WhistleblowerSupporter

Presidential Appointments Contributing to Continuing Waste, Fraud and Abuse in Defense Contracting

May2,2010

 

A reader sent this today after  I posted a number of other things this morning.  This reader understands why I have been unrelentingly posting concerns about some of President Obama’s political appointments.  We have a real mess on our hands that is getting worse, by appointment.  GFS

 

 

 

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What’s happenin’?

 

 

G. Florence-

 

Remember when the State Department posted export violation cases and export enforcement actions for recently closed investigations and cases?  I guess all that is no longer important.  The current Boeing Company controlled government administration doesn’t consider such information relevant.

 

It appears that 2007 is the last State Department posted information.

 

Could this be the following individuals hard at work for Boeing and the defense industry?

 

-Jim Jones, President’s National Security Advisor (former Boeing Director Audit and Finance Committees)

 

-Jim McNerney, Chairman, President’s Export Advisory Council (Boeing Company Chairman)

 

-Eric Holder, Attorney General (orchestrator of the Department of Justice Deferred Non-Prosecution Agreement with Boeing)

 

http://www.justice.gov/opa/pr/2007/October/07_nsd_807.html

 

Concerned Citizen

 

Review: Watchdogs Undermined by Political Appointees

I am hearing from a lot of people who are dealing with the same old same old in government, particularly defense, and in the work they do in some defense contractors.  There appears to be just as much corruption, fraud, waste and abuse going on as before.  And unfortunately, there is no miraculous change in how oversight is being managed, and in the poor leadership that seems to be endemic in both government and industry as of late.  More whistleblowers are still being created and whistleblowers are still suffering retribution and every other kind of abuse for caring enough to try to stand up to wrongdoers.  I am extremely disappointed that the political change does not seem to have had a reparative effect on government and business.  I am also disappointed the many of the appointments made by our current administration, as it seems to perpetuate the problems and the poor judgment of the last administration.  GFS

 

 

 

Watchdogs Undermined by Political Appointees

Congress to Reasses Office Created to Rein in Executive Branch

By Matthew Blake 02/11/2008

Illustration by: Matt Mahurin

 

The inspectors general for 64 federal agencies are the government’s frontline against waste, fraud and abuse. It sounds like a salutary public service. But the performances and experiences of inspectors general vary alarmingly and now Congress is reassessing an office created after Watergate to rein in the executive branch.

 

 

In two weeks, the Senate will debate the Inspector General Reform Act of 2007, according to aide for Sen. Claire McCaskill (D-Mo.), a bill co-sponsor. Meanwhile, the House Committee on Oversight and Government Reform collected a survey last week from the majority of inspectors general, listing the recommendations they have made during the Bush administration that have gone unimplemented.

The Senate legislation—the House passed a Reform Act in November—would "ensure that IGs remain autonomous and operate independent of the agencies they oversee," said Beth Petite Lavine, spokeswoman for Sen. Charles Grassley (R-Ia.) a bill co-sponsor. The oversight committee is looking at what happens when the agencies allow the investigations but ignore the findings.

Both efforts are part of a sentiment expressed by Democrats and Republicans in Congress who focus on oversight as well as by analysts who study the federal bureaucracy: the White House-appointed leadership at federal agencies is undermining the watchdogs. "This is a crisis," argued Kenneth Gold, director of Georgetown University’s Government Affairs Institute, "The IG’s power has diminished."

Beverley Lumpkin, an investigator for the non-profit Project on Government Oversight, agrees. But she emphasizes it’s more than a blame-Bush situation. "Things are not much worse in the Bush administration," Lumpkin said, "It’s been a problem for 20 years. Administrations take advantage of the fact that agency heads control so much."

Advocates for inspector general reform argue that there are essentially three ways the office of inspector general has been politicized and consequently lost its bite. The first is the matter of a rogue inspector general stonewalling his own staff’s investigations. In the past year, six inspectors general have been investigated by a committee of their peers for allegations like stopping staff investigations on administration political appointees, cutting back on staff while giving themselves a raise and abusive treatment of employees.

 

The most well-known case is that of the State Department IG, Howard "Cookie" Krongard. Krongard resigned shortly after deceiving the House Committee on Oversight and Government Reform about knowing whether his brother was on the Blackwater advisory board. Blackwater was one of several State Department contractors Krongard had ordered his staff to stop investigating.

 

While Secretary of State Condoleeza Rice didn’t seem to mind that Krongard stopping investigations, agency heads have taken action on IG’s who started them. The CIA’s John Helgerson appears to be the latest IG to be undermined in this way. Helgerson issued scathing reports on issues like the intelligence agency failing to anticipate 9/11 and the agency’s disregard for humane interrogation practices. So the Central Intelligence Agency turned the tables last October, and started investigating Helgerson on the premise of helping him do his job better.

