Procurement Ethics

By Pappalardo, Joe | National Defense, August 2005 | Go to article overview
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Procurement Ethics

Pappalardo, Joe, National Defense


When a scandal involving the manipulation of a $20 billion contract for Air Force refueling tankers emerged, it inspired more than guilty pleas by two former Boeing executives. The case also served as an impetus for greater coordination between the enforcers charged with ensuring these deals are done aboveboard.

Enter U.S. Attorney Paul McNulty, of the Eastern District of Virginia. In February, he announced the formation of the Procurement Fraud Working Group, an interagency effort to police government deals for abuse and conflicts of interest.

"If we didn't do it, I didn't see anyone else doing it," McNulty told National Defense. "I don't expect every federal district to be as concerned about procurement fraud as we are."

More than 20 federal agencies are involved, and that list is growing at a rate of one or two a week as word spreads, he said. The initiative includes representatives from the FBI, Defense Criminal Investigation Service and Naval Criminal Investigative Service, as well as each respective inspector general office at the departments of Homeland security, State and Transportation.

"We want to sort of be a clearinghouse for procurement fraud," McNulty said. The groups first meeting was conducted in March, and another occurred at the end of June.

The group will meet every three months to go over cases, review methods and strategies, trade information on promising leads and see if any investigations overlap.

"Historically, the FBI has had the lead on procurement fraud through their whitecollar crime program," McNulty said. "Post 9/11, they had to streamline those resources to expand their anti-terrorism efforts ... There was a shift in primary responsibility."

According to a 2004 report from the Government Accountability Office, the FBI's personnel shuffling in response to the 2001 attacks has moved 674 field agent positions permanently from the drug, white-collar and violent crime program areas to counterterrorism and counterintelligence. Even though the bulk of these positions were drawn from anti-narcotics staffs, the number of newly opened FBI white-collar crime investigations declined between 2001 and 2004.

Of all the federal agencies and departments, the FBI refers the greatest number of white-collar crime matters to U.S. attorneys for prosecution. These FBI referrals decreased about 23 percent, from 6,941 in 2001 to 5,331 in 2003, the GAO reported. At the same time, white-collar crime referrals by all other agencies increased by about 15 percent, according to the GAO.

As the onus shifted onto the inspectors general within each federal department, McNulty saw the Eastern District of Virginia was in a perfect position-literally and metaphorically-to organize a more concerted effort.

McNulty's jurisdiction sits in the heart of the defense industry. As such, there is virtually no contract issued without the Eastern District claiming oversight, either through contractor business offices, the Pentagon or subcontractors. The area also encompasses the Norfolk Naval Base, the largest such facility in the world.

McNulty said that because of its location, the Eastern District staff will prosecute the bulk of the cases. "There's a lot of ways for us to get in," he said.

The Procurement Fraud Working Group was formed initially with defense and homeland security contracts in mind. However, because all procurement oversight officers share the same problems and difficulties, other agencies outside the national security apparatus are expressing interest in the program.

But in an age of war and terrorism, the atmosphere is ripe for abuse in defense and homeland security. McNulty said he has to assume there is more procurement fraud in these areas because the money invested in them is increasing.

Just as a rising tide lifts all boats, the total amount of money lost to fraud also logically will rise with a sudden influx of funding, especially when it is tied to timesensitive wartime or national security purchases, McNulty said.

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Procurement Ethics


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