegedly told another Boeing official that he had hired Branch for $77,000 purely to obtain Lockheed information. Boeing employees had just finished an ethics class.

The bad news for Boeing was that another engineer heard the discussion. The engineer, who had also attended the ethics class, was married to a Lockheed employee. She told her Lockheed supervisors about the conversation.

Boeing fired Erskine and Branch in August 1999. Both employees filed suit against Boeing.

More than 'a few pages'

Boeing claimed the two were fired for stealing a few pages of Lockheed proprietary material. Boeing's lawyer filed a motion asking the judge to dismiss the employment case. In support of that motion, he in March 2002 attached a box full of Lockheed proprietary material that was in Boeing's possession.

These were documents that Boeing had told Lockheed it did not have.

The volume of documents surprised Lockheed officials, according to its court filings. Boeing executives and lawyers had told Lockheed that they discovered a few such documents, none of which were particularly incriminating and none of which Boeing's EELV team saw.

In March 2003, Boeing admitted to Lockheed that it had 10 more boxes of Lockheed documents.

By the end of the various investigations, the Air Force concluded Boeing received almost 30,000 pages of confidential information relating to the satellite launch vehicles before winning the bulk of the Air Force contract.

Inside track on contracts

The Boeing mess continues to unravel. In December, the Air Force reported that one of its acquisition officers, Darleen Druyun, was negotiating with Boeing's chief financial officer for future employment while helping the company win various contracts. Lockheed claims that Druyun, who is serving nine months in prison, also provided Boeing officials with EELV cost information before Boeing won the bidding.

Boeing's chief financial officer is scheduled for sentencing Feb. 18.

Probes, lawsuits and trials

The U.S. Department of Justice is investigating. Several shareholder suits against Boeing are pending.

Branch and Erskine are scheduled for trial in March. As many as a dozen Boeing employees have given grand-jury testimony.

If convicted, both Branch and Erskine face a maximum criminal fine of $850,000 and up to 15 years in prison.

Originally expected to have at least 2,300 employees by 2004, Boeing's $450 million Decatur plant will have 550 employees after the layoffs. Boeing located in Decatur after receiving $150 million in state and local economic incentives.

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Boeing units suspended; MCI faces debarment: corporate scandals bring penalties for contractors.

Publication: Set-Aside Alert
Date: Friday, August 8 2003
Link to Original:  http://www.allbusiness.com/government/658843-1.html

You are viewing page 1

In a rare slap at two of the government's largest contractors, three Boeing Co. units and MCI WorldCom have been declared ineligible for federal contracts as a result of separate ethics investigations.

Boeing

The Air Force suspended Boeing's Launch Systems, Launch Services, and Delta Program business units because the company used proprietary data from rival Lockheed Martin in bidding successfully on the Evolved Expendable Launch Vehicle contract.

Boeing was also stripped of seven of its 19 scheduled Delta rocket launches; those launches were given to Lockheed Martin. Air Force Undersecretary Peter Teets said Boeing stands to lose about $1 billion in revenue.

The suspension is indefinite; however, Teets said it might be lifted in time for the next round of competition for launches, set to begin late this year, if Boeing makes satisfactory changes in its ethics programs.

"If Boeing were to not take corrective actions, if Boeing were to not respond strongly to this matter, then we would take into consideration the potential for debarment," he said at a July 24 Pentagon briefing. But he added that it is in the government's interest for Boeing to remain in the space business, so there will be two strong competitors.

The Justice Department is conducting a criminal investigation of Boeing's activities. Two former employees have been indicted in Los Angeles in the case.

The Air Force investigation found that one of those former employees had worked for Lockheed Martin, and brought proprietary documents with him when he joined Boeing.

"I have never heard of a case of this scale," Teets said.

"First, the extent of Lockheed Martin proprietary material in Boeing possession at the time of (launch) source selection was extraordinary--approximately 25,000 pages. Second, the quality of information was sufficient to provide great insight into Lockheed Martin's proprietary cost and pricing. Third, Boeing was not forthcoming with the Air Force about the amount of Lockheed Martin data in its possession, and it took a period of approximately four years for them to provide us with all of it."

