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Afghanistan: Very high risk of corruption in defence, but results better than expected – Transparency International — Press Release

February 14, 2013 by · Comment
Filed under: Business Line, Companies, Countries, crime, Events, Press Releases 

Afghanistan: Very high risk of corruption in defence, but results better than expected.

Kabul, 14th February 2013 – Afghanistan leaves the door open to waste, impunity, and endangers troops and citizens, because it lacks strong anti-corruption systems in the defence and security sector, according to the first of its kind Government Defence Anti-Corruption Index (GI). This new study by Transparency International UK’s Defence and Security Programme measures how governments prevent and counter corruption in defence.

The Government Defence Anti-Corruption Index (GI) analyses what 82 countries do to reduce corruption risk. These countries accounted for 94 per cent (USD 1.6 trillion) of the global military expenditure in 2011. Countries are scored in bands from very low risk (A) to critical risk (F) according to detailed assessment across 77 indicators that cover five prominent risk areas in the sector: politics, finance, personnel, operations, and procurement.

“Corruption in defence is dangerous, divisive and wasteful, and the cost is paid by citizens, soldiers and governments. Our study suggests that the corruption problem is pervasive in defence around the world, with a significant proportion of this spending at risk. Worse, high levels of defence corruption lead to impunity and public mistrust.” explains Mark Pyman, Director of Transparency International UK’s Defence and Security Programme.

Afghanistan was placed in Band E, which reflects very high risk of corruption in defence and security. The defence sector was found to have several serious problems including widespread petty bribery, corruption problems in recruitment and promotions, and lack of transparency. The Index shows defence procurement to be the area with the highest corruption risk and addressing this risk needs to be a top priority. “As responsibility for defence purchases spending shifts from the ISAF coalition to the Ministry of Defence, Afghan MOD spending will increase hugely; this will put much greater stress on their procurement system, with many more corruption opportunities” warns Pyman.

“Corruption in the Afghan defence has devastating effects in the context of transition. It erodes the confidence of the Afghan citizens and political circles about the ability of the Afghan security forces to ensure future security of the country. In addition, waste in Afghan defence can potentially take away the resources from development and poverty reduction programmes” says Yama Torabi, Executive Director of Integrity Watch Afghanistan.

Yet there were several positive features of the Afghan defence sector, such as the establishment of a Military Anti-Corruption Unit inside the Ministry of Defence, which has the remit of rooting out corruption in the sector, and the willingness of Defence Ministry and military leaders to analyse and follow up their corruption risks.

“Whilst Afghanistan is performing very poorly in general corruption indices, the Afghan Defence Ministry and the Afghan military are performing better than the government as a whole, and certainly much better than the nine nations who scored in band F (Algeria, Angola, Cameroon, Democratic Republic of Congo, Egypt, Eritrea, Libya, Syria, Yemen)” explains Oliver Cover, principal author of the report. The index is to be repeated in two years, so any such improvement will be measured and tracked.

Transparency International-UK calls on the Afghan government to prioritise integrity and anti-corruption reforms in Defence, in Security and in the Police, given how important these sectors are for the security of the country.

Transparency International-UK estimates the global cost of corruption in the defence sector to be a minimum of USD 20 billion per year, based on data from the World Bank and the Stockholm International Peace Research Institute (SIPRI). This equates to the total sum pledged by the G8 in 2009 to fight world hunger.

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FCPA Security Case Ends In A Fiasco

Two years ago at the SHOT Show where civil, security and military small arms manufacturers display their wares the FBI ran a major sting leading to the arrest of 22 individuals for attempted bribery of a foreign official in order to gain a contract. It was one of the biggest cases in terms of numbers of persons and companies involving the Foreign Corrupt Practices Act (FCPA).

The FCPA is designed to prevent U.S. and foreign companies, too, from being involved in bribes or other illegal means to gain work from overseas customers. If a company does business in the U.S. or with the U.S. government it may be targeted under this act. Recently large companies have been charged under this law including the Dutch giant Siemens, BAE Systems as well as oil support company KBR.

This case involved a fake representative of an African country negotiating for equipment for a police force that would require some payments to people to make the deal go through. Different companies were involved and various people charged.

