(Bloomberg) -- Defense contractors have returned more than $200 million to the U.S. in the decade since it became mandatory to self-report potential fraud, waste or abuse, according to a new tally by the department’s inspector general.
Until late 2008 the Defense Department had a voluntary program for contractors to disclose potential violations. Then lawmakers made timely disclosure mandatory at the risk of potential suspension or disbarment when there’s credible evidence of a criminal violation.
“The disclosures we receive involving recoveries” may be for “labor mischarging or timecard fraud,” such as when employees put in for time they didn’t work or for work they didn’t complete, Patrick Gookin, director of the inspector general’s hotline, said in an email. “We also receive disclosures involving overpayments, or false claims that can lead to additional recoveries than initially reported.” Gookin’s team assembled the tally.
In an example of the self-reporting requirement under the Contractor Disclosure Program, Sierra Nevada Corp. disclosed in December 2012 possible Pentagon overpayments for development costs on some contracts after a preliminary inquiry, according to a summary by the inspector general. The company later supplemented its disclosure, identifying $6 million in potential overpayments.
The inspector general’s criminal investigative arm, as well as the Navy’s, subsequently conducted probes, and the Defense Contract Audit Agency reviewed the paperwork.
The Sparks, Nevada-based company reached a $14.7 million settlement with the Justice Department in February 2017 to resolve allegations that it violated the federal False Claims Act “when it knowingly misclassified certain costs, resulting in inflated overhead rates paid,” according to the department.
Sierra Nevada said in a post-settlement statement that after the disclosure it “implemented rigorous and comprehensive accounting processes, and added additional training and tools designed to ensure adherence to the highest standards of compliance with regulations.”
In addition to the $200 million in self-reported possible overpayments, the inspector general’s latest semi-annual report cited $4 million in potential recoveries for reasons such as non-confirming or counterfeit parts, false certifications and theft of government property.
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