Boeing CEO Philip Condit apologized for the employees' actions. The company has appointed former senator Warren Rudman (RNH) to lead a review of its policies on ethics and the handling of competitive information.

In a recent study, the Project on Government Oversight, a watchdog group, found that Boeing had committed 50 acts of misconduct and paid nearly $379 million in fines and penalties from 1990 to 2003.

MCI WorldCom

The General Services Administration suspended MCI WorldCom from bidding on new federal contracts and proposed debarment of the scandal-ridden telecommunications company.

In announcing the action July 31, GSA said it had "determined that MCI WorldCom lacks the necessary internal controls and business ethics."

The federal government is MCI's largest customer, spending $700 million to $1 billion a year.

The company was suspended immediately from competing for new work and has 30 days to appeal the proposed debarment. Its biggest federal contract comes up for renewal in January.

MCI is under federal bankruptcy protection after admitting to accounting irregularities amounting to $11 billion.

GSA said its decision was not related to the latest charges against MCI, that it cheated competitors by rerouting long-distance calls to avoid paying access fees to link to local telephone networks. Federal prosecutors are investigating.

The company told a federal bankruptcy court in New York that the charges are "groundless." It said competitors, especially AT&T, are trying "to generate negative publicity and derail the Company's reorganization efforts."

In a letter to GSA, Verizon General Counsel William Barr noted the fraud allegations and wrote that the "United States is now on notice that it is effectively serving as a 'fence" for stolen property," the Wall Street Journal reported.

Competitors had protested when the government awarded new contracts to MCI to build telecom networks in Afghanistan and Iraq even after its accounting scandal had come to light.

Invitation to View POGO's Federal Contractor Misconduct Database

This is the letter sent out recently by Project On Government Oversight regarding their Federal Contractor Misconduct Database.

Enjoy!  -GFS

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Dear________________

Breaking news: POGO has just released an updated and expanded version of our Federal Contractor Misconduct Database (FCMD), which now includes information on the misconduct history of the top 100 federal contractors.  The updated database also features several format changes and new search and sort functions that will make it more accessible and user-friendly.  POGO hopes that the FCMD will be used as a valuable tool to ensure that taxpayer dollars are only awarded to responsible contractors.

 

 

Click here to view the updated database.  And be sure to check out our press release to learn more.

Yesterday afternoon, President Bush signed into law the FY 2009 National Defense Authorization Act, which includes a provision to establish a government-wide database with information on the integrity and performance of federal contractors and grantees.  The good news is that the new government database will be modeled after our FCMD, but since the government's version will not be made available to the public, we will continue to maintain our database as a free public resource with updated information on the misconduct of the top federal contractors.  We applaud the leadership of Rep. Carolyn Maloney (D-NY) and the efforts of countless Members of Congress who worked hard to ensure that the Defense Authorization Act included a provision to improve contractor accountability.

 

 

The FCMD now lists over 750 instances of contractor misconduct dating back to 1995, including government fraud and violations of environmental, securities, and labor laws.  Lockheed Martin still tops the list with 47 instances of misconduct, but it's worth noting that 25 of the top 100 contractors appear to have a clean track record.

 

 

To coincide with the release of the updated FCMD and the passage of the Defense Authorization Act, POGO is also releasing a fact sheet that will hopefully dispel many of the myths surrounding a federal contractor responsibility database.  Click here to learn more.

Warm regards,

 

 

Danielle Brian

Executive Director

Project On Government Oversight

Boeing in Trouble Again...

 

 

Link to Original:  http://ohmygov.com/blogs/general_news/archive/2008/09/04/boeing-in-trouble-again-for-contract-fraud.aspx?postcat=4568&miid=28&pid=2899

 

Boeing in trouble for $7.5 million contract fraud

Earlier this week, the United States Department of Justice filed a civil lawsuit against The Boeing Company for alleged price gouging. According to the Justice Department, Boeing unlawfully inflated the price tag by $7.5 million for manufacturing a missile decoy system designed for the Air Force's B-1 bomber.

The lawsuit states that Boeing failed to disclose it would outsource the manufacturing of the majority of parts needed to create the Towed Decoy System - a tool for intercepting missiles fired at the B-1 - during contract negotiations. The company claimed, according to the suit, that it would instead build the parts in-house at a greater cost than required for outsourcing. Consequently, Boeing charged more for something they outsourced for less, and in effect, defrauded the government for the price difference.