Now after two years of failing to convict anybody in the first two trails the FBI and Justice Department have given up. Rather then attempt to retry the cases they have decided to drop charges against the remaining defendants. Whether they will attempt to retry the first two trials remain to be seen.

The first ended in an acquittal and the second in a mistrial as the jury could not make a decision. This was primarily due to the fact that the prime witness for the prosecution was considered unreliable as well as details of communications between him and the FBI agents involved in the case portrayed them negatively. The jury also felt that at no time was it made clear to the defendants that the payments demanded were bribes.

The FCPA is an important tool and the U.S. has worked hard to end the practice of defense contractors paying officials in other countries for contracts. That does not mean it does not still happen and there remain cases in the U.S. of government officials taking bribes. Other nations have had a harder time but overall the defense industry is a lot less corrupt then it was thirty years ago.

These cases illustrate that the government has to be very careful how it approaches these situations and the way they prepare their case.

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Contract Fraud is Universal as Mitsubishi Electric Hit with Ban

The issue of fraud, waste and abuse has been a constant in defense contracting since the first piece of equipment was sold to a soldier. It could be rotten food in the Civil War, poorly made weapons or just simple overcharging or substituting inferior work for what the contract requires. Even in this day of lawyers, strong contracts, inspections and high technology these issues still occur as people look for ways to get more money out of their customers. In Japan the second largest defense contractor, Mitsubishi Electric (TSE) is now facing a ban for falsely inflating contract costs.

Reportedly not only the defense ministry has suspended the company but also the Japan Aerospace Exploration Agency (JAXA) and the Cabinet Satellite Intelligence Center will also stop doing business with Mitsubishi Electric. The company is making different things related to the country’s space program for JAXA and developing a intelligence satellite for the Intelligence Center.

The company has been found artificially increasing the number of workers and hours billed for on a contract to produce the Type 03 surface-to-air missile. This is a vehicle mounted system that uses IR and radar guidance and reportedly has a range of about 50,000 meters.

In 2010 Mitsubishi Electric was working on over $1.5 billion in contracts for Japan making missiles, electronics and other equipment. The suspension currently means that it cannot get new work. A further inspection of other contracts is expected to begin in the near term.

The suspension is it last a significant length of time will affect the company as it will limit opportunities for new work. The company may also see it paying money back to the government and fines and charges that could affect the bottom line. Long term it will have to remain as a viable contractor for Japan due to the type of work it does and the requirements of the armed forces. Unfortunately in this time of very few defense contractors it is hard to ban or suspend permanently any one company.

Japan has not been immune to these problems. In 2010 the Japanese Air Self-Defense Force who most likely contracted for the Type 03 was investigated and many officers and officials charged with bid rigging and bribery. Bribes were being used to steer contracts for office equipment and supplies to preferred vendors.

These cases illustrate that when large amounts of money are involved there is a great deal of temptation to try and make profit and get rich off of it in ways that short change the customer, tax payer and the user.

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Waste, Fraud and the Federal Budget

Some of the issues that are going to be faced by Congress and its “Super Committee” when it comes to reforming Federal spending are those of waste and corruption. Governments spend a lot of money each year on everything from salaries, aircraft, social programs and even muffins. This leads to those who want a piece of the money without necessarily working for it or providing what is required. It also means that without layers of expensive audits and review which do exist there is always a chance the money is not spent correctly or properly. As The Washington Post once said (perhaps apocryphally) “The Government doesn’t buy things efficiently but ethically.”

Some recent cases only highlight the issues faced by procurement and contracting officials. One that got a great deal of publicity was an Inspector General’s investigation of conference costs from the Department of Justice. Their analysis found hotels charging the agency $16 for a muffin. Now of course it turns out the hotel invoiced improperly but it still looks bad that the government at this time of large deficits would be spending money on such items. The result, predictably, is another layer of review and approval for conferences.

Another issue that is more important due to the amount was that the Government is unable to track its retired work force properly and this has led to payments of over $120 million a year to deceased persons. Sometimes this is due to fraud by the relatives of employees but most of the time it is because they don’t know that person is dead. Now $120 million in a budget of $3.5 trillion is a small amount but again it illustrates how hard tracking all of the expenditures is.

