Do As I Say, Not As I Purchase

Loyal readers of this blog might recall a recent Government Accountability Office (GAO) audit that found widespread abuses of the purchase card program throughout the federal government (e.g., the luxurious steak-and-cocktail dinner hosted by U.S. Postal Service employees that cost taxpayers over $13,000).  But if the GAO report didn't convince you that federal agencies need to do more to strengthen accountability in their purchase card programs, maybe this week's headlines will change your mind.

One of the more ironic stories of purchase card abuse comes to us from Milwaukee, Wisconsin, where a U.S. Forest Service employee, Suzanne Poetz, has pleaded guilty to stealing $300,000 from her agency's program.  As part of her plea, Poetz admitted to over 150 instances of theft.  But the best part of all?  In 1998, Poetz received a Hammer Award from Vice President Al Gore--for developing the Agriculture Department's purchase card program.  (The Hammer Awards were given to federal employees whose work "resulted in a government that works better and costs less").

Another example of purchase card abuse was highlighted in the Houston Chronicle over the weekend.  A review by the Chronicle showed that NASA employees have used their purchase cards to pay for iPods, video games, jewelry, karate gear, and even clothes from the agency's headquarters.  In addition, some agency employees may have broken the law by not holding competitive bids for larger purchases.  As POGO's Scott Amey pointed out, "You have to ask: is somebody trying to get around competitive requirements?"

POGO has long argued that inadequate oversight in the purchase card program exposes federal agencies to wasteful and fraudulent expenditures.  We've also issued a number of recommendations for improving oversight and accountability in the program.  Hopefully these latest scandals will serve as yet another wakeup call for agency officials throughout the government.      

-- Michael Smallberg

Steak and Cocktails? Lingerie? Charge It to the Taxpayer!

A report released this week by the Government Accountability Office (GAO) found widespread abuses in the use of federal agencies' credit cards. Over the years, government employees have used their "SmartPay" cards to pay for gambling, breast implants for one inventive and compassionate federal employee's girlfriend, online dating services, iPods and lingerie. And what would a report on government fraud, waste and abuse be without the obligatory lavish steak-and-cocktails dinner costing well into the five figures?

The GAO report, based on a representative sampling, found that 41 percent of the purchase card transactions occurring from July 2005 through September 2006 did not comply with federal purchasing guidelines, lacking proper authorization or documentation. Federal agencies were also unable to locate over $1.8 million worth of items identified in the audit. Overall, the report found that problems in the purchase card program were "unacceptably high."

POGO recommended 'common sense' rules of engagement several years ago, including consistent program internal controls, training for participants with proper authorizing rules, and rigorous audits on a monthly basis. No reason to forfeit accountability for efficiency.

This report is the culmination of a series of GAO audits conducted over the last several years on the purchase card programs at specific agencies such as the Department of Defense and the Department of Homeland Security. The audit was requested by Senators Norm Coleman (R-MN) and Carl Levin (D-MI). As Coleman told the press, "Too many government employees have viewed purchase cards as their personal line of credit. It's time to cut up their cards and start over."

The General Services Administration-managed purchase cards program was started in the 1990s to help agencies reduce transaction costs for small purchases and provide flexibility in making acquisitions. In fiscal year 2006, about 300,000 government employees made roughly $18 billion in acquisitions with the cards, purchasing everything from pens and pencils to computers, relocation expenses and vehicles.  The report recommends ways the GSA and Office of Management and Budget can minimize improper and abusive purchase card activities. Unfortunately, the GSA is already balking at the majority of the GAO's recommendations.  It is really hard to see why.

POGO's news alert on the GAO report, as well as links to our previous work on this issue, can be found here.

-- Neil Gordon

AEY & Efraim Diveroli: Subject to the Foreign Corrupt Practices Act?