The lawsuit alleges that the Air Force would have renegotiated a substantially lower price tag for the Towed Decoy System had Boeing informed them they intended to purchase most components at a lower cost.

"It's a significant amount and, of course, it's all taxpayer money," Assistant U.S. Attorney Lisa Palombo told The Associated Press. "We make it a priority to collect all taxpayer funds that are obtained through fraud. We don't make exceptions for anyone, individuals or large companies."

Evidence of Boeing's actions originally came from whistle-blowers inside the organization that complained to their managers that the company was overcharging. The managers allegedly ignored the complaints and failed to tell their client, the Air Force.

Boeing spokesman Forrest Gossett told Business Week that the company disputes the allegations and believes it properly negotiated and fulfilled its contract with the Air Force.

But investigators from the Air Force’s Office of Special Investigations, the Defense Criminal Investigative Service, and auditors from the Defense Contract Audit Agency claim to have evidence of 140 incidents of over billing by Boeing, equating to $7.5 million in fraudulent charges. Under the False Claims Act, the government may recover up to three times the amount of the loss and enforce criminal penalties for each of the 140 incidents of fraud

 

Ms. Sparky, Former Iraq Employee and Whistleblower Speaks

This is a recent post from Ms. Sparky’s (a former employee in Iraq, and whistleblower) website.  Link to her page to see this and much more:  http://mssparky.com/2008/09/noi-will-not-shut-up/

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NO….I Will Not Shut Up!

Posted on September 9th, 2008

by ms sparky in About Me, KBR, Media Coverage, My Interviews, Rants, Women in Construction, Working Overseas

I got this comment last night in response to  “My 100th Blog Post - How MsSparky.com Evolved”. I get these responses all the time in emails and I normal just disregard them…but not today!

This is a comment from “DC”.

the testifying, I get. But the public speaking and anything remotely related to work or even specifically describing daily recreational activities was contractually prohibited….. did they change this? It used to be grounds for immediate termination. no “please remove this…” Just one question…. window or isle?

Ms Sparky’s Response:
First, I no longer work for KBR. I just read my contract AGAIN…just to make sure and it DOES NOT say anywhere that I can’t talk about mine and others experiences in Iraq and Afghanistan. There are countless books, websites, blogs already published by former KBR employees about their experiences in Iraq. I understand operational security (OPSEC). I understand classified information. I also understand KBR’s MO of threats, intimidation and misinformation. You can’t talk about this…you can’t talk about that. This is in violation of your contract!!! Bullshit!! My contract wasn’t even with KBR, is was with SEII. People need to talk about it and remove that KBR imposed veil of secrecy and get the word out. How long has this BS been going on now?? 5 years of Human Trafficking, Waste Fraud & Abuse, Employee Abuse, Rapes, Assaults, Unsafe Workplaces, Lack of Tools and Material? THAT’S WHY I DO THE INTERVIEWS!! And will continue to do so until the damn laws are changed so that the term “window or aisle” used as a threat is illegal even in Iraq! That’s how KBR controls it’s employees, through fear, intimidation, isolation (no more cell phones) and misinformation!

I will not stop until every US citizen working for any US Government funded contractor including KBR/SEII, at ANY US facility world wide is afford the same legal protections as their Stateside co-workers…. For one, DON’T THREATEN TO FIRE ME IF I DON’T SHUT UP ABOUT SAFETY ISSUES!!!!!! (Hostile workplace) And some OSHA protection would be nice as well.

 

So…in answer to your question NO NO NO NO NO NO NO NO NO NO NO I will not shut up. I WILL NOT shut this blog down. I will continue to publish peoples stories and comments. I will continue to publish information I feel is important to current and former KBR employees. It’s a free country, KBR can sue me if they want. That will just give me something more to blog about! If I’m not mistaken….my first amendment rights are still in effect here! Can you say ACLU?

 

The more qualified, licensed people KBR gets over there, the less they are going to be able to get away with crap!

 

So….DC…..comment on that! And just to clarify. I have no intentions at this time to write a book on my experiences in Iraq!

Ms Sparky