Then there is just outright contractor greed and crime. There are lots of ways for corrupt companies and Federal employees to take advantage of the procurement business.

Two recent examples illustrate this problem. In the first a small defense contractor has been charged with paying bribes to two contracting officials to get them to award his company a contract for a security vehicle to be used in Afghanistan. The bribes only totaled $20,000.00 and the contract was for $200,000.00. Reportedly they all knew each other from service together in the Army. Then to make it worse he didn’t deliver the product. Direct bribes like this are not common and the Federal government has been cracking down on this in the last few years. In 2010 the Justice Department got a settlement from the British defense contractor BAE Systems (BAE:LSE) for bribes to gain a major Saudi contract. There have been other recent cases involving KBR (KBR) and the Dutch company Siemens as well.

In another example a company in Alabama paid a settlement with the Justice Department over charges that it pretended to be located in a Historically Underutilized Business Zone (HUBZONE) when it was not to gain a competitive advantage. HUBZONE’s are for areas, predominantly minority, that haven’t received a great deal of Federal contracts. To spur investment in these areas the Government weights contract evaluations or sets aside contracts for these companies to help them gain work. The company here said its offices were in the HUBZONE when they were actually located in a nearby major office park. The company was able to win a set aside contract through this deceit.

The Federal and State Governments have a great deal of programs like this to help disadvantaged groups and companies. These include special programs for businesses owned by Native Americans, minorities and women. There is a temptation to take advantage of these to gain work by companies that shouldn’t qualify. For smaller business one or two contract may make a big difference in their bottom line and the compensation of their executives which leads to temptation. The chance of audit and review seem low leading to these cases.

When you are spending billions each year it can sometimes be hard to keep track of the little things. This is one of the reason there is fraud and waste with government spending. The Government needs to do a better job of following their spending and the contractors they use. At the same time layers of review and regulation may not fix the problems. Another way would be to reduce the number of special and set aside programs to limit temptation. This would also improve the ability to award contracts in a timely fashion. Every layer of review and audits delays processing of the contract and payment of the contractor.

As the Federal Government shrinks spending there will be more cases of fraud and crime as the temptation for contractors to keep the work they have and fight over the smaller pie of contracts will increase. That means companies will potentially use bribes, falsified status or other means to win them. The Government will also have to do a better job of eliminating problems to maximize the value of their remaining dollars. There will be a whole sale shift in some practices in theory such as eliminating things like conferences and travel in order to economize. Changes such as this will take time and to be honest may never happen leading to more deficit spending and waste.

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Thales and French Government to Share in Fine for Taiwanese Bribes

A French court ruled this week that the French defense contractor, Thales (HO:PA), along with the French government must pay a fine in relation to charges that bribes had been paid to the Taiwanese government to secure a large naval ship order. The deal was originally signed with Thomson-CSF and the government owned shipyard DCN. Thomson-CSF is now part of Thales.

The fine of 630 million euros, which is almost a billion dollars, will be split roughly 70/30 between the government and Thales. As part of the agreement with the court the government will not appeal the decision allowing Thales to get on with business without facing any more potential penalties or bad publicity. Thales says that the money has already been accounted for in preparation for paying the fine. The money will be returned to Taiwan.

Thales stock price has been little affected by the news.

This is the largest corruption case in French history and rivals the payouts that BAE Systems (BAE:LSE) has had to give to the U.K. and U.S. governments over its deals with Saudi Arabia. These totaled almost $500 million to the U.S. and $450 million in the U.K. The U.S. has especially been harsh on companies that used bribes and corrupt acts to win contracts overseas.

Historically bribes and payments have been a part of the international arms trade. Many countries required these kind of payments or the use of middle men to facilitate deals. This practice has been accepted by governments more interested in winning the contract for their own domestic companies like this deal then in ethical practices. These kind of actions cheat the customer because they may not get the best system or deal for their money as well as the other potential bidders as they do not get a fair selection process.