Based on my quick Google search of the web for AEY, Efraim Diveroli and "Foreign Corrupt Practices Act," I haven't seen anyone ask the question (though someone may have): Is Efraim Diveroli's alleged bribery of Albanian government officials, if true, a violation of the Foreign Corrupt Practices Act?  It seems that it would be the case.  According to the New York Times:

As Mr. Diveroli began to fill the Army’s huge orders, he was entering a shadowy world, and in his brief interview he suggested that he was aware that corruption could intrude on his dealings in Albania. “What goes on in the Albanian Ministry of Defense?” he said. “Who’s clean? Who’s dirty? Don’t want to know about it.”

The way AEY’s business was structured, Mr. Diveroli, at least officially, did not deal directly with Albanian officials. Instead, a middleman company registered in Cyprus, Evdin Ltd., bought the ammunition and sold it to his company.

The local packager involved in the deal, Mr. Trebicka, said that he suspected that Evdin’s purpose was to divert money to Albanian officials.

The purchases, Mr. Trebicka said, were a flip: Albania sold ammunition to Evdin for $22 per 1,000 rounds, he said, and Evdin sold it to AEY for much more. The difference, he said he suspected, was shared with Albanian officials, including Mr. Pinari, then the head of the arms export agency, and the defense minister at the time, Fatmir Mediu.

...

The conversation, he said, showed that the American company was aware of corruption in its dealings in Albania and that Heinrich Thomet, a Swiss arms dealer, was behind Evdin.

...

Mr. Diveroli recommended that Mr. Trebicka try to reclaim his contract by sending “one of his girls” to have sex with Mr. Pinari. He suggested that money might help, too.

“Let’s get him happy; maybe he gives you one more chance,” he said. “If he gets $20,000 from you ... ”

At the end, Mr. Diveroli appeared to lament his business with Albania. “It went up higher to the prime minister and his son,” he said. “I can’t fight this mafia. It got too big. The animals just got too out of control.”

 

Perhaps Chairman Waxman should push the issue at his upcoming hearing.  Seems the Justice Department's Fraud section could have a field day if it looks into this, if hasn't already started to.

-- Nick Schwellenbach

DOJ in Doghouse Over Anti-Fraud Lawsuits Filed by Government Employees

Yesterday, the Senate Judiciary Committee held a hearing on S. 2041, legislation to strengthen the False Claims Act, a law that allows citizens to file suit to challenge fraud against the federal government and which has recovered $20 billion since it was strengthened in 1986.

Much of the first panel of the hearing concerned Senators' pointed consternation with the Department of Justice's (DOJ) long-standing position that government employees should not be allowed to file such suits. DOJ has been particularly hostile to cases filed by government employees, refusing to intervene in almost all of them and often filing court motions to have them dismissed. For example, the DOJ refused to intervene in the case of Department of Interior auditor Bobby Maxwell which resulted in a $7.5 million jury verdict against Kerr-McGee but which has been appealed.

Despite DOJ's position on this issue, several Federal Circuit Courts have held that the plain language of the statute does not preclude federal employees from filing suit and has allowed qui tam cases filed by government employees to go forward. The result is that there is widespread confusion about the viability of these cases and what the proper procedures should be if a government employee chooses to file such a suit. As the comments below reflect, S. 2041 outlines a reasonable process but provides a way for whistleblowers to fight fraud when the government fails to do so.

During his opening statement at the hearing, Michael Hertz, Deputy Assistant Attorney General of the DOJ Civil Division, expressed that position this way (all text transcribed by POGO below):

The department is opposed to an explicit legislative recognition of the right of government employees to serve as relators and obtain qui tam awards. Each federal employee has an existing duty to report fraud, waste and abuse. Adding a financial incentive to the qui tam suits conflicts with this duty and has the potential to undermine both the employees' loyalty to the government and the public's confidence in the fairness and impartiality of the government's decisions. This is particularly true for those government employees such as auditors, investigators, contracting officials and attorneys who are paid salaries by the taxpayer to identify and root out fraud and who under S. 2041 would not be barred from filing suits using information they learned in carrying out those duties.