 

Last week with no public explanation, the CIA director, Gen. Michael Hayden, announced the appointment of an ombusdman for Helgerson. "This is especially troubling," said Brian Miller, inspector general of the General Services Administration, "because it may tend ultimately to subvert the independence of inspectors general."

 

Miller knows about going up against an agency head. GSA Administrator Lurita Doan told Miller last year that he was terrorizing employees by scrutinizing whether they were getting the best deal on the $56 billion worth of contracts purchased by GSA. Doan subsequently wrote an e-mail to GSA regional administrators stating, "Everyone now understands we have challenges with our OIG. ... This is going to require a lot of work to fix and I’m going to need your help."

"Psychologically it is extremely hard for people who take their jobs seriously and want to improve GSA to work in a climate where the agency head is openly hostile to the duties those people must perform," said David Farley, a spokesman for the GSA’s office of inspector general.

 

Doan also took the extraordinary step of reducing Miller’s budget. One key provision of the Senate legislation, according to McCaskill’s aide, is that inspectors general would be able to send their budget proposal straight to Congress and the White House. Another key provision would set up an "integrity council," independent of the White House, with the ability to discipline IG’s not aggressively investigating their agencies.

 

The legislation doesn’t tackle the third obstacle to effective IG’s, when the agency is simply looking the other way. That was the problem Clark Kent Ervin experienced as the first inspector general of the Department of Homeland Security. "This administration has tended more to ignore recommendations than to actively fight or obstruct investigations," Ervin said.

Sen. John F. Kerry may have cited Ervin’s scathing audits during the 2004 presidential campaign, but DHS ignored them. After publicly feuding with the White House, Ervin left in December 2004.

 

Still, a good deal of work by inspector generals is implemented. Roll Call newspaper reported last year that IG’s provided the government $9.9 billion in potential savings from audit recommendations and $6.8 billion in investigative recoveries. And some IG’s are neither thwarting investigations nor being thwarted. "Everyone in town agrees that Glenn Fine at the Justice Department and Earl Devaney at Interior are great," said Lumpkin, of the Project of Government Oversight.

 

Lumpkin added that the public doesn’t know about the work of a lot of other good ones because the administration is interfering with it. And this, she said, "is a problem that’s reached it’s boiling point."

Contractors Reportedly Tracked and Killed Militants

Based on what I understand about how such contractors must be cleared to do government contract work, particularly in the case of National Security types of arenas, there is a question that needs to be asked: Were these contractors cleared and vetted through the National Industrial Security Program and the Defense Security Service, or was this an entirely rogue operation?  There had to have been contracts, and there had to have been clearances.  No one gets in theater and doing this type of work (legally) without vetting and clearances.  GFS

 

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Contractors tied to effort to track, kill militants

Intelligence-gathering operation used for lethal action, officials say

 

By Dexter Filkins and Mark Mazzetti  March 14, 2010

 

KABUL, Afghanistan- Under the cover of a benign government information-gathering program, a Defense Department official set up a network of private contractors in Afghanistan and Pakistan to help track and kill suspected militants, according to military officials and businessmen in Afghanistan and the United States.

 

The official, Michael D. Furlong, hired contractors from private security companies that employed former C.I.A. and Special Forces operatives. The contractors, in turn, gathered intelligence on the whereabouts of suspected militants and the location of insurgent camps, and the information was then sent to military units and intelligence officials for possible lethal action in Afghanistan and Pakistan, the officials said.

 

While it has been widely reported that the C.I.A. and the military are attacking operatives of Al Qaeda and others through unmanned, remote-controlled drone strikes, some American officials say they became troubled that Mr. Furlong seemed to be running an off-the-books spy operation. The officials say they are not sure who condoned and supervised his work.

 

It is generally considered illegal for the military to hire contractors to act as spies. Officials said Mr. Furlong’s secret network might have been improperly financed by diverting money from a program designed to merely gather information about the region.

Moreover, in Pakistan, where Qaeda and Taliban leaders are believed to be hiding, the secret use of private contractors may be seen as an attempt to get around the Pakistani government’s prohibition of American military personnel’s operating in the country.

Officials say Mr. Furlong’s operation seems to have been shut down, and he is now is the subject of a criminal investigation by the Defense Department for a number of possible offenses, including contract fraud.

 

Even in a region of the world known for intrigue, Mr. Furlong’s story stands out. At times, his operation featured a mysterious American company run by retired Special Operations officers and an iconic C.I.A. figure who had a role in some of the agency’s most famous episodes, including the Iran-Contra affair.

 

The allegations that he ran this network come as the American intelligence community confronts other instances in which private contractors may have been improperly used on delicate and questionable operations, including secret raids in Iraq and an assassinations program that was halted before it got off the ground.

