Many Faces of Fraud Seminar 12 October 2017 US Army Criminal Investigation Command Major Procurement Fraud Unit Hartford Ct fraud resident agency Many Faces of Fraud Seminar 12 October 2017 SA Jesse Zander Office: 860-233-8673

Major Procurement Fraud Unit Mission: conduct criminal investigations into allegations of fraud associated with major acquisition programs to recover Army funds, insure the integrity of the Army procurement process, and deter future crimes in order to preserve Soldier Safety and Army Readiness. Frauds involving major systems acquisition contracts include the activities of contractors, consultants, and Army and DOD employees

Detection Internal Reviews and Audits Hotline Tips Proactive initiatives Outside Agency Referrals Registered/Open Sources Whistleblowers / Qui Tam Suits Contracting Personnel

Investigative Techniques Undercover/Covert Task Force Operations Email/Phone Records Forensic Data Recovery/Examinations Financial Records Extradition

Trends Less military deployed=less military contract $$$ Accounting Frauds (cost-mischarging) “Steering Contracts” Exploitation of Public Trust Positions Bogus Small Business Status Claims Counterfeit Parts Counter-proliferation efforts

Fraud in Contracting False Statement/False Claims The supply of materials or services that do not conform to contract requirements, and which are supplied by means of intentional misrepresentations and/or concealment of material facts. False Statement/False Claims Cost mischarging (Cost plus contracts) Defective Pricing/TINA violation Nonconforming deliverables Product Substitution Defective Products Graft & Related Crimes Improper Sole Source Justifications & “steering” of contracts (Conflict of Interest) Bribery/Procurement Integrity Act violations Acceptance of Illegal Gratuities Post Employment Restrictions Money Laundering/Mail Fraud/Bulk Cash Smuggling Wire Fraud

Contract Award Indicators of Fraud Acceptance of questionable bid (late/non-responsive/non-responsible) “Lost” bids Improper Sole Source Justifications Improper disqualification Vague specifications/evaluation criteria Contractor drafting Specs or SOW Identical or similar bids from competitors (Bid Rigging) Sudden, Unexplained wealth Contractor favoritism/favorable treatment over a period of time without justification

Post-Award Indicators of Fraud COR/COTR approving a modification (Lead Agency Discussion) Items accepted that are of lesser value but contract cost is not reduced Invoices paid without signed receiving docs/DD250/MIRR Unapproved modifications Large claims for additional work Vague or no invoices to support costs/claims

Historical Cases Can cost lives, not just money-MARSOC Marines and K9 killed in fire caused by nonconforming electrical parts and substandard wiring in Afghanistan

Recent MPFU Cases: Total Recoveries since 2015: 41 Million Manhattan U.S. Attorney Files and Simultaneously Settles False Claims Act Lawsuit Against Defense Contractor and its President for Multi-Year Fraud Involving Sale of Defective Weapon Sights to U.S. Military and Other Agencies.

Recent MPFU Cases Independent Contractor in Afghanistan Sentenced to 48 Months For His Role in Offering $54,000 in Bribes to a U.S. Government Official.

The Threat of Counterfeit Parts Integrated into U. S The Threat of Counterfeit Parts Integrated into U.S. Army Weapon Systems

Harry Krantz & Bay Components Investigation Counterfeit Integrated Circuits & the Kiowa Warrior Helicopter

Recent Investigative Focus Buy American and Berry Amendment/DFARS Clause Preference for Certain Domestic Commodities

Emails of Interest

Remedies Criminal Civil (recovery of funds back to Army) Contractual /Administrative (You Have The Power!) Not all bad contracting is Fraud!

Contractual & Administrative Remedies Termination for Default Termination for Convenience Disallowance of Costs Removal from automated pay system Extended Warranties Withholding Payments Offset of Payments Price Reduction Correction of Defect/Re-work Refusal to Accept Denial of Claims Also disallowance of questionable costs Removal from automated pay system

CONCERNS ABOUT REPORTING FRAUD What if I am wrong? My supervisor may be involved. It’s none of my business (willful neglect) ) Ways to avoid these concerns. I Believe this is happening right next to me

Report it! United States Army CID Major Procurement Fraud Unit 700 South Quaker Lane, Suite 65 West Hartford, CT 06110 860-236-2140 Link for the DOD IG Hotline Form: https://www.dodig.mil/hotline/submit_complaint1a.cfm Phone Number: 800-424-9098 You can remain anonymous

QUESTIONS ?