Overseas Civilian Contractors

News and issues relating to Civilian Contractors working Overseas

Harold F Babb, Eyak Technology, pleads guilty in contracting fraud case

Prosecutors say their investigation has unmasked one of the largest and most brazen government procurement frauds in history

Associated Press  March 13, 2012

WASHINGTON — A former executive on Tuesday admitted his role in a $28 million bribery scheme involving the awarding of government contracts and is cooperating with prosecutors in their continuing investigation.

Harold F. Babb, 60, pleaded guilty in federal court in Washington to one charge each of bribery and unlawful kickbacks. Babb was arrested in October along with three other men, including two employees of the U.S. Army Corps of Engineers. Prosecutors say their investigation has unmasked one of the largest and most brazen government procurement frauds in history.

“It took me a while to come to terms (with), but I am guilty,” Babb told a federal judge before entering his plea.

Babb, who has been in custody since his arrest, admitted participating in a complex, far-ranging scheme.

Prosecutors say the fraud involved contracts steered to favored subcontractors for kickbacks, contracts awarded through bribery and the submission of phony and inflated invoices for payment. Authorities say the illicit proceeds of the scheme were split among multiple defendants and used to purchase clothing, real estate, cars, fine jewelry and other luxuries.

A bribery conviction carries a possible sentence of up to 15 years in prison and the unlawful kickbacks charge can carry up to 10 years, though Babb is likely to face a much shorter sentence because of his guilty plea and cooperation.

“Mr. Babb decided to accept responsibility and cooperate with the government and move on his with his life,” his lawyer, Jeffrey Jacobovitz, said after the plea hearing.

At the time of his arrest, Babb was director of contracts for Eyak Technology, the subsidiary of an Alaska Native Corporation with operations in Virginia and the prime contractor for a lucrative contract with the Army Corps of Engineers. EyakTek, in turn, had multiple subcontractors, including Nova Datacom and Big Surf Construction Management.

Babb admitted to accepting more than $1 million in kickbacks from Nova Datacom’s chief technology officer, Alex N. Cho, in exchange for giving the subcontractor preferential treatment, and to paying more than $7 million in bribes in return for approval on Army Corps of Engineers contracts and subcontracts, according to authorities.

Babb was arrested along with two Army Corps of Engineers employees, Kerry F. Khan and Michael A. Alexander, and Khan’s son, Lee Khan. Alexander pleaded guilty last month to bribery and conspiracy. Prosecutors initially described the scheme as totaling $20 million, but they say the scope of the fraud has increased to $28 million as new bribes and kickback payments have been discovered.

Since the initial arrests, prosecutors also have revealed charges against a handful of other men associated with subcontractors, including Cho, who pleaded guilty last September to money laundering, conspiracy and other charges.

Please see the original and read more here

March 14, 2012 Posted by | Government Contractor, USACE | , , , , , , , , , , , , , , | Leave a comment

Justice Department alleges kickback scheme tied to Iraq munitions disposal contracts

The Huntsville Times  March 13, 2012

HUNTSVILLE, Alabama — A series of multi-million contracts for munitions disposal in Iraq were used in a kickback scheme worth more than $1 million, and three men now face criminal charges, according to the U.S. Attorney’s Office in Birmingham.

The scheme involved employees of an unnamed California-based prime contractor, awarding Iraq reconstruction work to subcontractors in exchange for payments, the Justice Department alleges.

The original contracts were issued as part of the Coalition Munitions Clearance Program, which is operated in Iraq by the U.S. Army Corps of Engineers, Huntsville Engineering and Support Center, according to the Justice Department’s news release.

The Huntsville Engineering and Support’s operated the program to clear out, store and dispose of weapons that were seized or abandoned in Iraq since the 2003 invasion, the Justice Department said.

The HESC awarded a contract to perform this work to an international engineering and construction firm based in Pasadena, Calif.

Two employees of that company, Billy Joe Hunt, 57, of Athens and Gaines Newell, 52, of Richton, Miss., are charged with conspiracy in connection with kickbacks, wire fraud and mail fraud, and with filing false tax returns.

Both men have entered pleas by information and were not indicted.

Those pleas contend both men were involved in soliciting and receiving a total of more than $1 million in kickbacks.