 

“While no legitimate intelligence operations got screwed up, it’s generally a bad idea to have freelancers running around a war zone pretending to be James Bond,” one American government official said. But it is still murky whether Mr. Furlong had approval from top commanders or whether he might have been running a rogue operation.

 

This account of his activities is based on interviews with American military and intelligence officials and businessmen in the region. They insisted on anonymity in discussing a delicate case that is under investigation.

 

Col. Kathleen Cook, a spokeswoman for United States Strategic Command, which oversees Mr. Furlong’s work, declined to make him available for an interview. Military officials said Mr. Furlong, a retired Air Force officer, is now a senior civilian employee in the military, a full-time Defense Department employee based at Lackland Air Force Base in San Antonio.

 

Network of informants- Mr. Furlong has extensive experience in “psychological operations” — the military term for the use of information in warfare — and he plied his trade in a number of places, including Iraq and the Balkans. It is unclear exactly when Mr. Furlong’s operations began. But officials said they seemed to accelerate in the summer of 2009, and by the time they ended, he and his colleagues had established a network of informants in Afghanistan and Pakistan whose job it was to help locate people believed to be insurgents.

 

Government officials said they believed that Mr. Furlong might have channeled money away from a program intended to provide American commanders with information about Afghanistan’s social and tribal landscape, and toward secret efforts to hunt militants on both sides of the country’s porous border with Pakistan.

 

Some officials said it was unclear whether these operations actually resulted in the deaths of militants, though others involved in the operation said that they did.

 

Military officials said that Mr. Furlong would often boast about his network of informants in Afghanistan and Pakistan to senior military officers, and in one instance said a group of suspected militants carrying rockets by mule over the border had been singled out and killed as a result of his efforts.

 

In addition, at least one government contractor who worked with Mr. Furlong in Afghanistan last year maintains that he saw evidence that the information was used for attacking militants.

 

The contractor, Robert Young Pelton, an author who writes extensively about war zones, said that the government hired him to gather information about Afghanistan and that Mr. Furlong improperly used his work. “We were providing information so they could better understand the situation in Afghanistan, and it was being used to kill people,” Mr. Pelton said.

 

He said that he and Eason Jordan, a former television news executive, had been hired by the military to run a public Web site to help the government gain a better understanding of a region that bedeviled them. Recently, the top military intelligence official in Afghanistan publicly said that intelligence collection was skewed too heavily toward hunting terrorists, at the expense of gaining a deeper understanding of the country.

 

Instead, Mr. Pelton said, millions of dollars that were supposed to go to the Web site were redirected by Mr. Furlong toward intelligence gathering for the purpose of attacking militants.

 

In one example, Mr. Pelton said he had been told by Afghan colleagues that video images that he posted on the Web site had been used for an American strike in the South Waziristan region of Pakistan.

 

Among the contractors Mr. Furlong appears to have used to conduct intelligence gathering was International Media Ventures, a private “strategic communication” firm run by several former Special Operations officers. Another was American International Security Corporation, a Boston-based company run by Mike Taylor, a former Green Beret. In a phone interview, Mr. Taylor said that at one point he had employed Duane Clarridge, known as Dewey, a former top C.I.A. official who has been linked to a generation of C.I.A. adventures, including the Iran-Contra scandal.

 

In an interview, Mr. Clarridge denied that he had worked with Mr. Furlong in any operation in Afghanistan or Pakistan. “I don’t know anything about that,” he said.

 

Mr. Taylor, who is chief executive of A.I.S.C., said his company gathered information on both sides of the border to give military officials information about possible threats to American forces. He said his company was not specifically hired to provide information to kill insurgents.

 

Some American officials contend that Mr. Furlong’s efforts amounted to little. Nevertheless, they provoked the ire of the C.I.A.

 

Last fall, the spy agency’s station chief in Kabul, Afghanistan’s capital, wrote a memorandum to the Defense Department’s top intelligence official detailing what officials said were serious offenses by Mr. Furlong. The officials would not specify the offenses, but the officer’s cable helped set off the Pentagon investigation.

 

Afghan intelligence- In mid-2008, the military put Mr. Furlong in charge of a program to use private companies to gather information about the political and tribal culture of Afghanistan. Some of the approximately $22 million in government money allotted to this effort went to International Media Ventures, with offices in St. Petersburg, Fla., San Antonio and elsewhere. On its Web site, the company describes itself as a public relations company, “an industry leader in creating potent messaging content and interactive communications.”

 

The Web site also shows that several of its senior executives are former members of the military’s Special Operations forces, including former commandos from Delta Force, which has been used extensively since the Sept. 11 attacks to track and kill suspected terrorists.

 

Until recently, one of the members of International Media’s board of directors was Gen. Dell L. Dailey, former head of Joint Special Operations Command , which oversees the military’s covert units.

