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Pentagon Reports Billions of Dollars in Contractor Fraud

3 years ago
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David Wood
Chief Military Correspondent
The Pentagon paid hundreds of billions of dollars to defense contractors engaged in criminal or civil fraud -- in some cases paying the companies after they were convicted, according to a new Defense Department report.

At least 91 contractors holding contracts worth $270 billion were the subjects of civil fraud judgments -- and in some cases criminal fraud convictions as well, many of which resulted in fines, suspensions or debarments. Even so, Defense Department contracting officers still assigned $4.9 billion worth of work with these companies after the fraud was uncovered, the report said.

The contractors identified in the report include such blue-chip entities as Boeing, Lockheed Martin, General Dynamics, Pratt & Whitney, IBM and even the Yale medical school.

The Pentagon said its own sloppy bookkeeping, missing records and inadequate training of acquisition officials were to blame for the mess. The Pentagon also acknowledged that the data in the report, which covers only 2007 through 2009, are probably incomplete because the Defense Department cannot accurately track individual contractors or how much is actually spent. And the report only tracks those fraud cases of over $1 million.

At least $682 million was paid in error to 30 companies that had been convicted of criminal fraud, according to the report, including $29.6 million to Herley Industries, an electronics manufacturer, and $66 million to AEY Inc., a military surplus and sporting goods firm.

The number of fraudulent contractors identified in the report is relatively small -- some 120 companies out of the 235,000 contractors that work for the Defense Department. But the dollar amounts are significant, a continuing drain on taxpayers and on the military's combat readiness.

Military contracting fraud, which first plagued Gen. George Washington during the Revolutionary War, has long bedeviled the American armed forces. Defense Secretary Robert Gates is only the latest of a long succession of defense chiefs to try to crack down on waste, fraud and abuse in the Pentagon's giant acquisition bureaucracy.

Under the pressure of two hot wars and a defense budget that has mushroomed to its current $700 billion size, the Pentagon has set up a Procurement Fraud Working Group. But in the six years the task force has been at work, fraud seems to have expanded even as the Pentagon's ability to detect it has increased.

With the data in the new report, the Pentagon acknowledged, came "recognition that additional guidance and training . . . is needed'' for its contracting officers.

The report was released by Sen. Bernie Sanders of Vermont, who had demanded a Pentagon accounting of fraud. "The sad truth is that virtually all of the major defense contractors in this country for years have been engaged in systemic fraudulent behavior, while receiving hundreds of billions of dollars of taxpayer money," he said in a statement.

"It is clear that DOD's current approach is not working and we need far more vigorous enforcement to protect taxpayers from massive fraud," Sanders said.

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423 Comments

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JIM

also the government agencys should train their personel much better instead of just putting them to work like they do a politician I mean look at the politicians they dont know what they are doing until about the time their term runs out--they are afraid they will step on someones toes and get fired.

March 13 2011 at 11:40 AM Report abuse +1 rate up rate down Reply
JIM

contractors have lots of money wraped up in the work they do for the federal and state government and it takes wayyyyyyyyyyyyyy too long to get paid by either agency that is why those agencys get charged so much more because of the long wait the contractors have to go thru befor they are paid. When the state or federal government puts a job out for bid then they should have the money already appropreated to pay the contractor when the job is completed, they would get a much better deal if they would pay on time.

March 13 2011 at 11:37 AM Report abuse +1 rate up rate down Reply
mymamaw

Make fraud of the government/military treason.

March 03 2011 at 3:03 PM Report abuse rate up rate down Reply
rosenlundkv

Oversight blew this. Our money is being handled with carless disregard for the citizens who entrust it to be used judiciously. Training is always a soft issue with large contracts but also longevity of employees is a problem as well. The constant moves of administrators blurs the pool of accountability and serves the employee from his own involvement.

March 01 2011 at 9:07 PM Report abuse +1 rate up rate down Reply
Brian

A bill hidden inside a bill?

March 01 2011 at 8:53 PM Report abuse +1 rate up rate down Reply
gtrepo1

Fraud, How do you think Cheney and the rest of the boys get their millions, Because they steal it from the taxpayers. We the People have to enforce term limits on congress and the senate seats. No more than 2 terms, No more life benefits. Get a job like the rest of American and pay you own 401 and retirement benefits, One term and they get benefits for life, What a joke

February 28 2011 at 8:14 AM Report abuse +4 rate up rate down Reply
Jim

Why not have the IRS audit all government contractors on a frequent basis? If these companies are over charging the government for their services, they most likely are reporting their tax liability incorrectly.

Having the IRS audit the contractual agreements with the government will likely decrease the Federal taxable income but may identify expenses that should not be absorbed under contractual agreements with the government. Also the government should move away from cost reimbursed agreements in the future.

February 27 2011 at 8:40 AM Report abuse +2 rate up rate down Reply
cftenor

And can't we be sure that all those guilty were put in their positions by the previous republican regime and the money has trickled into everyone's pockets, except for educators and health care. OBAMA 2 more terms...PLEASE!!!

February 23 2011 at 10:33 PM Report abuse -2 rate up rate down Reply
lowrodiay65

Lets see, the pentagon knows about the fraud but does nothing about it. Figures.

February 23 2011 at 8:01 PM Report abuse +6 rate up rate down Reply
Bob

Again why do we need contractors?. To do what the arm forces did years back all this started when the Rep. were in power. Bush,channey,rusmfel.

February 23 2011 at 7:06 PM Report abuse -1 rate up rate down Reply

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