Procurement Fraud

Please join us for the Compliance & Government Investigations Seminar hosted by Bass, Berry & Sims and FTI Consulting. Due to ongoing COVID-19 concerns, this event will be virtual only.

We are excited for this year’s complimentary CLE program, which will provide the same caliber of practical advice, insight into government developments, and thoughtful discussion from industry panelists you have come to expect from this seminar. This year’s topics include:

  • Inside Scoop: Top Issues In-House Counsel Currently Face
  • Update on International Trade Regulations and Enforcement
  • SEC Update: Key Enforcement and Regulatory Priorities
  • Running an Investigation
  • Antitrust Is Back: DOJ and FTC Signal Significant Increase in Antitrust Enforcement
  • Data Privacy Update
  • Healthcare Fraud Enforcement Updates
  • Hot Topics in Procurement Fraud in 2021 and Beyond
  • COVID-19 Funding Fallout: Preparation for Government Scrutiny

This year’s seminar will be held from 8:30 a.m.–3:45 p.m. CDT on Tuesday, September 28. To register, please click here.

Click here to view the agenda.Continue Reading [Virtual Event] 8th Annual Compliance & Government Investigations Seminar

This past January, the Department of Justice (DOJ) announced that procurement fraud recoveries comprised the second largest category of fraud recoveries in Fiscal Year (FY) 2020, a trend that continued from FY 2019. With last November’s announcement of DOJ’s intent to expand its Procurement Collusions Strike Force (PCSF), we expect to see a continued trend…

Bass, Berry & Sims attorney Richard Arnholt provided comments on the questionable communications related to the bidding process for two separate contracts awarded by the St. Louis Economic Development Partnership. In both cases, email exchanges between individuals in the St. Louis county executive and economic partnership offices and a top donor to the county executive’s campaign revealed that the donor requested feedback on his proposal prior to formally submitting the bid. The Economic Development Partnership subsequently awarded the two government contracts to the donor’s company.
Continue Reading Information on Inquiries Arising from Economic Development Partnership Bidding Process

In another example of the government’s efforts to root out fraud in government procurement programs, on July 5, U.S. District Judge Reggie B. Walton sentenced Virginia businessman, Tarsem Singh, to 15 months in prison followed by three years of supervised release for conspiracy to commit major fraud on the United States. In December of 2015, Singh pleaded guilty to executing a scheme to defraud the Small Business Administration (SBA) and the General Services Administration (GSA) through fraudulent procurement of more than $8.5 million in federal government contracts through SBA’s 8(a) program. Created to help small, disadvantaged businesses engage in federal procurement, the 8(a) program requires that qualifying businesses are at least 51% owned and controlled by a socially and economically disadvantaged U.S. citizen.

From 2000 to 2009, Singh was the vice president of “Company A,” a construction company specializing in renovating and altering buildings. From 2000 through 2009, Company A was certified under the 8(a) program and lawfully received approximately $23 million in contracts from the GSA. The real trouble began in 2009, when Company A graduated from the 8(a) program and, on the same day, entered into a Mentor-Protégé Agreement with “Company B.” With monetary support and guidance from Company A, Company B was certified under the 8(a) program and was ultimately awarded 26 federal contracts under the program. According to the government’s calculations and Judge Walton’s Memorandum Opinion, the contracts awarded to Company B totaled more than $8.5 million.Continue Reading Business Owner Sentenced to 15 Months for Defrauding SBA’s 8(a) Program Through Use of “Shell” Company to Receive 8(a) Contracts

Let’s get the ball rolling here with a clichéd look at procurement fraud. Most government contractors firmly believe that as long as they knuckle down and keep their nose to the grindstone, they will earn their stripes and eventually make a King’s ransom in the contracting game. Occasionally though, a contractor may try to cut corners and will push the envelope and go against the grain in order to get a leg up on the competition.

While in the short term that may lead to the contractor making money hand over fist, all that glitters is not gold and eventually the long arm of the law will catch up to the scheme and make a federal case out of it. At that point, the contractor will certainly find themselves in hot water. Typically, the federal government will likely hold all the cards, and have the contractor over a barrel.

But even contractors that try to go by the book may find themselves with their feet to the fire due to actions of an employee. A chain is only as strong as its weakest link, and one bad egg employee can really be a fly in the ointment for an otherwise law-abiding government contractor.Continue Reading Procurement Potholes: Don’t Get Caught by a Cliché

Recently, U.S. District Judge Deborah K. Chasanow sentenced Wesley Burnett of Hermosa Beach, California to 42 months in prison followed by three years supervised release for conspiracy to commit wire fraud in connection with a scheme to fraudulently obtain more than $2.8 million in federal government contracts through the use of the Small Business Administration’s 8(a) program, designed to assist disadvantaged businesses. Burnett originally pled guilty to these charges back in October of 2014.

Burnett was the owner and operator of Confederate Group LLC and Total Barrier Works (TBW). These companies maintained and installed anti-terrorist systems and vehicle-control equipment such as security barriers, bollards, gates, uninterrupted power systems (UPS) and other perimeter security anti-terrorist equipment.

