1. 0 © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International, Cooperative a Swiss entity. KPMG Forensic is a service mark of KPMG International. Service offerings are subject to legal and regulatory restrictions. Some service offerings may not be available to KPMG's audit or other attest service clients. 30459WDC Fraud in Bailouts and TARP Economic Crime Institute

2. 1 © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International, Cooperative a Swiss entity. KPMG Forensic is a service mark of KPMG International. Service offerings are subject to legal and regulatory restrictions. Some service offerings may not be available to KPMG's audit or other attest service clients. 30459WDC Fraud in Bailouts and TARP Ken Jones Director – Fraud Risk Management, KPMG Retired - Deputy Chief, US Postal Inspection Service Peter Goldmann White Collar Crime Fighter; Author, Fraud in the Markets

3. 2 © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International, Cooperative a Swiss entity. KPMG Forensic is a service mark of KPMG International. Service offerings are subject to legal and regulatory restrictions. Some service offerings may not be available to KPMG's audit or other attest service clients. 30459WDC Topics Recent Changes Impacting Fraud Against the Government Contractor Self-reporting Steps to Prevent, Detect and Respond against Government Fraud Examples, Suggestions and Thoughts from Mr. Goldmann Open Discussion

4. 3 © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International, Cooperative a Swiss entity. KPMG Forensic is a service mark of KPMG International. Service offerings are subject to legal and regulatory restrictions. Some service offerings may not be available to KPMG's audit or other attest service clients. 30459WDC Improper Payments Information Act (IPIA) of 2002 The Improper Payments Information Act (IPIA) of 2002, requires annual estimates of improper payments helped frame the issue and the magnitude of the problem The ensuing efforts to improve the tracking of improper payments and subsequent findings of significant and growing levels of estimated improper payments in turn led to the Presidential Executive Order.

5. 4 © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International, Cooperative a Swiss entity. KPMG Forensic is a service mark of KPMG International. Service offerings are subject to legal and regulatory restrictions. Some service offerings may not be available to KPMG's audit or other attest service clients. 30459WDC 4 Federal Requirements for Reducing Improper Payments Executive Order – Reducing IP and Eliminating Waste in Federal Programs (11/20/09) Purpose of the Executive Order to Reduce Improper Payments Comprehensive set of policies, including transparency and public scrutiny Identifying and eliminating the highest improper payments Accountability for reducing improper payments Federal, State and Local Coordination

6. 5 © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International, Cooperative a Swiss entity. KPMG Forensic is a service mark of KPMG International. Service offerings are subject to legal and regulatory restrictions. Some service offerings may not be available to KPMG's audit or other attest service clients. 30459WDC 5 Improper Payments Executive Order Highlights Establish a Senate Confirmed Accountable Official for each Agency that has High Priority Programs Focus on Improving ability to identify and recover improper payments and to coordinate at the Federal, State and Local level. Establish an Internet-based public reporting of improper payments Establish and report on reduction targets Establish working groups to recommend improving the ability to detect / recovery IP through single audit reporting, State and Local coordination, Data Sharing, enhancing eligibility verification, prepayment scrutiny, forensic accounting and auditing

7. 6 © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International, Cooperative a Swiss entity. KPMG Forensic is a service mark of KPMG International. Service offerings are subject to legal and regulatory restrictions. Some service offerings may not be available to KPMG's audit or other attest service clients. 30459WDC The Improper Payments Act of 2010 improper payments act 2010 Signed by President Obama July 22, 2010 Bill aims to help achieve goal of reducing wasteful payments by $50 billion by 2012

8. 7 © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International, Cooperative a Swiss entity. KPMG Forensic is a service mark of KPMG International. Service offerings are subject to legal and regulatory restrictions. Some service offerings may not be available to KPMG's audit or other attest service clients. 30459WDC Recent Changes Impacting Procurement Fraud A Brief History of the False Claims Act: The False Claims Act dates back to the Civil War when, in 1863, President Abraham Lincoln and the Congress enacted this law to combat “defense procurement fraud.”False Claims Act Unscrupulous defense contractors were billing the Union Army for: dead mules, boots with soles that had been glued on, rather than stitched (and were coming apart in the rain and mud), gunpowder that had been salted down with sawdust.

9. 8 © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International, Cooperative a Swiss entity. KPMG Forensic is a service mark of KPMG International. Service offerings are subject to legal and regulatory restrictions. Some service offerings may not be available to KPMG's audit or other attest service clients. 30459WDC Fraud Enforcement and Recovery Act (FERA) of 2009 Signed into law by President Obama in May of 2009 Increased law enforcement personnel/budget for fraud investigations Expanded the provisions of the False Claims Act

10. 9 © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International, Cooperative a Swiss entity. KPMG Forensic is a service mark of KPMG International. Service offerings are subject to legal and regulatory restrictions. Some service offerings may not be available to KPMG's audit or other attest service clients. 30459WDC Increased Funding for False Claim Act Investigations $470 million Over 2 years To DOJ, SEC, U. S. Secret Service and others Fraud Enforcement and Recovery Act (FERA) of 2009

11. 10 © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International, Cooperative a Swiss entity. KPMG Forensic is a service mark of KPMG International. Service offerings are subject to legal and regulatory restrictions. Some service offerings may not be available to KPMG's audit or other attest service clients. 30459WDC FERA enhancements to the False Claims Act FERA expanded liability to virtually every recipient of federal funding (contractors, sub-contractors, any recipient) FERA expanded the protection of whistle blowers (not just employees, but contractors, competitors, etc.) FERA allows whistle blowers access to information gained from government subpoenas FERA expands the statute of limitations for FCA actions, specifying that government complaints "relate back" to earlier whistleblower complaints. Earlier FCA Provisions Still in Effect: Qui Tam Relators Treble Damages

