One would think once a company had been convicted of defrauding the government, they wouldn't see another dime. Not so, shows a new DoD report. Believe this or not, the DoD has awarded over $1.1 trillion dollars in defense contracts to companies have been convicted, found liable, or settled fraud charges earlier with the DoD since 2001.
Senator Bernie Sanders summed up some of the numbers buried in the report:
Over the past ten years, DOD awarded $254,564,581 to companies that were convicted of a crime in connection with a DOD contract during that same period of time. To make matters worse, DOD awarded $33,079,743 of that to convicted companies after they had been convicted.
Over the past ten years, DOD awarded $573,693,095,938 to companies that were found liable or settle charges of a civil wrong in connection with a DOD contract during that same period of time. To make matters worse, DOD awarded $398,081,775,397 of that to those companies after they settled the charges or were found liable.
The numbers become increasingly shocking if you look at company affiliations. Over the past ten years, DOD awarded $1,104,423,438,564.10 to entities affiliated with companies that have a history of fraud.
Wow. Looking at the tables compiled by the DoD, we see the usual suspects, Boeing, Lockheed Martin, Cisco Systems, Dynamics Research, EMC, Johnston Controls, HP, HoneyWell, IBM, L-3 Communications, Motorola, Northrup Grumman, PricewaterhouseCoopers, Raytheon, TWS, Unisys....
the list goes on and on.
In 2008, Lockheed Martin paid $10.5 million to settle charges that it defrauded the government by submitting false invoices for payment on a multi-billion dollar contract connected to the Titan IV space launch vehicle program. But this didn’t seem to sour any relationship between Lockheed and the Defense Department.
The next fiscal year, in FY09, Lockheed received $30.2 billion in DOD
contracts—more than it had ever received before.
In another case, Northrop Grumman paid $62 million in 2005 to settle charges that it "engaged in a fraud scheme by routinely submitting false contract proposals," and "concealed basic problems in its handling of inventory, scrap and attrition." Despite the serious charges of pervasive and repeated fraud, Northrop Grumman received $12.9 billion in contracts the next year, 16 percent more than the year before.
Many of these same corporations offshore outsource jobs and labor arbitrage U.S. citizen engineers, most notably HP and IBM. It seems they get rewarded no matter what they do and why is that? While Senator Sanders points to:
- Part of the reason is that DOD awards more contracts than it has the capacity to oversee, and, as a result, it is unable to effectively manage its contractors.
- The other part of the reason is that DOD is not careful about which companies it awards contracts to begin with.
I'd say it's because we have outsourced the military. If the DoD doesn't contract with these same firms, there isn't anyone else capable of providing what they need. Even worse, it seems the auditing arm of the DoD is seriously underfunded and understaffed. Hence, we get fraud, rip-offs, waste, then a slap on the wrist and even larger contracts.
Beyond private contractors, wartime contracts are also under scrutiny, with Senators Jim Webb and Claire McCaskill supposedly crafting legislation to crackdown on waste and fraud. Believe this or not, contract rip-offs have improved since 2007.