Hertz was then grilled by three Senators in a row largely on this issue, starting with Committee Chairman Patrick Leahy who stated:

Understand under our bill and I understand what you said about employees already have, the government employees have a duty to report fraud or abuse and we all agree with that. The concern I've had, I know Senator Grassley and others have had, is that many times when that, when that is reported, it's reported to the detriment of the career of the person doing the reporting. And, our bill says that they discover fraud they have to report it to their superiors or to the Inspector General of the Department. And they are not allowed to sue if action is taken. But, the only time they can sue is if a year goes by and no action has been taken. Then they, then they can sue..

But I understand, but we have a certain amount of frustration, that somebody finds something, they report it to the Inspector General, they report it to the Secretary or whoever might be and nothing happens. And that has been the situation. What do you do? You read all these cases about Iraq and Afghanistan, we spent $500 billion there. Read the press, there seem to be well-documented cases of fraud and waste. There's been, if I am correct by my notes here, five False Claims Act settlements for the Justice Department, $16 million in cases involving fraud in Iraq and Afghanistan. The AG says there's 230 False Claim cases involving defense procurement fraud under seal at the Justice Department.

My concern is that political decisions can be made to stop these claims from going forward or that if you have a government employee who is usually the first place, the first one who can see fraud and waste, you know the trucks that got a flat tire and just leave the trucks behind, the huge amounts of money that Halliburton is spending on hotels and things like this. They're the ones who are going to see it. And if nothing is done on it, does it just get covered up?

Senator Richard Durbin was equally outraged with the DOJ position:

Having served on the Intelligence Committee where they classify everything that isn't moving including the coffee pot, I'm concerned here. Because I know that if you want to break out and get something done significantly, there are many ways within government to stop you. And these people who have pursued regular governmental due process without good results have as last recourse the option as a government employee of taking this to court and getting it resolved. And my fear is that at the end of the day that if we follow your lead, and follow your suggestion, we are going to close off a lot of opportunities to stop the fraud on the taxpayers. That seems to me like a greater public good than the possible notion that a federal employee who does the right thing, blows the whistle, and gets the right result may end up with some money in their pocket..

I will just conclude by saying I think the American public would be less scandalized by the notion that a federal employee might end up with 10 percent or 20 percent of the outcome and find millions if not billions of dollars being saved from being defrauded.

Finally, the author and champion of the 1986 amendments which resurrected the False Claims Act, Senator Charles Grassley, finished off the the trip to the whipping shed with these thoughts:

I have a longstanding belief that the '86 amendments did not preclude federal government employees from acting as qui tam relators. For instance, in 1990, I testified in the House that government employees should be allowed to file qui tam suits if they first make a good faith effort to report the fraud within the proper channels. My rationale is that a government employee reports the fraud and supervisors sit on it because they don't want egg on their face, there needs to be a way to address the loss to the American taxpayer. Allowing federal or allowing government employees to act as relators is yet another check that we can have on bureaucracy that may too big and too unenthusiastic about stopping fraud.

However, we should put reasonable steps in place to ensure that these employees aren't just sitting on the job building a qui tam case. Section 3 of the bill includes requirements that the government employee must overcome such as reporting to supervisors, the Inspector General and then to the Attorney General. Then after that, there has to be a whole year that has to lapse, inaction on the part of the government. Seems to me one year is long enough for the government to make a decision if they are going to get involved or not be involved. And if they decide not to get involved, then the qui tam out to proceed. These are procedural hurdles that aren't even required now under the case in the 11th circuit. I understand the Department strongly opposes this section. But what should a government employee who uncovers fraud do if he reports it up the chain and there is nothing to stop it?

-- Beth Daley

Hired Guns: Government Oversight Weak

You know things are bad when even the enemy of real accountability and oversight says they are. This week, the trade association that represents private mercenary armies (including Blackwater until it resigned earlier this month) issued a report through what appears to be a nonprofit front organization noting that "Massive increases in defense service contracting have outpaced the government's ability to adequately conduct oversight of defense contracts," even noting "the need to strengthen depleted oversight organizations such as the Defense Contract Management Agency and the Defense Contract Audit Agency."

