Pentagon Paid $1 million to Ship Two Washers

[Skywalker]

:sl:

Aug. 16 (Bloomberg) -- A small South Carolina parts supplier collected about $20.5 million over six years from the Pentagon for fraudulent shipping costs, including $998,798 for sending two 19-cent washers to an Army base in Texas, U.S. officials said.

The company also billed and was paid $455,009 to ship three machine screws costing $1.31 each to Marines in Habbaniyah, Iraq, and $293,451 to ship an 89-cent split washer to Patrick Air Force Base in Cape Canaveral, Florida, Pentagon records show.

The owners of C&D Distributors in Lexington, South Carolina -- twin sisters -- exploited a flaw in an automated Defense Department purchasing system: bills for shipping to combat areas or U.S. bases that were labeled ``priority'' were usually paid automatically, said Cynthia Stroot, a Pentagon investigator.

C&D and two of its officials were barred in December from receiving federal contracts. Today, a federal judge in Columbia, South Carolina, accepted the guilty plea of the company and one sister, Charlene Corley, to one count of conspiracy to commit wire fraud and one count of conspiracy to launder money, Assistant U.S. Attorney Kevin McDonald said.

Corley, 46, was fined $750,000. She faces a maximum prison sentence of 20 years on each count and will be sentenced soon, McDonald said in a telephone interview from Columbia. Stroot said her sibling died last year.

Corley didn't immediately return a phone message left on her answering machine at her office in Lexington. Her attorney, Gregory Harris, didn't immediately return a phone call placed to his office in Columbia.

`Got More Aggressive'

C&D's fraudulent billing started in 2000, Stroot, the Defense Criminal Investigative Service's chief agent in Raleigh, North Carolina, said in an interview. ``As time went on they got more aggressive in the amounts they put in.''

The price the military paid for each item shipped rarely reached $100 and totaled just $68,000 over the six years in contrast to the $20.5 million paid for shipping, she said.

``The majority, if not all of these parts, were going to high-priority, conflict areas -- that's why they got paid,'' Stroot said. If the item was earmarked ``priority,'' destined for the military in Iraq, Afghanistan or certain other locations, ``there was no oversight.''

Scheme Detected

The scheme unraveled in September after a purchasing agent noticed a bill for shipping two more 19-cent washers: $969,000. That order was rejected and a review turned up the $998,798 payment earlier that month for shipping two 19-cent washers to Fort Bliss, Texas, Stroot said.

The Pentagon's Defense Logistics Agency orders millions of parts a year. ``These shipping claims were processed automatically to streamline the re-supply of items to combat troops in Iraq and Afghanistan,'' the Justice Department said in a press release announcing today's verdict.

Stroot said the logistics agency and the Defense Finance and Accounting Service, which pays contractors, have made major changes, including thorough evaluations of the priciest shipping charges.

Dawn Dearden, a spokeswoman for the logistics agency, said finance and procurement officials immediately examined all billing records. Stroot said the review showed that fraudulent billing is ``not a widespread problem.''

``C&D was a rogue contractor,'' Stroot said. While other questionable billing has been uncovered, nothing came close to C&D's, she said. The next-highest billing for questionable costs totaled $2 million, she said.

Stroot said the Pentagon hopes to recoup most of the $20.5 million by auctioning homes, beach property, jewelry and ``high- end automobiles'' that the sisters spent the money on.

``They took a lot of vacations,'' she said.

Source: http://news.yahoo.com/s/bloomberg/20...a_piz20xqxeu_1

Well, now you guys know where your tax money is going :confused:... that is if someone is actually naive enough to believe all this. It's a conspiracy I tell you!

[Keltoi]

This is a very common story. Companies often attempt to overcharge government entities because in many cases the payments are automatic, without any oversight. As the story mentions, these payments were considered "priority" and weren't checked out by the DOD before payment was issued. It is really a stupid thing to do, since eventually the payments will be found by audit.

[Cognescenti]

The good news is they got a really good deal on washers. 19 cents a piece is fantastic! I wonder how much they paid for the dryers?

[Isambard]

This is a very common story. Companies often attempt to overcharge government entities because in many cases the payments are automatic, without any oversight. As the story mentions, these payments were considered "priority" and weren't checked out by the DOD before payment was issued. It is really a stupid thing to do, since eventually the payments will be found by audit.

Sadly, there are thousands of other cases of companies being naughty that are often looked over :(

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[Skywalker]

The good news is they got a really good deal on washers. 19 cents a piece is fantastic! I wonder how much they paid for the dryers?

Lol! Obviously they're not talking about clothes washers, but the little metal rings they use with nuts and bolts. 19 cents a piece is pretty expensive if you ask me. Here in Egypt you can get a half a kilogram of them for a couple of pounds (around 35 cents).

[Cognescenti]

Lol! Obviously they're not talking about clothes washers, but the little metal rings they use with nuts and bolts. 19 cents a piece is pretty expensive if you ask me. Here in Egypt you can get a half a kilogram of them for a couple of pounds (around 35 cents).

It was a joke, sir :happy:

BTW, nothing srong with a 19 cent washer if it is composed of exotic materials and has to meet engineering standards. It might be holding on a rotor to a 5 million dollar helicopter.

Now, the shipping cost, that is a little steep.:happy:

People worry about fraud, theft and abuse in the Pentagon when the Pentagon is a relatively small part of the US budget. There is plenty of bad deed doing with the rest of the Federal budget too.:thumbs_do

[barney]

This is "Black Op" money.

Operations or technology not sanctioned by Congress are paid for by redirecting money in this way.

It pays for things like covert operations, espionage and things better hidden away for the publics good. It's been the way for many many decades. nothing particulary unusual in this.

[backbencher]

Keltoi,

"It is really a stupid thing to do, since eventually the payments will be found by audit."

It is a risky thing to do, possibly immoral depending on where you're coming from, but not necessarily stupid. If they'd been less greedy, they probably wouldn't have been caught. Many audits are random - meaning most things are never audited. In the federal gov't, many, many things are never audited or tracked in any way - like half the AK's we shipped to Iraq, apparently.

Gig 'em,

backbencher

[Trumble]

It is a risky thing to do, possibly immoral depending on where you're coming from, but not necessarily stupid.

Sorry.. what direction could you be "coming from" in which defrauding the taxpayer out of $20 to spend it on cars and beach-houses isn't immoral?!!!

[backbencher]

Trumble,

From any direction that doesn't support the war aims of the United States. Defrauding the gubbermint out of $20 million, especially the Pentagon, means a lot less bullets I can shoot. I'm not happy about it - I suspect there are folks on this board who are rather amused by it. And they should be.

Gig 'em,

backbencher