Thales also illustrates the situation where mergers and acquisitions lead to a company inheriting the problems of another. Even though potentially no Thales employees were involved the company is responsible due to acquiring Thomson-CSF. Hopefully more decisions and cases like this will help eradicate this problem from the defense trade.

Photo from Lordcolus’ Flickr photostream.

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Bribes, Corruption Suspected in Greek Submarine Order

Procurement fraud and outright crimes have afflicted government spending and contracting since the dawn of history. There have been many recent cases of bribery used to affect contract awards or purchasing decisions. This has included elected officials, civil servants as well as company representatives. There are cases large and small from accusations against BAE Systems (BAE:LSE) in a multi-billion deal with Saudi Arabia to a U.S. Army Major who took $200,000 in bribes from foreign companies to give them work in Iraq, Kuwait and Afghanistan.

Foreign military sales has always been one area that in the past has seen rampant bribery and corruption. In the last few decades governments have been cracking down on such practices especially the United States. They have made it illegal to use such methods to help win contracts overseas even if those practices were considered part of the cost of doing business. In 2008 for example Siemens (SI) settled with the U.S. government on charges they used such methods to win contracts.

Now there are allegations that Greek defense and elected officials were bribed to influence the award of a contract for four submarines to a German company. The contract was one of the largest in Greek history and would see one boat built in Germany and the other three in Greek yards.

The Greek government and the manufacturer, ThyssenKrupp, ended up having long running dispute about the quality of the submarine leading to the builder to threaten to cancel the deal outright. Greece then came up with the idea of taking delivery of only the first one and perhaps selling it directly themselves to recover some of the costs.

Greece’s government is suffering from financial and debt issues and the idea that the contract was inflated in cost due to corruption has only added fuel to the fire of disputes between the government and political rivals.

Corruption distorts contracts so that the buyer may not get the best value for what could be limited funds. It also affects the contracting market as it may not allow a company with better products the ability to sell those and they cannot or will not pay the necessary bribes to get the work. As more countries follow the U.S. lead in investigating and ending this type of fraud the overall defense market will benefit. Unfortunately stories like this remain much too common.

Photo from sky#walker’s flickr photostream.

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Nine Charged With Defrauding the U.S. Government of More Than $40 Million in Military Supply Scheme — Press Release

Nine Charged With Defrauding the U.S. Government of More Than $40 Million in Military Supply Scheme

BUFFALO, N.Y., April 30 /PRNewswire-USNewswire/ — A federal grand jury has returned an indictment charging six persons and three corporations with conspiring to defraud the U.S. government and wire fraud in connection with the supply and composition of critical materials used in the American war effort, U.S. Attorney for the Western District of New York William J. Hochul, Jr., announced today. U.S. Immigration and Customs Enforcement (ICE), along with other agencies mentioned below, investigated the case.

The indictment alleges that the defendants sold 1.8 million countermeasure flares, which are used in military aircraft to divert heat-seeking missiles, valued at $42 million to the Department of Defense (DoD) in violation of contract regulations. Such flares are composed primarily of magnesium powder.

The indictment states that the defendants violated DoD rules by obtaining magnesium produced by companies in China, rather than companies in the United States or Canada as required. The indictment further alleges that the defendants fraudulently mislabeled and undervalued the imported materials in order to evade customs and anti-dumping duties, which resulted in the loss of more than $10 million in customs duties. The U.S. Government enacted the anti-dumping duties on magnesium imports to protect the domestic magnesium industry. Such protection ensures a domestic supplier would always be available in times of war or national emergency given the critical need for magnesium for war fighting purposes.

The indictment specifically names: Gregory Magness, age 62, of Polk, Pa.; Justin Magness, age 34, Oil City, Pa.; Superior Metal Powders Inc., Franklin, Pa.; Charles Wright, age 60, Youngstown, N.Y.; William Nehill, age, 65, of Orchard Park, N.Y.; International Technology Group Inc., Orchard Park, N.Y.; Eldon Bott, age 58, of Brigham City, Utah; Innovative Materials & Solutions Inc., Brigham City, Utah; and Qian Chen, age 48, of Beijing, China.

The charges carry a maximum penalty of five years in prison, $250,000 fine or both (the conspiracy charge), and 20 years in prison, a fine of $250,000 or both (the wire fraud charge) along with the forfeiture of assets.