But don't be seduced by their crocodile tears over the government's failures to hold big contractors accountable. After pouting about the dire state of affairs, they put forward their so-called solutions which include "find genuine possibilities for teamwork" (LET'S BE FRIENDS!). For example, its a good idea for contractor personnel to be embedded in the government. Of course it is! While they are embedded, the contractors can also, just by coincidence, keep a close eye on their paramount interest in landing the next big contract.

Well, we'd like to suggest that the so-called "International Peace Operations Association" take their members up to the Hill and lobby to roll back the massive spending cuts imposed on the Defense Contract Management Agency and, to a lesser extent, the Defense Contract Audit Agency.

House appropriators discussed the very real problem of the shredded government oversight system in their recent FY 2008 defense budget report: "It is clear that DoD currently lacks the means to provide proper oversight of its service contracts, in part because of an insufficient number of contract oversight personnel. While the spending for contracted services has grown, the size of DoD's workforce, including its contracting and acquisition workforce, has been decreased significantly."

The Committee goes on to note: "For example, the Defense Contract Management Agency's (DCMA) workforce has been reduced by over 50 percent between the period 2000 to 2005, making it more difficult for DCMA to provide thorough and meaningful oversight of the Department's increasing reliance on contracted services." In other words, the DCMA was shrunk to half its size during a period of time when the dollar amounts of government contracts roughly doubled from $200 billion to $400 billion.

The Defense Contract Audit Agency also suffered a modest cut of 5% between FY 2000 (4,256 staff) and 2006 (4,051staff), during a time when their budget probably should have been doubled.

The House sensibly attempted to give the DCMA a much-needed additional $17 million and the DCAA $12 million for FY 2008. Unfortunately, Senate appropriators didn't see eye to eye on the increases. So, will we see those hired guns on the Hill lobbying for DCAA and DCMA funding? Don't count on it.

-- Beth Daley

New Details on Largest Single Iraq War Bribery Case Yet

The New York Times has a front page story that both humanizes an Army officer "accused of orchestrating the largest single bribery scheme against the military since the start of the Iraq war" and takes you through some of the institutional breakdowns that make corruption in defense contracting more likely.  The systemic weaknesses detailed in the article were:

• "Military officials said a major assigned to award such large contracts for the Army Contracting Agency should have at least 10 years of experience in 'broad acquisition,' a minimum of four years of direct contracting experience and annual ethics training. But the procurement workload from the Iraq war grew so big so fast that the Pentagon was forced to rush people with virtually no training or experience into some of its most complicated contracting jobs, Army officials said."
• "Oversight was virtually nonexistent by design. There were no auditors at Camp Arifjan, and contracts worth more than $500,000 were the only ones requiring review in Washington. Most contracts were written for about $100,000. It was also common for contracting officers to use 'blanket purchase agreements,' allowing them to open a line of credit with a company with little more than a promissory note, much like a customer at a small-town grocery store."
• "Ideally, Army officials said, the purchasing cycle would be divided among at least three contracting officers. One would take an order for supplies from a unit commander and seek bids from companies to fill the order. Another would award the contract, and a third would oversee delivery of the goods. That system, officials said, would allow each contracting officer to serve as a check on the others."
• "At Camp Arifjan, a single contracting officer handled all three parts of the process, giving the officers broad discretion and creating opportunities for unit commanders to join conspiracies by inflating their troops’ needs. What resulted, said Mr. Young, the Army Contracting Agency director, was 'a web of deceit.'"

In a sidebar, the story also tallies up charges filed against 29 people for corruption in Iraq and Afghanistan.  I've posted the NYT sidebar image here, then, according to its tally, quickly downloaded some (not all) of the original indictments/complaints/information in each of the cases from PACER and posted them below, roughly in the order they're listed in the sidebar image.