A United Kingdom national, Ahmed Sarchil Kazzaz and his company, Leadstay Co., also face multiple charges. Kazzaz paid more than $947,500 in unlawful kickbacks to win lucrative subcontracts for himself and Leadstay in connection with the Coalition Munitions Clearance Program, the Justice Department said.

Kazzaz and Leadstay face one count of conspiracy to defraud and commit offenses against the United States; six counts of unlawful kickbacks; one count of wire fraud; and three counts of mail fraud. Kazzaz was arrested on Feb. 14, 2012, in Los Angeles.

“Government contracts fraud is an insult to all law-abiding taxpayers,” said Northern District of Alabama U.S. Attorney Joyce White Vance. “These defendants’ conduct was even worse in that they tried to illegally profit from defense contracts in Iraq, where American men and women were willing to put their lives on the line for freedom.”

Please see the original and read more here

March 13, 2012 Posted by | Bomb Disposal, Civilian Contractors, Explosive Ordnance Disposal, Explosive Remnants of War, Government Contractor, Iraq, USACE | , , , , , , , , , , , , | Leave a comment

Tamimi Global To Pay $13 Million Over Army, KBR Kickbacks

WSJ Blog September 16, 2011

Tamimi Global Co., or TAFGA, agreed to pay the U.S. $13 million to settle criminal and civil allegations that it paid kickbacks to an employee of a government contractor and illegal gratuities to a former U.S. Army Sergeant in connection with Army operations in Iraq and Kuwait.

The Saudi Arabia-based company entered into a deferred-prosecution agreement with the U.S. that calls for TAFGA to pay the U.S. $5.6 million and institute a compliance program. In a separate civil settlement, TAFGA agreed to pay the U.S. $7.4 million to settle allegations that it paid kickbacks to a Kellogg Brown & Root employee for favorable treatment.

“When we believe companies are engaging in wartime profiteering, we will not hesitate to act,” said Tony West, assistant attorney general for the Justice Department’s Civil Division, in a statement.

Under the deferred-prosecution agreement, the new compliance program TAFGA must form requires it to establish a new Kuwaiti management team, as well as an ethics and compliance team with oversight over U.S. government contracts. It also has to institute a compliance hotline, and to retain a monitor.

If TAFGA meets its obligations under the agreement for 18 months without violating it, the Justice Department said it will dismiss the criminal charges

Please see the original at WSJ Blog

September 16, 2011 Posted by | Civilian Contractors, Contractor Corruption, KBR | , , , , , | Leave a comment

Navy contractor to plead guilty in kickback scheme

Associated Press at NECN.com  April 18, 2011  11am

PROVIDENCE, R.I. (AP) — A Navy contractor has agreed to plead guilty in federal court in Rhode Island to his part in a multimillion-dollar kickback and bribery scheme.

Anjan Dutta-Gupta (AHN’-juhn DOO’-tuh GOOP’-tuh) entered a plea agreement Monday.

The U.S. attorney’s office in Rhode Island says the 58-year-old has agreed to admit to paying more than $9 million in bribes to Ralph Mariano, a civilian employee of the Navy, and his family members in exchange for increased funding to contracts Dutta-Gupta’s company had with the Navy. Dutta-Gupta’s attorney did not immediately return calls for comment.

The company, Advanced Solutions for Tomorrow, was based in Georgia, and had offices in Middletown, R.I. It had $120 million in Navy contracts at the time Dutta-Gupta was arrested earlier this year.

Mariano has also been charged, and has not pleaded guilty.  See original here


April 18, 2011 Posted by | Civilian Contractors, Contractor Corruption, Government Contractor | , , , , | Leave a comment

US oversight of war-zone contractors labeled weak

by Richard Lardner Associated Press at SF Chronicle

President Barack Obama pledged nearly two years ago to fix the broken system of awarding and managing federal contracts. But a new report paints a grim picture of the government’s reliance on the private sector for support in war zones and urges a series of reforms to prevent more U.S. tax dollars from being wasted.

Commission on Wartime Contracting

The Commission on Wartime Contracting concluded that the use of hired hands has become a “default option,” pointing to the estimated $177 billion spent since 2001 on contractors in Afghanistan and Iraq, according

to a draft of the report expected to be released Thursday. Yet vigorous oversight and management of contractors by the Pentagon, State Department and U.S. Agency for International Development is too often “an administrative after-thought,” the report said.