From 2007 until 2014, Burnett admitted that he falsely represented to the U.S. Government that Confederate Group LLC was a “Hispanic-American Owned Business,” a “Minority Owned Business,” a “Service Disabled Veteran Owned Business” and a “Small Disadvantaged Business” in order to win federal government contracts set aside exclusively for firms in these categories. However, Burnett was neither a member of any of these racial or ethnic minority groups nor a disabled veteran nor member of a socially disadvantaged group. These false representations resulted in Confederate Group LLC receiving approximately $534,315 in unjustified contract awards.Continue Reading Business Owner Sentenced for Fraudulent “Pass-Through” Contract Scheme

SB95 by Norris/HB84 by McCormick – Dept. of General Services
This bill was part of the administration’s package and revises certain provisions of Tennessee’s procurement code as follows:

Section 1: Rewrites the cooperative purchasing agreements statute (Tenn. Code Ann. § 12-3-701) to authorize the central procurement office and public institutions of higher education to participate in cooperative purchasing agreements for the procurement of goods or services with the cooperation of other states or local governments. The bill specifies that cooperative purchasing must be awarded through “full and open competition.”

Section 2: Rewrites the protest procedure statute (Tenn. Code Ann. § 12-3-514) to provide more detail with regard to a party’s standing to protest and to the calculation of the protest bond. The bill revises the procedure as follows:

A. Time
Previously: A protest must have been submitted in writing within seven calendar days after the claimant knew or should have known the facts giving rise to the protest. A stay of award may have been requested in the case of a pending award.

Now: A protesting party may submit a protest within seven calendar days after (a) the earlier of the notice of the award or (b) intent to award the contract is issued. Regarding a stay, the bill revises the requirement to specify that a stay of the solicitation, award, or proposed award will be granted upon receipt of a protest and the accompanying protest bond. A stay issued under this provision must not be lifted unless, after giving the protesting an opportunity to be heard, the chief procurement officer or the protest committee makes a written determination that continuation of the procurement process or the award of the contract without further delay is necessary to protect the interests of the state.Continue Reading 2015 Legislative Update: Government Contracts and Procurement

In recent months, Relators’ qui tam complaints have been subject to increased scrutiny by criminal prosecutors. In addition to civil False Claims Act (FCA) liability, individuals doing business with the federal government face potential criminal liability under various criminal fraud-related statutes. Potential charges for fraudulent activities are not limited to a criminal fraud charge, but also include bribery, false statements, conspiracy to defraud, wire fraud, mail fraud, and identity theft, among others. Most of these crimes are felonies and carry substantial penalties, including fines, freezing of assets, and imprisonment. Especially in the healthcare industry and defense procurement space, many criminal investigations originate as civil qui tam filings only later adopting a criminal component. These parallel investigations typically involve the U.S. Department of Justice (DOJ) and may include other enforcement agencies.

Recent DOJ rhetoric encourages an increased use of such parallel investigations. In September 2014, Assistant Attorney General for the Criminal Division of the DOJ, Leslie Caldwell, announced that the Criminal Division would be “stepping up” its review to look for potential criminal liability in qui tam complaints, noting that such complaints “are a vital part of the Criminal Divisions’ future efforts.”[1] Consistent with this message, Caldwell encouraged the Relator’s bar to notify the Criminal Division directly when a complaint is filed instead of coordinating only with the local U.S. Attorney’s Office. As part of the new process, the Criminal Division will receive and review new complaints so that prosecutors may determine the nature and extent of any criminal exposure.Continue Reading New DOJ Qui Tam Protocols Likely to Lead to Increased Parallel Criminal Investigations

Following the federal government’s example, states are increasingly looking to their own false claims act (“FCA”) statutes to combat procurement and healthcare fraud. This trend is being driven by two main factors: (1) the huge recoveries by the Department of Justice (“DOJ”) under the federal FCA – $5.7 billion in Fiscal Year 2014 alone; and (2) a federal statute that provided a financial incentive for states to mirror their own FCAs on the federal FCA with regard to healthcare fraud. This state-level activity represents a new front in the battle against procurement fraud, one that government contractors must be aware of to fully analyze and mitigate risks when contracting with state entities.

Currently, 33 states and the District of Columbia have a false claims statute. Of these, 11 states have FCAs that are limited to healthcare fraud; the remaining statutes penalize a broad range of false claims. Many – but not all – of these state FCAs have provisions allowing for whistleblowers to file qui tam actions on behalf of the state government and to share in any recovery.Continue Reading A New Front in the Battle Against Fraud – the Continued Expansion of State False Claims Act Liability

Lockheed Martin Integrated Systems (“LMIS”), a subsidiary of Lockheed Martin, agreed on Friday, December 19, 2014 to pay $27.5 million to resolve allegations that it inflated labor costs and submitted false claims to the government in violation of the False Claims Act.  Specifically, the Department of Justice (“DOJ”) alleged that LMIS overbilled for work performed by personnel who lacked the job qualifications required under Rapid Response and Strategic Services Sourcing contracts issued by the U.S. Army Communications and Electronics Command.

The overbilling allegations against LMIS are similar to the DOJ’s allegations in a separate case against DRS Technical Services Inc., which resulted in a $13.7 million settlement announced on October 7, 2014.  The DOJ also alleged in that case that DRS Technical Services overbilled labor costs for under-qualified employees under the Rapid Response contract.Continue Reading Defense Contractor Reaches Settlement in Procurement Fraud Case Involving Overbilling Allegations

From the Bass, Berry & Sims Blog Network
From the Bass, Berry & Sims Blog Network

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