• Criminal complaint (pdf) as to Maj. John Lee Cockerham;
• Indictment (pdf) of Col. Curtis G. Whiteford, Lt. Col. Debra M. Harrison, Lt. Col. Michael B. Wheeler, William Driver and Seymour Morris, Jr. (Phillip Bloom, Lt. Col. Bruce D. Hopfengardner (information (pdf)), Robert H. Stein are listed as co-conspirators);
• Criminal complaint (pdf) as to Gheevarghese Pappen;
• Information (pdf) on Chief Warrant Officer Peleti Peleti Jr.;
• Indictment (pdf) of Bonnie Murphy;
• Information (pdf) on Samir Mahmoud;
• Indictment (pdf) of Jeff Alex Mazon and Ali Hijazi;
• Information (pdf) on Glenn Allen Powell;
• Criminal complaint (pdf) as to Faheem Mousa Abdel Salam;
• Criminal complaint as to Mohammad Shabbir Khan (pdf) and Zubair Khan (pdf) and information on Stephen L. Seamans (pdf);
• Indictment (pdf) of Jesse D. Lane Jr.;
• Information (pdf) on Christopher J. Cahill.

-- Nick Schwellenbach

Legislation to Boost False Claims Act Introduced

The fraud-fighting False Claims Act got a boost yesterday when Senator Charles Grassley (R-IA), Senator Richard Durbin D-IL), Senator Patrick Leahy (D-VT), and Senator Arlen Specter (R-PA) introduced legislation to close several loopholes in the Act. Below is their release and floor statements by Senators Grassley and Durbin. Companion legislation will reportedly be introduced in the House of Representatives by Rep. Howard Berman. Senator Grassley, who has been the leading light on this issue expressed his concerns about the state of the False Claims Act back in July, 2007 when he made a floor statement.

POGO commends the Senators and Representative Berman for their leadership on addressing the loopholes which have unnecessarily resulted in tens, if not hundreds, of millions of dollars being lost to the government.

Among improvements proposed, the Act will clarify that government employees can have standing to sue. This issue has inexplicably perplexed the courts, despite the plain language of the act which says that any "person" can file such suits. Some courts have bought the tired line that government employees should not have standing from lawyers representing those corporations who are the target of False Claims Act lawsuits as well as a Department of Justice which takes a ridiculously hostile approach to government employee fraud suits.

For example, in January 2007, a former Department of Interior Minerals Management Service auditor Bobby Maxwell prevailed in a lawsuit against Kerr-McGee with a jury trial finding the company underpaid by $7.5 million to the federal government in oil drilling fees, a verdict that could ultimately bring as much as $40 million when penalties are included. The Department of Justice (DOJ) refused to intervene in the case which is now floundering on a technicality. DOJ has also refused to intervene in the lawsuits filed by three additional Minerals Management Service auditors who documented an estimated $20 million in underpayments by oil giants including Shell. An independent investigative report is expected imminently which will likely vindicate the concerns raised by the whistleblowers filing these suits. Still, DOJ is sitting on the sidelines, putting the taxpayers' recoveries of tens of millions of dollars at grave risk.

The legislation introduced yesterday will also seek to address issues raised by the Custer Battles False Claims Act case. Like the Maxwell case, DOJ also dropped the ball on the much publicized Custer Battles case when it failed to intervene. A jury verdict found a total award of $10 million in the case. Then, in a technical dodge, the Judge threw the case out by finding that the Coalition Provisional Authority was not part of the U.S. Government and so therefore could not be sued under the False Claims Act.

-- Beth Daley

                   