The bipartisan commission is urging Congress to provide the agencies with more people and authority to control this industrial army, which at times has nearly equaled the size of U.S. forces in Afghanistan and Iraq.

“Unless Congress provides resources to oversee and evaluate contractor performance, waste will continue and national objectives will suffer,” according to the draft report, obtained by The Associated Press. The investment “will be amply repaid in reduced waste and increased effectiveness” of war-zone contracting, it said.

Please read the entire article here

February 22, 2011 Posted by | Afghanistan, ArmorGroup, Civilian Contractors, Contractor Oversight, Department of Defense, DynCorp, Government Contractor, Iraq, KBR, Pakistan, Pentagon, Ronco, State Department, USAID, Wartime Contracting | , , , , , , , , , | Leave a comment

Ret. Navy officer, contractor enter guilty pleas to Iraq bribery scheme

Associated Press

NORFOLK, Va. — A retired Navy officer and a contractor have entered guilty pleas in Virginia to paying bribes to obtain U.S. government contracts for work in Iraq.

According to the government, retired Lt. Cmdr. Frankie J. Hand Jr. of Chesapeake entered his plea Tuesday before a magistrate in Norfolk. The other plea was entered by 44-year-old Michelle L. Adams of Miami.

Prosecutors said 48-year-old Hand developed a relationship with Adams while stationed at Camp Taji near Baghdad in 2007. He allegedly obtained competing contractors’ bids and bribed Navy personnel to help Adams’ companies obtain contracts worth more than $757,000.

Hand also received thousands of dollars in kickbacks on the contracts.

Hand and Adams are scheduled for sentencing in March. Each faces 15 years in prison and a fine of $250,000.

Please see the original report here

December 8, 2010 Posted by | Civilian Contractors, Contractor Oversight, Iraq | , , , , | Leave a comment

DAI Afghanistan Terminates Several Afghan Employees for Allegedly Soliciting Kickbacks

Note:  This is just a CYA Press Release from USAID not a statement from DAI, Development Alternatives Inc.

WASHINGTON, June 16 /PRNewswire-USNewswire/ — This week in Kabul, Development Alternatives, Inc. (DAI) terminated 10 employees including several engineers and other staff members after months of investigation.  DAI Afghanistan is a contractor with the U.S. Agency for International Development (USAID).

USAID Inspector General Donald Gambatesa stated that the investigation involves Afghan staff members who allegedly approached owners of various companies bidding for subcontracts with DAI Afghanistan.  The individuals reportedly offered to help the companies win awards in exchange for a percentage of the total dollar value of the project.

Read the full press release here

June 16, 2010 Posted by | Afghanistan, Civilian Contractors, Contractor Corruption, Contractor Oversight, State Department | , , , , , , , , | Leave a comment

KBR to Get $568 Million Army Order as US Joins Lawsuit

By Tony Capaccio at Bloomberg

May 5 (Bloomberg) — KBR Inc., the Army’s largest contractor in Iraq, was picked for a no-bid contract worth as much as $568 million through 2011 for military support services in Iraq, according to Army officials.

The Army announced the new work order only hours after the Justice Department said it will pursue a lawsuit accusing the Houston-based company of taking kickbacks from two subcontractors on Iraq-related work. The Army also awarded the work to KBR over objections from members of Congress, who have pushed the Pentagon to seek bids for further logistics contracts.

The Justice Department said the government will join a lawsuit filed by whistleblowers alleging that two freight- forwarding firms gave KBR transportation department employees kickbacks in the form of meals, drinks, sports tickets and golf outings.

“Defense contractors cannot take advantage of the ongoing war effort by accepting unlawful kickbacks,” said Assistant Attorney General Tony West, in a statement.

KBR will review the litigation when it is received and “will continue to cooperate with the government,” company spokeswoman Heather Browne said in an e-mail. “Gifts of dinners, baseball tickets and similar items would violate KBR policies and KBR was not aware of these violations.”

KBR will continue to provide services such as housing, meals, laundry, showers, water purification and bathroom cleaning under the new order, which was placed under a military contract KBR won in late 2001, shortly after the U.S. invaded Afghanistan.

‘Appropriate Safeguards’

The Army has “reviewed the government’s notice to intervene” in the whistleblower lawsuit, Army spokesman Dan Carlson said. “We feel we have appropriate safeguards in place” to protect the government’s interests.

