‘Spending-conscious’ Congress gives $285 Billion to contractors convicted of contract fraud

Posted on February 17, 2011


Hey, you know that “serious, no-nonsense attack mode” that both sides of Congress say they’re taking on “making aggressive to-the-bone cuts” to the federal spending? As I’ve pointed out several times recently in these pages, the Department of Defense and defense contracts are clearly not part of “the attack.”

Want proof?

Defense contractors that have already been convicted on numerous counts of defrauding the Pentagon received new contracts from the Department of Defense in January to the tune of $285 billion.

That’s $285 Billion of your tax dollars that the Department of Defense has decided to continue funneling into the bank accounts of contractors that the courts have convicted of intentionally stealing money from the federal government.

In late 2009, after some not-exactly-surprising revelations about fraud committed by entry-level employees of the Association of Community Organizations for Reform Now (ACORN), Republicans forced Democrats in Congress to move with unprecedented speed and dramatic aggression to prevent the allocation of federal money to advocates for low- and moderate-income families.

This created the “ACORN Standard” for policing federal expenditures, which dictates that federal funding must be immediately ceased if any employees of any organization that feeds off the federal teat are accused of inappropriate behavior. These contractors were *CONVICTED* of fraud, not just accused, and they’ve been handed $285 Billion of your dollars on yet another Congressionally engraved silver platter.

Most of the money was paid to more than 200 companies that have already had multiple civil judgments against them or settled fraud charges of more than $1 million. 30 of those defense contractors were convicted of criminal fraud, but still were awarded more than $700 million in new Pentagon-approved work.

One of the contractors was AEY Inc., a company in Miami that was granted a $300 million contract to supply ammunition to Afghan security forces, even though it had already been cited several times for poor performance on previous contracts. Investigators found that AEY committed intentional fraud by selling millions of rounds of banned Chinese-made military ammunition that they repackaged with wrappers of ammunition made in Albania. The company’s owner was sentenced to four years in federal prison after pleading guilty in 2009 to a fraud conspiracy charge.

“The sad truth of the matter is that virtually every major defense contractor in this country has, for a period of many years, been engaged in systemic, illegal, and fraudulent behavior, while receiving hundreds and hundreds of billions of dollars of taxpayer money,” said independent Vermont Senator Bernie Sanders. “We’re not talking here about the $53 million that ACORN received over 15 years. We’re in fact talking about defense contractors who have received hundreds of billions in defense contracts and year after year, time after time, violated the law, ripping off the taxpayers of this country big time. And in some instances, these contractors have done more than ripping off the taxpayers. In some instances, they have endangered the lives and well-being of the men and women who serve our country in the armed forces.”

In a proof of concept, Sanders attached a provision to a defense spending bill that required the Pentagon to produce a report detailing instances of contract fraud and how they were dealt with. The preliminary version of that report was made available today and it revealed that there’s a lot of fraud -— involving more than 200 contractors just during the three-month-span that was studied.

The report concludes:

  • The Pentagon distributed $285.4 billion from 2007 to 2009 to ninety-one contractors involved in civil fraud cases that resulted in judgments of more than $1 million.
  • The Pentagon spent another $682 million during the same period on thirty contractors convicted of hard-core criminal fraud in the same three-year period.
  • More than $80 Billion more went to firms that had been suspended or debarred by the Pentagon for misusing taxpayer dollars.

With the country running a $14 trillion national debt, my goal is to provide as much transparency as possible about what is happening with taxpayer money,” Sanders said. “It is clear that DoD’s current approach is not working,” says the senator, who adds that “we need far more vigorous enforcement to protect taxpayers from massive fraud.”

The provision Sanders attached to the defense spending bill also required the Pentagon to detail how it was moving to address fraud. In particular, the provision directed the Department of Defense to recommend ways to punish fraudulent contractors. Under a separate Sanders provision in another law signed by President Obama, a government-wide federal contractor fraud database will be accessible to the public by April 15.  Until now, access to the Federal Awardee Performance and Integrity Information System was limited to federal acquisition officials and certain members of Congress.

Sanders’ summary of the Pentagon report can be downloaded HERE.

The Pentagon’s response essentially amounts to, “Yeah … so?”

“The Department of Defense believes that existing remedies with respect to contractor wrongdoing are sufficient,” concluded the Report to Congress on Contractor Fraud. “We see no reason to act.”

Do you?