For Immediate Release

September 12th, 2007

GRASSLEY, DURBIN, LEAHY, SPECTER SPONSOR LEGISLATION TO FORTIFY TAXPAYERS AGAINST FRAUD

WASHINGTON --- Sens. Chuck Grassley and Dick Durbin are sponsoring new legislation in response to recent federal court decisions that threaten to limit the scope and applicability intended by Congress with its highly successful 1986 update of the False Claims Act, which has recovered $20 billion for the U.S. Treasury that would otherwise be lost to fraud. The False Claims Act Correction Act of 2007 has the support and cosponsorship of Judiciary Committee Chairman Patrick Leahy and Ranking Member Arlen Specter. Companion legislation will be introduced in the U.S. House of Representatives by Rep. Howard Berman. Grassley and Berman were the sponsors of the 1986 amendments to the False Claims Act. Those amendments breathed new life into what is known as Lincoln 's Law by empowering qui tam relators to act as private attorneys general and file suit against those who defraud the federal government. "It's been proven time and again that without the courage and willingness of these individual citizen whistleblowers, the federal government would not have known what was going on or been able to pursue successful cases against those who defrauded the government, including contractors and state and local governments. These settlements have returned tens of billions of dollars that would otherwise be lost and gone forever," Grassley said. "Our new legislation works to make sure recent court decisions won't weaken the government's ability to recover tax dollars lost to fraud, whether its in health care, defense or another areas of spending." "President Lincoln signed the False Claims Act into law in 1863 to prevent war profiteers and others from defrauding the government and the nation's taxpayers.  Sadly, 144 years later, ' Lincoln 's Law' is still needed," Durbin said.  "This bipartisan bill modernizes and strengthens the False Claims Act, and will help "Lincoln's Law" continue to serve as an effective tool against fraud." "This bipartisan bill strengthens and restores the False Claims Act as one of our most powerful and effective tools for combating fraud, waste, and abuse in government," said Senator Leahy. "These protections are more important than ever as unscrupulous contractors in Iraq and elsewhere have defrauded American taxpayers of billions of dollars and undermined our troops fighting overseas."  "This legislation is as important today as it was when it was enacted during the Civil War in 1863," stated Senator Specter.  "We must continue to combat fraud and abuse of government programs and waste of taxpayer dollars.  One way to do that is to encourage and protect employees who step forward to identify fraud.  This legislation would ensure that the law continues to do both.  President Abraham Lincoln sought the False Claims Act during the Civil War in response to war profiteering that defrauded taxpayers. The 1986 updates to the law are today the government's most effective weapon against fraud. The False Claims Act Correction Act of 2007 would make the following corrections to the False Claims Act. · Makes corrections to 31 U.S.C § 3729 removing the requirement that false claims be presented to a government employee. This section corrects longstanding problems with the requirement that false claims be presented directly to government employees, instead applying liability directly to any false claim regarding government money or property. This correction ensures that any government money lost to fraud, waste, or abuse can be recovered using the FCA regardless of whether the individual making the false claim directly represents such a claim to a government employee. This problem arose following the D.C. Circuit Court of Appeals decision in U.S. ex rel. Totten v. Bombardier Corp, 380 F.3d 488 (2004) which held that false claims to government grantees (here Amtrak) were not "presented" to a government employee and barred government recovery of government funds lost to fraud. · Amends the FCA to clarify the dismissal of parasitic claims filed based upon publicly disclosed information. Commonly referred to as the public disclosure bar, the FCA currently allows for the dismissal of FCA cases brought based upon publicly disclosed information unless the relator is the "original source" of the public information. This complex area of FCA law was further complicated when the Supreme Court decided Rockwell Int'l Corp. et al. v. United States, 549 ___ (2007). This decision held that the public disclosure bar requires a qui tam relator to be an original source for all claims that are ultimately settled or upon which a verdict is rendered. Absent this original source, a relator is barred from recovery. This decision dramatically limits the FCA by restricting legitimate qui tam relators who often bring fraud to the attention of DOJ with information DOJ expands and ultimately settles on other grounds. This correction also clarifies it is the exclusive right of DOJ to dismiss relator claims on public disclosure grounds, and not a jurisdictional defense of those who defraud the government. · Clarifies that false or fraudulent claims against