 

In an e-mail message, General Dailey said that he had resigned his post on the company’s board, but he did not say when. He did not give details about the company’s work with the American military, and other company executives declined to comment.

In an interview, Rear Adm. Gregory Smith, the top military spokesman in Afghanistan, said that the United States military was currently employing nine International Media Ventures civilian employees on routine jobs in guard work and information processing and analysis. Whatever else other International Media employees might be doing in Afghanistan, he said, he did not know and had no responsibility for their actions.

 

By Mr. Pelton’s account, Mr. Furlong, in conversations with him and his colleagues, referred to his stable of contractors as “my Jason Bournes,” a reference to the fictional American assassin created by the novelist Robert Ludlum and played in movies by the actor Matt Damon .

 

Military officials said that Mr. Furlong would occasionally brag to his superiors about having Mr. Clarridge’s services at his disposal. Last summer, Mr. Furlong told colleagues that he was working with Mr. Clarridge to secure the release of Pfc. Bowe Bergdahl, a kidnapped soldier who American officials believe is being held by militants in Pakistan.

From December 2008 to mid-June 2009, both Mr. Taylor and Mr. Clarridge were hired to assist The New York Times in the case of David Rohde, the Times reporter who was kidnapped by militants in Afghanistan and held for seven months in Pakistan’s tribal areas. The reporter ultimately escaped on his own.

 

The idea for the government information program was thought up sometime in 2008 by Mr. Jordan, a former CNN news chief, and his partner Mr. Pelton, whose books include “The World’s Most Dangerous Places” and “Licensed to Kill: Hired Guns in the War on Terror.”

 

Top general approached- They approached Gen. David D. McKiernan , soon to become the top American commander in Afghanistan. Their proposal was to set up a reporting and research network in Afghanistan and Pakistan for the American military and private clients who were trying to understand a complex region that had become vital to Western interests. They already had a similar operation in Iraq — called “Iraq Slogger,” which employed local Iraqis to report and write news stories for their Web site. Mr. Jordan proposed setting up a similar Web site in Afghanistan and Pakistan — except that the operation would be largely financed by the American military. The name of the Web site was Afpax .

 

Mr. Jordan said that he had gone to the United States military because the business in Iraq was not profitable relying solely on private clients. He described his proposal as essentially a news gathering operation, involving only unclassified materials gathered openly by his employees. “It was all open-source,” he said.

 

When Mr. Jordan made the pitch to General McKiernan, Mr. Furlong was also present, according to Mr. Jordan. General McKiernan endorsed the proposal, and Mr. Furlong said that he could find financing for Afpax, both Mr. Jordan and Mr. Pelton said. "On that day, they told us to get to work,” Mr. Pelton said.

 

But Mr. Jordan said that the help from Mr. Furlong ended up being extremely limited. He said he was paid twice — once to help the company with start-up costs and another time for a report his group had written. Mr. Jordan declined to talk about exact figures, but said the amount of money was a “small fraction” of what he had proposed — and what it took to run his news gathering operation.

 

Whenever he asked for financing, Mr. Jordan said, Mr. Furlong told him that the money was being used for other things, and that the appetite for Mr. Jordan’s services was diminishing.

 

“He told us that there was less and less money for what we were doing, and less of an appreciation for what we were doing,” he said.

 

Admiral Smith, the military’s director for strategic communications, said that when he arrived in Kabul a year later, in June 2009, he opposed financing Afpax. He said that he did not need what Mr. Pelton and Mr. Jordan were offering and that the service seemed uncomfortably close to crossing into intelligence gathering — which could have meant making targets of individuals.

 

“I took the air out of the balloon,” he said.

 

Admiral Smith said that the C.I.A. was against the proposal for the same reasons. Mr. Furlong persisted in pushing the project, he said.

 

“I finally had to tell him, ‘Read my lips,’ we’re not interested,’ ” Admiral Smith said.

 

What happened next is unclear.

 

Admiral Smith said that when he turned down the Afpax proposal, Mr. Furlong wanted to spend the leftover money elsewhere. That is when Mr. Furlong agreed to provide some of International Media Ventures’ employees to the strategic communications command, which Admiral Smith oversees.

 

But that still left roughly $15 million unaccounted for, he said.

“I have no idea where the rest of the money is going,” Admiral Smith said.

Dexter Filkins reported from Kabul, and Mark Mazzetti from Washington.

 

This story, "Contractors tied to effort to track and kill militants", first appeared in The New York Times.

 

Link to original:  http://www.msnbc.msn.com/id/35867435/ns/world_news-the_new_york_times

 

 

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.

---

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

-------------------------------------------------------------------------------------------------------------------------

 

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
[email protected] · 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.

--------------------------------------------------

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.