Defense Procurement News

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

Because of the significant number of recent reports on contract fraud, bribery and other contract issues we have had to add
“Crime” as a category.  Look for more stories in the future due to the large size of the defense budget and the many rules that government and contractor must follow.  In many ways I should use “crime” for the earmark process as well, although it is not illegal many times they are unethical.

The company Raman International and one employee, Elie Samir, were indicted for attempting to bribe a military contracting officer located in Iraq. It was done in an attempt to gain work for the company. See The Oklahoman website for more. The contracting officer also was involved in a conspiracy with Samir, so further charges will probably be coming.