Feds Fail To Catch YEARS Of Defense Contracting Fraud

REUTERS/U.S. Navy/Mass Communication Specialist 3rd Class Kristina

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Bureaucrats at multiple federal agencies allowed contractors to scam taxpayers out of millions of dollars for years by selling the government one thing, then delivering something else, according to the U.S. attorney for the Southern District of California.

Defense contracting firm owners Jeffrey Harrington and Michael Mayer, and employee sisters Kimberlee Hewitt and Natalee Hewitt, pleaded guilty in U.S. District Court in California to conspiracy to commit wire fraud and file false claims for using their companies — Veteran Logistics, Inc., Industrial Xchange, Inc., and Boston Laser Technology, Inc. — to sell the government $45 million worth of mostly incorrect and overpriced products.

The companies, which regularly sold supplies to the Department of Defense (DOD), Department of the Navy, General Services Administration (GSA) and other federal agencies, also pleaded guilty to the scheme, according to the news release.

“Corrupt contracting practices damage the public trust and ultimately undermine the efforts of the Department of Defense to support our men and women in uniform,” Chris Hendrickson, special agent in charge of the Defense Criminal Investigative Service’s Western Field Office, said in a statement.

“Along with our law enforcement partners, we make the investigation of such offenses a top priority. Cases such as these are not motivated by need or other difficult personal circumstances; they are the product of simple greed,” Hendrickson said.

The defendants secured contracts from March 2008 to January 2015, allowing the firms to sell up to $5 million in pre-approved products at a set, maximum price. They then manipulated the web-based, electronic commerce site EMALL to carry out their scheme, according to the U.S. attorney.

Federal officials did not explain how government procurement officers either did not catch or did not report the fraud over such a long period of time, on multiple contracts involving millions of tax dollars.

In one case, the defendants agreed to supply the Norfolk Naval Shipyard in Virginia with more than 10,000 Post-it notes, but then replaced them with 50 electronic transceivers at a 134 percent markup. The contractors “repeatedly employed this fraudulent technique dozens of times, on a host of products, across a wide array of components in the military,” the U.S. attorney said.

In another contract, Veteran Logistics agreed to supply the USS Ronald Reagan aircraft carrier with motorized plumber snakes, but substituted that order with 160 Toshiba TVs. The firm purchased the electronics for $39,558, but billed the government $66,807. (RELATED: Feds Ran Fraud Scheme In Their Own Parking Lot)

Harrington and Mayer also pleaded guilty to making false statements on their tax returns for understating their income. All of the defendants will appear in federal court May 19 for sentencing.

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