The no-bid work order is unusual because the Army, at the insistence of Congress, has since April 2008 put all logistics orders to bid, pitting KBR against Falls Church, Virginia-based DynCorp International Inc. and Irving, Texas-based Fluor Corp.

The Army didn’t put the work out for bids because U.S. commanders in Iraq advised against it, saying that enlisting a new company would be too disruptive, Army program director Lee Thompson said in an interview before the Justice Department action was announced. The U.S. force in Iraq is scheduled to shrink from 94,000 troops today to 50,000 by August, with a complete withdrawal by December 2011.

Transition Costs

The Army, in a statement, said putting to bid an order for 18 months’ work, and making the transition to a new contractor, would cost at least $77 million. The KBR work order will be awarded by Aug. 31, said Mike Hutchison, deputy director of Army logistics contracting.

The lawsuit is the second government action this year against KBR. The U.S. sued the company on April 1, alleging that it used private armed security guards in Iraq between 2003 and 2006 in violation of its Army contract and then improperly billed for their services.

Before today’s Justice Department announcement, the Army had said in an e-mailed statement that it was aware of the April lawsuit and would use “additional oversight measures to ensure only reasonable, allowable costs are paid” under the new work order.

The new lawsuit, filed in a Texas federal court, was based on information from two whistleblowers who work in the air cargo industry, the Justice Department statement said. The whistleblowers can get a portion of any money the Justice Department obtains in the case.

Senate Objections

KBR’s no-bid work order drew criticism from Congress even before it was announced.

Senator Claire McCaskill, the Missouri Democrat who heads a subcommittee that oversees military contracting, and the panel’s ranking Republican, Susan Collins of Maine, wrote to Defense Secretary Robert Gates on April 30 urging the Army against “continued reliance” on KBR in light of the Justice Department’s April lawsuit.

Under the new competitive-bid approach, KBR on March 2 won a one-year, $571 million contract with four option years that, if exercised, could be worth as much as $2.77 billion.

That contract calls for KBR to provide services including transportation and postal operations. DynCorp initially protested the award and then dropped its objections.  Original Here

May 5, 2010 Posted by | Contractor Corruption, Contracts Awarded, KBR | , , , , , | Leave a comment

DOJ Intervenes in Lawsuit Against KBR On Kickbacks

By Brent Kendall
Of DOW JONES NEWSWIRES

WASHINGTON -(Dow Jones)- The Justice Department said Wednesday that it is joining a lawsuit alleging that employees of KBR Inc. (KBR), the prime contractor for logistical support of U.S. military operations in Iraq, took kickbacks from two freight-forwarding companies.

The department alleged that KBR employees accepted meals, drinks and tickets to sports events and golf outings from freight-forwarding companies Eagle Global Logistics and Panalpina Inc., a unit of Panalpina WeltTransport Ltd (PWTN.EB).

The lawsuit was brought under the federal False Claims Act, which provides financial rewards to litigants who report fraud against the government.  Original here

-By Brent Kendall, Dow Jones Newswires; 202-862-9222; brent.kendall@dowjones.com

May 5, 2010 Posted by | Contractor Corruption, KBR | , , , , , , , | Leave a comment

Iraq rebuilding fund thefts investigated

By Joe Gould – Staff writer Army Times April 12

A special task force is analyzing every transaction and person connected to Iraq reconstruction funding in order to hold people accountable for “hundreds of millions of dollars” lost to fraud, bribery and theft.

Stuart Bowen Jr., special inspector general for Iraq reconstruction, is part of a multi-agency task force that is using automated data mining to sift through the $50 billion spent on reconstruction by various military and civilian agencies.

SIGIR is working with federal law enforcement agencies and the U.S. Treasury Department’s Financial Crimes Enforcement Network, or FinCEN.

“It’s a coordinated, concerted interagency forensic review that has been ongoing for over a year and is now yielding significant fruit,” Bowen told Army Times. “We will continue to implement the program until we have reviewed all of the money used for Iraq reconstruction and all of the personnel that had access to it.”

The task force is required to report its findings to Congress.

As of its January report, SIGIR has examined 73,000 records that represent $28 billion and identified $340 million in suspicious transactions involving 800 vendors. These include duplicate payments, and payments to possibly fictitious contractors or vendors listed simply as “vendor” or “cash.”