non-U.S. Government funds under the trust and control of the U.S. Government are subject to recovery under the FCA. This clarification would ensure funds administered by the U.S. Government on behalf of third party nations or other entities are protected from fraud, waste, or abuse by extending FCA liability to those funds. This clarification addresses concerns raised by the Federal District Court for the Eastern District of Virginia in United States ex rel. DRC, Inc. v. Custer Battles, LLC, 2006 WL 2388790 (E.D. Va. Aug. 16, 2006), dismissing a jury verdict finding FCA violations for funds allocated to contractors operating on Iraqi funds administered by the U.S. Government. · Clarifies a split between Circuit Courts of Appeal as to when a government employee may act as a qui tam relator under the FCA. This clarification would explicitly state in statute the original legislative intent of the 1986 amendments to the FCA allowing government employees to act as qui tam relators in limited circumstances when they have reported activities up the chain of command, to the Inspector General, to the Attorney General, and only if no action was taken after 12 months. · Makes technical and clarifying amendments to the statute of limitations in FCA cases, as well as technical edits to the Civil Investigative Demands authorized under the current FCA. Grassley and Durbin are senior members of the Judiciary Committee. The text of the floor statements they delivered today marking introduction of the False Claims Act Correction Act of 2007 follows here. False Claims Act Correction Act (as introduced) with hand written edits Floor Statement of U.S. Senator Chuck Grassley of Iowa Introduction of the False Claims Act Correction Act of 2007 Tuesday, September 11, 2007      Mr. President, for 27 years I have come to the Senate floor to discuss legislation that will help the Federal government run efficiently and effectively.  I've been an outspoken advocate for whistleblowers who, in good faith, bring forth information about waste, fraud, and abuse of taxpayer dollars.  I have championed oversight efforts and have spent my time in the Senate asking the tough questions of government bureaucrats in order to expose problems.  One thing that I've learned from oversight is that no matter how engaged the Congress may be, there are just not enough hands to find all the waste, fraud, or abuse in government programs.  Instead, we must rely on courageous individuals who speak out and blow the whistle when a government program is not working and taxpayer dollars are being lost. By sticking their necks out, these individuals often risk everything to fix problems with our government, and for doing so they are as welcome as a skunk at a picnic.  However, pointing out fraud is one thing, getting results, fixing the problem, and recouping taxpayer money lost to fraud, waste, and abuse is another.  The key to recouping these lost funds is ensuring we have effective laws on the books.  One such law is the federal False Claims Act.  The False Claims Act, which is also known as " Lincoln 's Law," was originally passed by Congress to combat war profiteering by government contractors during the Civil War.  The FCA allowed individual citizen whistleblowers to go to court to collect government money that was lost to unscrupulous contractors who were selling false or fraudulent goods to Union troops.  This legal mechanism, known as qui tam, is the key component to the False Claims Act, allowing individual citizens to act as private Attorneys Generals to help unearth fraud and recover lost money.  However, following World War II, the FCA was weakened by an act of Congress which lowered the penalties limiting the money the government could recover from fraud.  This remained the state of the FCA until 1986, when I authored amendments to the Act which restored the teeth and breathed new life into a law that was designed to protect all American taxpayers.  I'm happy to report that in the 20 years since I introduced and Congress passed the 1986 amendments, the Federal government has used the FCA to recover over $20 billion from those who defraud the government.  That's $20 billion that would otherwise be lost and gone forever.  More importantly, this $20 billion serves as a deterrent reminder to those who wish to steal from the government.  Today, the FCA again faces a situation where it may not be as effective as intended.  Recent decisions by federal courts have limited the FCA in a way that was not envisioned when I authored the 1986 amendments. These decisions threaten to undermine both the spirit and intent of the 1986 amendments to the FCA.  The first case ex rel. Totten v. Bombardier Corp, held that false claims presented to government grantees, in this case employees at Amtrak, were not actually presented to the federal government.  As a result, the government was precluded from recovering money lost to fraud and abuse perpetrated against Amtrak.  The second case, Rockwell International Corp. et al. v. United States, was decided earlier this year by the U.S. Supreme Court.  