Conflicts of interest.
Naval Surface Warfare Center, Philadelphia Division (NSWCPD) tackled these topics and more during its first Contract Fraud Awareness Week, Oct. 5-9, aimed at exploring some of the contract fraud indicators, schemes, and ways to avoid them.
“Fraud, waste, and related improprieties, such as theft or misuse of government property and conflicts of interest, are serious matters, which increase costs to the government and reduce resources available to support the operating forces,” said NSWCPD Commanding Officer Capt. Dana Simon, who emphasized the importance of fraud awareness and prevention.
“Fraud training and awareness is critical as we are all part of the line of defense for detecting, reporting and responding to indicators of fraud. We have a duty to protect the taxpayer,” added Karen Gutmaker, NSWCPD contracting department head.
NSWCPD’s Contract Fraud Awareness Week kicked off on Oct. 5 with guest speaker Kyle Crowther from the Naval Criminal Investigative Service (NCIS) with 155 attendees participating virtually.
Crowther, who has nearly 12 years of NCIS experience, noted that he is the first fraud agent physically assigned here in Philly in 17 years, starting his current role in June 2020.
After providing a brief overview of NCIS, Crowther focused on corruption, bribery, conflicts of interest, case studies, the Procurement Integrity Act, fraud prevention, red flags, and remedies.
One study cited by Crowther was the “Fat Leonard” bribery case, which is the largest example of fraud in the U.S. Navy. More than 40 people, including U.S. Navy active duty personnel, have been indicted so far, including Leonard Francis himself. Another key example mentioned Ralph Mariano, a former Naval Sea Systems Command (NAVSEA) senior systems engineer who was sentenced to 120 months in prison for masterminding a kickback scheme that defrauded the U.S. Navy of $18 million.
Joann Woodring, special agent with the Defense Criminal Investigative Service (DCIS), the investigative arm of the Department of Defense Inspector General (DoD IG) office, also physically located in Philadelphia, served as the second presenter on the first day of Fraud Week.
Woodring noted that DCIS works with all of the services, and with the Federal Bureau of Investigation (FBI), Homeland Security, National Aeronautics and Space Administration (NASA), and Health and Human Services (HHS), among others.
The presentation by Woodring emphasized common fraud schemes, specifically involving the contracting process, such as defective pricing, bid manipulation/rigging, product substitution, counterfeit products, labor and cost mischarging, plus more.
“There are lots of different ways contractors can defraud us,” she said after citing a number of examples, including one about a Research and Development (R&D) company that purchased a yacht as an office space in New Orleans after Hurricane Katrina, but then was found to be using the vessel for other purposes.
“About 400 or more investigations are initiated per year. We get referrals from government employees, people who are out at contractor locations … You are the eyes and ears who are out there,” Woodring continued, adding that DCIS also gets tips from the DoD Hotline, as well as Whistleblower complaints.
The second virtual event, which was held on October 7, featured Dan Lanter, a special agent from DCIS, Norfolk Residency Agency.
In explaining how fraud is not a victimless crime contrary to popular opinion, he provided examples of cases on which he personally worked, including one involving a faulty O-ring on an F/A-18 aircraft that crashed and resulted in the pilot’s death.
While interspersing his brief with recollections of a wide variety of cases, Lanter noted that one of the main investigative challenges includes the complexity of the fraud schemes.
“As big as these contracts are it’s difficult for an investigator so it helps us tremendously to have folks in the contracting world who bring that to our attention. It’s folks like you all who are working this every day who help us ferret out what we need to move on in the investigation,” he said, adding that this briefing was providing him an opportunity to be even more proactive by educating those involved with the contracting process.
Lanter also emphasized the importance of getting the mission done the “right way” by properly utilizing appropriate waivers, deviations, and other tools.
“No activity is immune from fraud, waste and abuse; period. Opportunities are there, and someone can take advantage of that,” he said.
In addition, throughout Fraud Week NSWCPD’s contracting department shared useful tips each day covering topics such as the Association of Certified Fraud Examiners (ACFE) 2020 Report and a comprehensive article on how to avoid ethical pitfalls, among others.
However, although a dedicated Contract Fraud Week is a first for NSWCPD, promoting awareness on the topic is not.
“Our Monthly Fraud Schemes are posted to our command website and are heavily related to contract fraud. Our command has been doing that for two to three years now as a reminder to everybody to always be alert and attentive,” said Barbie Walters, contracting officer representative (COR) certification manager in NSWCPD’s Acquisition Support Section.
NSWCPD employs approximately 2,700 civilian engineers, scientists, technicians, and support personnel. The NSWCPD team does the research and development, test and evaluation, acquisition support, and in-service and logistics engineering for the non-nuclear machinery, ship machinery systems, and related equipment and material for Navy surface ships and submarines. NSWCPD is also the lead organization providing cybersecurity for all ship systems.