“The critical aspect of this case is that the defendants stand accused of intentionally evading Department of Defense regulations, jeopardizing military service men and women and a critical American industry, and defrauding the Government out of millions of dollars of tariffs and duties,” said U.S. Attorney Hochul.

“This is a case where men, operating under the guise of legitimate businesses, conspired to import mislabeled and undervalued magnesium powder – a key component of flares – from China into the United States,” said ICE Special Agent in Charge Lev Kubiak. “As a result, DoD was sold non-conforming flares, which could have put our war fighters at additional risk.”

The indictment was the culmination of an investigation by Special Agents of the ICE Buffalo Office of Investigations; Defense Criminal Investigative Service, Philadelphia Office under the direction of Special Agent in Charge Edward Bradley, Internal Revenue Service Criminal Investigation Division, New York Field Division, under the direction of Patricia Haynes and, U.S. Customs and Border Protection, Office of Field Operations under the direction of Port Director Joseph Wilson provided significant assistance in this case.

The evidence was presented to the grand jury by Assistant U.S. Attorney Michael DiGiacomo, who will handle the trial of the case.

The fact that a defendant has been charged with a crime is merely an accusation and the defendant is presumed innocent until and unless proven guilty.

Source: U.S. Department of Justice

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Army Awards Forensic Contract

In our continuing saga of the Department of Defense buys a great deal of different things the Army awarded a contract to American Systems to provide IT support for criminal forensics services. This while it may seem like the U.S. Army is getting into the CSI business is really not that surprising. Under this one year with four option yeas American Systems will provide support for the Defense Forensic Enterprise System (DFES) in use for both military criminal investigations and combat operations. If all options on the contract are exercised it will be worth up to $145 million.

The contract is structured for task orders and this award qualifies American Systems to compete for discrete task orders. This means that despite qualifying there is no guarantee that the company will receive any work or revenue. The Army has used these type of contracts commonly with SETA support to their large acquisition commands to allow entities to buy the necessary services from qualified vendors.

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More on the Alaskan Missile Range Corruption Case

We have written in the past about Mr. Cantrell, an manager at the Army’s Space and Missile Defense Command (SMDC), and his corruption scheme that will lead to his jailing on taking bribes from contractors in the past here and here. Now The Kodiak Daily Mirror has more details on how Mr. Cantrell used Alaskan Senator Stephens to build a range on Kodiak Island which allowed him to get the necessary work in order to generate the kickbacks. Read more

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Does the Punishment Fit the Crime? Former DoD Worker Sentenced for Fraud

A Defense Logistics Agency (DLA) worker, Constance Walton, was sentenced to two years probation and a $10 K fine. Ms. Walton directed contracts be given to companies that she either had a financial role in or owned outright. She also failed to report income from these ventures. MarketWatch.com has the press release from the US Department of Justice on her case. To top it off the companies she directed work to never did any and were still paid. Read more

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Defense corruption in Russia

October 15, 2008 by · Comment
Filed under: Contract Awards, crime, development program, IT, Russia 

The Russian Ministry of Defense announced that contract fraud was perpetuated on the Russian government through manipulation of contract evaluation and awards. The Ministry had contracted with the state owned 26th Central Scientific Research Institute to manage a security software system. The Research Institute awarded the contract to a company that turned out to be made up of people on the contract evaluation board. Up to 20 M rubles may be involved in this case where little or no work was done and the money was moved around via false contracts. In the US when a Source Selection Evaluation Board (SSEB) is established all the members are investigated for such conflicts, although there have been cases of outright bribery of members for a favorable contract award.

For more see Komersant’s website.

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Missile Defense corruption

Last year the US Government arrested two employees of the US Army’s Space and Missile Defense Command (SMDC) on charges that they were taking bribes to steer contracts to selected companies. Now the New York Times has done some further research on the issue and have found out that the main figure, the head of SMDC S&T center, had created a whole scheme to make Congress fund a large test program that would then be self-perpetuating. As part of this he broke Federal law by lobbying Congress directly.