SIGIR has launched 500 investigations since it opened shop in Iraq in 2004, resulting in 27 convictions and the court-ordered forfeiture of $69.5 million. Bowen said cases tend to involve contracting officers in Iraq and Camp Arifjan in Kuwait who funneled contracts to specific contractors in return for kickbacks and bribes, or the simple pilfering of cash, mainly from the Commander’s Emergency Response Program, or CERP.

The guilty have been found to have smuggled cash home in their boots and mailed it home in boxes; they sold truckloads of stolen fuel in downtown Baghdad and took payola in the form of watches, cars and airplane tickets.

“Kickbacks and contractor collusion characterize most of these criminal investigations,” Bowen said. “It’s contracting officers and paymasters and individuals who had control over large sums of money or access to it.”

Many of the cases stem from activity in 2003 to 2006. In the early days of the war, reconstruction funding oversight was granted to only a few people with limited power with the Coalition Provisional Authority, which Bowen said was “not a deterrent.”

Meanwhile, billions of dollars in American cash meant to fuel the interim Iraqi government received little scrutiny, said Bowen.

“When you have uncontrolled money in an unstable environment, inevitably you’re going to see crimes committed,” he said.

The criminal convictions contain “an unfortunately high percentage of Army officers” because of the service’s greater role in the war and reconstruction, Bowen said.

He said the ongoing probe has uncovered 52 new cases in the last year.

What’s more, he said, the bulk of the agency’s criminal investigations are still to come.

‘A lot of work to do’

Alongside the ongoing financial forensic investigative review, SIGIR has detailed three prosecuting attorneys to the fraud section of the criminal division at the Justice Department to handle SIGIR-generated cases full time, Bowen said.

“We know that we can only catch a fraction of the wrongdoing that occurred because of the difficulty of operating in a conflict zone,” he said. “We’ve done as well as we could under the circumstances, and we’re by no means finished. An almost doubling of our caseload reveals we have a lot of work to do.”

The single largest case of corruption SIGIR has previously encountered may be the Bloom-Stein conspiracy, a bid-rigging scheme involving $8.6 million in contracts, which has resulted in at least seven convictions.

The scheme is named for contractor Philip H. Bloom and Robert Stein, a former contracting official with the Coalition Provisional Authority – South Central region who led other Army officials in the Hillah, Iraq, office as they illegally steered contracts toward Bloom.

Stein admitted that he and his co-conspirators smuggled $2 million out of Iraq on commercial airlines and took part in an illegal bid-rigging scheme.

Another significant case concerns CERP, a program that provides Army unit leaders with cash to fund reconstruction and security projects. Bowen said the program has improved, but suffered from “weak controls” in its early days.

Capt. Michael Nguyen, a West Point graduate and civil affairs officer for the headquarters company of the 2nd Battalion, 23rd Infantry Regiment, funneled $690,000 in CERP funds from his battalion safe and sent it home to himself. He pleaded guilty in the case after investigators spotted a pattern of large bank deposits and exorbitant purchases, such as a 2009 Hummer H3T and a 2008 BMW M3.

“It was all cash, and it wasn’t well-controlled, so therefore it was very easy for him to steal from that safe and put in the mail back to his house in the states,” Bowen said.

Although abuses persist, Bowen said that SIGIR’s presence has created a deterrent resulting in less wrongdoing and improved controls. He said the Defense Department has improved record-keeping practices, reduced cash concentrations in forward areas, improved coordination between civilian agencies on project selection, and now requires senior-level approval for projects greater than $1 million.

Bowen also credited the Army’s Money as a Weapon System manual and institutionalized training for Brigade Combat Team officers who oversee CERP projects.

Nevertheless, SIGIR’s audits still show “weakness” in CERP. For example, hand-off and coordination between commander’s tours “continues to be a challenge,” the system needs tighter controls on cash and CERP projects are not coordinated well-enough between the Defense and State departments to address needs in Iraq, audits state.

As SIGIR conducts its analyses, it is also soliciting tips from soldiers about wartime fraud, said Bowen, noting that the statute of limitations for such crimes does not expire for at least five years.

“Soldiers have an obligation to promote the integrity of the U.S. effort in Iraq, and that integrity is strengthened when violators are brought to justice,” Bowen said.

April 12, 2010 Posted by | Civilian Contractors, Contractor Corruption, Pentagon, State Department | , , , , , , , , , , , , | 1 Comment