Sunday, March 1, 2009

Firms Defraud Government but Get New US Contracts

Firms defraud government but get new U.S. contracts

Payments went to a company whose president tried to sell nuclear bomb parts to North Korea, a company that jeopardized lives on the aircraft carrier USS John F. Kennedy and a seller of body armor that the Air Force said was defective.

The companies were on a government database of 70,000 individuals and businesses suspended or barred by various U.S. agencies from receiving government contract work.

The Government Accountability Office blamed some of the mistakes on faulty computer searches by officials who left out commas or periods. But it also said the search engine for the database often failed to identify any of the entries on the exclusion list.

A hypothetical suspended company named XYZ Corp., Inc. —- with a comma —- would escape detection if one searched for XYZ Corp. Inc. —- without the comma —- the report said.

The investigators found a staggering list of offenses by companies awarded new contracts. They included use of fictitious Social Security numbers, massive tax fraud, delivery of faulty parts for the military, false filings with the Securities and Exchange Commission, use of insider information to bid on federal contracts, and Medicare fraud.

Rep. Edolphus Towns (D-N.Y.), chairman of the House Oversight and Government Reform Committee, asked in a hearing Thursday, “What is the point of having suspension and debarment regulations if our own agencies disregard them?”

Most contracts were awarded to excluded companies by mistake. However, the Army deliberately continued a contract with a German company, Optronic GmbH, whose president was convicted in Germany for attempting to illegally ship dual aluminum tubes to North Korea. The equipment can be used in the development of nuclear bombs.

The Army paid the company $31 million under the contract, including $4 million after it was placed on the exclusion list. The firm supplied civilians for training exercises for 7,000 U.S. troops prior to their deployment to Iraq.

In ruling that the company should not receive new contracts, the Army stated in July 2005 that the gravity of the conduct was clear, given that 37,000 U.S. forces were stationed on South Korean soil.

An Army official, in an interview, said the payments continued because the convicted president was removed from the company and the firm did an excellent job in its crucial role in the training exercises.

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