Procurement Fraud in Japan

by: Matthew Potter
December 17, 2010

Category: Business Line, Companies, Congress, Contract Additions, Contract Awards, Countries, Department of Defense, Events, Federal Budget Process, IT, Japan, logistics, Military Aviation, Services | RSS 2.0

As long as governments have been buying things there has been fraud related to this process. Sometimes it involves greedy suppliers who deliver low quality products or substitute one thing for another in an attempt to maximize their profits. Sometimes government employees take bribes to favor one contractor over another. Most major governments have laws and regulations established to prevent this or punish those who participate. Even though there are several cases a year in the U.S. and across the world of procurement crime and corruption.

In Japan they have just had a major shake-up of the Japanese Air Self-Defense Force (ASDF) as they found rigging and bribery related to office supply contracts at a major depot.

In this case it involved multiple violations of ethics and procurement rules. Officials were diverting money from other requirements including aircraft maintenance and communications and base support services to buy unneeded office equipment. As well as that misuse of funds the contracting officials were favoring companies that hired their retired colleagues. This led to bid rigging for the contracts.

As fall out from the case the ASDF Chief of Staff was replaced as were forty-nine other officers. The investigation also led to a reorganization of the ASDF procurement force. The contractors did not get off lightly either with five companies paying millions in penalties. On top of that the retired ASDF staff were forced to resign and could not work for the contractors for ten years.

Because governments spend so much money especially on defense item fraud is tempting to both sides. The most egregious case in modern U.S. history was the twenty-one year old Miami Beach arms dealer who received a $300 million contract from the Pentagon to supply ammunition to the Afghanistan military. Because they used Russian weapons there was no U.S. domestic manufacturer. The company tried to use old Chinese made ammo from Albania. This violated several different laws and no real work was done on the contract and it was suspended.

These cases will continue as long as defense spending and contracting does. Human are human and many are tempted to try and make money themselves off of the deals.

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