The scheme he concocted was one that when I worked supporting the Ballistic Missile Defense Organization (BMDO), now Missile Defense Agency (MDA), never made much sense to me. The MDA had an issue with testing the systems against long range targets. They targets required could not be tested in the United States as there was no range big enough to hold them. The Navy invested in improving their range on the West Coast of Kuaii in Hawaii that faced a broad open area. Targets would be air launched and fired into the range. The Army looked at building a launch facility on Midway to fire that targets at their main range in Kwajalien. The gentlemen at the core of the scandal, Mr. Cantrell, worked a proposal directly with Congress and various contractors to build a facility in Alaska on Kodiak Island and then use an old Navy helicopter carrier to fire the targets at Kodiak. This never really made sense due to its cost and the creation of all new facilities and modifying the ship at some cost.

Ultimately the idea went nowhere, although a launch facility has been built at Kodiak which supports Air Force operations right now. MDA made the sensible decision to begin testing US Army systems in Hawaii using the range there. Now that it turns out the Mr. Cantrell and various Senators using the earmark system was doing this for personal gain.

See an article in the Huntsville Times here.

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Arrests in Afghanistan contracting scandal

Two Air Force personnel and three Afghan nationals were arrested over charges that bribes were paid to win contracts for military construction in Afghanistan. Two of the Afghans also resided in the United States. Supposedly a bribe of $30,000 was paid to the US Air Force officials to win a $1 M construction contract in 2004. Another bribe was paid later to win a road contract. Several US military and civilian personnel have been arrested and charged with contract related corruption in Kuwait, Iraq and the United States. With the amount of money going to the efforts in Afghanistan and Iraq there is always a chance for such crime.

There is more at The Wall Street Journal’s MarketWatch.com site.

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Air Force leadership canned

June 5, 2008 by · Comment
Filed under: crime, Restructuring, U.S. Air Force 

The Secretary of the Air Force and its Chief of Staff both resigned today. See the story here. The most obvious reason was the completion of an independent review of how the USAF was handling it’s nuclear weapons. Badly was the conclusion since Minuteman fuzes were shipped to Taiwan and a B-52 flew across the country with nukes on board without the crew’s knowledge. Other issues were the problems and favoritism related to Thunderbird contracts as discussed here. On top of the fairly recent scandal with Boeing and the tanker lease it is a dark day for the service.

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CH-47 said vandalized

Bump – Boeing employee arrested for vandalizing aircraft. Story is here.

In a way this is good news. If it had been a quality issue then it might delay restarting the production line as they worked out new procedures and where they had gone wrong. The other good thing is they discovered the damage before they were fielded. The CH-47 is being used a great deal in Afghanistan and Iraq, as are all Army aviation assets, but in Afghanistan it is key due to the high altitude which limit smaller helicopters.

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Story on earmarks illustrates issue

The Wall Street Journal and The Huntsville Times both have stories today on Congressional Earmarks, the Defense budget and corruption. See the stories here and here. The Journal highlights how a Huntsville company, Digital Fusion, received an earmarked contract from a Texas Democrat at around the same time they gave him a large campaign contribution. The Times is following up on a recent case where Federal workers at the Space and Missile Defense Command (SMDC) were taking bribes from contractors for giving contracts to them. In that case the contractors have yet to be named. The Federal investigators as part of their follow-up are looking at companies that received earmarked contracts through SMDC. The first case is not a crime unless you can tie the contribution directly to the contract award which is almost impossible without some kind of documentation. That is what befell Congressman Cunningham from California as they had written evidence linking the two events. SMDC spreads a lot of RDT&E money around each year, much of it earmarked by local Senators and Congressman. All received campaign contributions from contractors and deny any linkage. You be the judge.

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Force Protection sued by share holders

In an action related to previous posts, here and here, it seems that some of the Force Protection shareholders are suing the company and management. The press release is here. Congress has recently made it harder to win these kind of lawsuits as it was felt they had been abused in the past. The crux of the matter is that executives were misleading about the company’s future, and points to DoD reports that contracts to Force Protection had not been awarded properly. This will take some time to work out in the courts. Force Protection has recently struggled to win contracts.