12. 11 © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International, Cooperative a Swiss entity. KPMG Forensic is a service mark of KPMG International. Service offerings are subject to legal and regulatory restrictions. Some service offerings may not be available to KPMG's audit or other attest service clients. 30459WDC “Defense” Contractor Disclosure Program and Overpayments Close the Contractor Fraud Loophole Act: Requires timely notification by Federal contractors Must report all violations of Federal criminal law or overpayments  Contracts in amount >$5M and more than 120 days in duration Flow down to subcontracts

13. 12 © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International, Cooperative a Swiss entity. KPMG Forensic is a service mark of KPMG International. Service offerings are subject to legal and regulatory restrictions. Some service offerings may not be available to KPMG's audit or other attest service clients. 30459WDC FAR Rule Requires all contractors to: “timely disclose to the Govt., in connection with the award, performance, or closeout of a govt. contract or a subcontract awarded there under, credible evidence of a violation of federal criminal law involving fraud, conflict of interest, bribery, or gratuity violations found in 18 USC or a violation of the civil False Claims Act... [and] remit [any] significant overpayment amount.”

14. 13 © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International, Cooperative a Swiss entity. KPMG Forensic is a service mark of KPMG International. Service offerings are subject to legal and regulatory restrictions. Some service offerings may not be available to KPMG's audit or other attest service clients. 30459WDC Defense Stakeholders DoD OIG DCMA Services General Counsel Services Suspension & Debarment Authority Contracting Officer Affected Military Department DCAA Defense Agencies Defense Criminal Investigative Organizations AFOSI CID DCIS NCIS DOJ Criminal Division (Fraud Section) DOJ Civil Division (Commercial Litigation) US Attorney Office SIGAR

15. 14 © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International, Cooperative a Swiss entity. KPMG Forensic is a service mark of KPMG International. Service offerings are subject to legal and regulatory restrictions. Some service offerings may not be available to KPMG's audit or other attest service clients. 30459WDC Contract Overpayments and Reverse False Claims  FERA defines “obligation” for the first time: “an established duty, whether or not fixed, arising from an express or implied contractual, grantor-grantee, or licensor- licensee relationship, from a fee-based or similar relationship, from statute or regulation, or from the retention of any overpayment.”

16. 15 © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International, Cooperative a Swiss entity. KPMG Forensic is a service mark of KPMG International. Service offerings are subject to legal and regulatory restrictions. Some service offerings may not be available to KPMG's audit or other attest service clients. 30459WDC Suspension & Debarment FAR 3.1003(a)(3) Relating to the payment clauses, “A contractor may be suspended and/or debarred for knowing failure by a principal to timely disclose credible evidence of a significant overpayment, other than payments resulting from contract financing payments

17. 16 © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International, Cooperative a Swiss entity. KPMG Forensic is a service mark of KPMG International. Service offerings are subject to legal and regulatory restrictions. Some service offerings may not be available to KPMG's audit or other attest service clients. 30459WDC Increased Attention - Fraud WILL be Uncovered Government Agency Focus on Improper Payments Contractor Disclosure and Overpayment Requirements Increased Funding for Law Enforcement More People Can Become Whistleblowers Expanded Protection for Whistleblowers Qui Tam Relators (Whistleblowers)  15% to 25% of rewards from cases that are accepted by the Department of Justice  25% - 30% If the Department of Justice does not go forward with a case. A whistleblower can go forward on his own, in some cases with the assistance of a qui tam attorney.

18. 17 © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International, Cooperative a Swiss entity. KPMG Forensic is a service mark of KPMG International. Service offerings are subject to legal and regulatory restrictions. Some service offerings may not be available to KPMG's audit or other attest service clients. 30459WDC GAO Recommended Model for Anti-Fraud Programs and Controls

19. 18 © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International, Cooperative a Swiss entity. KPMG Forensic is a service mark of KPMG International. Service offerings are subject to legal and regulatory restrictions. Some service offerings may not be available to KPMG's audit or other attest service clients. 30459WDC Fraud Risk Management

20. 19 © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International, Cooperative a Swiss entity. KPMG Forensic is a service mark of KPMG International. Service offerings are subject to legal and regulatory restrictions. Some service offerings may not be available to KPMG's audit or other attest service clients. 30459WDC Prevention Fraud and misconduct risk assessment Code of conduct and related standards Employee and third-party due diligence Communication and training Process-specific fraud risk controls Proactive forensic data analysis

21. 20 © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International, Cooperative a Swiss entity. KPMG Forensic is a service mark of KPMG International. Service offerings are subject to legal and regulatory restrictions. Some service offerings may not be available to KPMG's audit or other attest service clients. 30459WDC Detection Hotlines and whistleblower mechanisms Auditing and monitoring Retrospective forensic data analysis

22. 21 © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International, Cooperative a Swiss entity. KPMG Forensic is a service mark of KPMG International. Service offerings are subject to legal and regulatory restrictions. Some service offerings may not be available to KPMG's audit or other attest service clients. 30459WDC Response Internal and external investigations Established investigative protocols Enforcement and accountability protocols Disclosure protocols Remedial action protocols

23. 22 © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International, Cooperative a Swiss entity. KPMG Forensic is a service mark of KPMG International. Service offerings are subject to legal and regulatory restrictions. Some service offerings may not be available to KPMG's audit or other attest service clients. 30459WDC Conclusions Changes in the law, funds to investigative agencies, encouraging whistle-blowers, etc. will certainly increase the number of Frauds Against the Government, which are identified. Government agencies will make every attempt to internally reduce fraud and other improper payments.