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Former NY contractor convicted of price fixing

The US Attorney in Long Island has got a former company to plead guilty to price fixing. The news story can be found here. The company, Peck & Hale, manufactured tie downs and other gear to secure cargo on ships, aircraft and vehicles. This is part of an ongoing investigation into several companies involved in this business. Peck & Hale employees pleaded guilty to colluding with the other companies to fix the prices they would propose and ultimately get from the services.

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Iraqi Oil For Food scandal reaches Indian Navy

March 23, 2008 by · Comment
Filed under: Contract Awards, crime, India, logistics, training 

A contract awarded to buy training for Indian Navy simulators was put on hold due to allegations of improprieties with Indian Naval officers. See an article here. It turns out that the scandal started with an investigation into Indian companies related to the Iraqi Oil for Food bribery scheme. Now the contract is one of many that the Indian legislature is supposed to investigate. For previous articles about this kind of issue see this and this. In the last few years corruption has been a major issue in the awarding of defense contracts, both to foreign and Indian firms.

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Supreme Court to review how contract whistleblower law works

In this case from Ohio, two workers for a sub-contractor used the US Government whistleblower law to inform their prime that their was issues with defrauding the government. See the Dayton Daily News for the story. The first court ruled that they couldn’t do this as it had to be reported to the government, not another contractor. On appeal this decision was overruled. Now it is heading for the Supreme Court. Previously the courts consistently have held that the report must be to the government, as they are the ones being defrauded. If the Supreme Court overturns precedent it will probably lead to more whistleblower type cases.

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Corruption case at Redstone Arsenal continues

February 22, 2008 by · Comment
Filed under: Contract Awards, crime, Federal Budget Process, SMDC 

According to this story in The Huntsville Times, an official from the Army’s Redstone Arsenal pleaded guilty in a corruption cast that broke a few months ago. His boss was the one who was more dirty. Both took bribes from contractors to steer business there way. The interesting part of the story is that more is starting to come out. Previously there had been no mention of the companies involved, but in the article they refer to a unnamed minority owned company. It also discusses that a contractor lobbied Congress for earmarks that were then steered to that contractor. Another example of how the Federal Budget is manipulated.

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Construction contractor pleads guilty for defrauding DoD on Pentagon rebuilding

February 21, 2008 by · Comment
Filed under: crime, Department of Defense 

This is a really bad story. A construction company in Pennsylvania plead guilty to falsely billing DoD for reconstruction of the Pentagon after 9/11 and stealing supplies for his own use. See The Pittsburgh Gazette for more. Really not much more to say here except one hopes that the judge throws the book at them. Also involved was a manager for the prime contractor on the contract who was taking kickbacks.

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Randy “Duke” Cunninghams co-conspiritor sentenced to 12 years in jail

February 20, 2008 by · Comment
Filed under: crime, Federal Budget Process 

The defense contractor who bribed Congressman Randy Cunningham was sentenced to 12 years in jail yesterday. See The San Diego Union-Tribune for more. Congressman Cunningham, a retired Navy pilot who was the first ace in Vietnam, used the power of earmarks to reward Mr. Wilkes’ company with contracts. He in turn then received cash and goods as rewards. Mr. Wilkes for some reason still won’t admit he did anything wrong. For more on this case see this.

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Norwegian military cleared in investigation

January 31, 2008 by · Comment
Filed under: crime, Norway, Siemens 

In a switch three Norwegian naval officers were cleared of taking kickbacks from Siemens related to contract awards. The three had gone on a golf outing to Spain, I guess all senior sailors are alike no matter what the country, that Siemens paid for. They were exonerated of not knowing who paid for it. Siemens did win some contracts from the Norwegian government at the time. See this article for more.

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Indian investigators claim former Navy chief received kickbacks

January 31, 2008 by · Comment
Filed under: Contract Awards, crime, India, Russia 

In the continuing saga that is Indian defense contracting comes word that the former head of the Navy, Admiral S M Nanda is being investigated for kickbacks as part of the deal to buy the former Russian aircraft carrier, Admiral Gorshkov. See The Times of India article for further sordid details. It turns out that the admiral’s son was acting as a broker for various deals including this one.

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