In this case, the court interpreted an area of the False Claims Act, known as the "public disclosure bar," which prohibits a FCA case from moving forward if the case was based upon publicly disclosed information, such as a government report, unless the whistleblower filing the case was the "original source" of the information.  Here, the Supreme Court held that a qui tam whistleblower was barred from receiving a share in any money recovered unless they were the "original source" of all claims ultimately settled.  This may not sound like a troublesome decision.  However, the impact is that often times a case is brought by a whistleblower on a certain set of facts and then expanded by the Department of Justice who ultimately settles on other grounds.  As a result, this case creates a disincentive for a whistleblower to bring forth information about fraud as they may not get to share in any part of the recovery. Finally, the third case that challenges the intent of the FCA is ex rel. DRC, Inc. v. Custer Battles, LLC, decided in 2006.  In this case, a jury found that a defense contractor in had defrauded the government of $10 million.  However, the judge overturned the jury verdict finding that the money lost was not U.S. Taxpayer money, but was instead Iraqi money under the control of the U.S. Government.  As a result of this case, the U.S. Government may not recover for any fraud committed against the U.S. Government if the funds are not American funds, even if the U.S. Government has been entrusted with the management of those funds. Mr. President, these decisions are contrary to the spirit and intent of 1986 amendments.  So today, I am here, joined by Senator Durbin as the lead cosponsor along with Senators Leahy and Specter to introduce the False Claims Act Correction Act of 2007.  This bill seeks to correct these judicial interpretations damaging the FCA and is narrowly tailored to ensure that the intent of Congress in the 1986 amendments is upheld. The False Claims Act Correction Act would correct these three judicial interpretations in addition to making technical and correcting amendments.  First, the bill would address the Totten decision by removing the requirement that false claims be directly presented to the government official, instead tying the liability directly to government money and property.  Next, the bill would address the Rockwell decision by requiring the Attorney General to file a timely motion to dismiss claims that violate the public disclosure bar.  By allowing the Attorney General to present to the court information about public disclosures up front in a case, the bill would eliminate procedural uncertainties that exist now by allowing public disclosures to be addressed at any time in the case.  The False Claims Act Correction Act also clarifies that non-taxpayer funds under the trust and administration of the U.S. Government subject to fraud are actionable under the FCA.  Thus, monies directly under the control of the U.S. Government subject to fraud that are currently outside the scope of the FCA would now be covered.  This would correct the problems that have arisen following the decision in ex rel. DRC, Inc. v. Custer Battles, LLC. Additionally, the bill clarifies a split between Federal Circuit Courts of Appeal that currently exists regarding whether a government employee may file a FCA case.  More specifically, the bill provides that a government employee would be able to bring a FCA case based upon information learned in the course of their employment, only when the employee: (1) discloses the fraud to their supervisors, (2) discloses the fraud to the Inspector General of their agency, (3) discloses the fraud to the Attorney General, and then waits 12 months without the government acting.  After these conditions are met, then and only then, may a government employee act as qui tam whistleblowers.  Finally, the bill makes two technical corrections to the FCA.  The first is a technical correcting amendment that clarifies the statute of limitations.  The second is a technical amendment to the Civil Investigative Demands that the Department of Justice is already authorized to issue.  These technical corrections will streamline the procedures for filing and prosecuting FCA cases by both qui tam whistleblowers and the Department of Justice.  Mr. President, the False Claims Act Correction Act is a narrowly tailored bill that seeks to ensure that the legislative intent of the 1986 amendments is truly understood.  This is not a Democrat or Republican issue.  This is an American taxpayer issue.  And I'm proud to say that this bill has strong bipartisan support, as I am joined by Senator Durbin as the lead Democratic cosponsor along with Senators Leahy and Specter as other original cosponsors.  I'm glad we have a bipartisan coalition ready to work to fix the FCA with these narrowly tailored corrections.  But I encourage my colleagues to not bow to special interests groups who have worked to weaken the #1 tool for recovering government dollars lost to fraud.  American taxpayers deserve a law that detects, prevents, and recovers money lost to fraud.  The FCA works and has recovered $20 billion in the last 20 years.  However, the FCA can work better.  The False Claims Act Correction Act will provide necessary, narrowly tailored corrections to ensure that the FCA works to protect taxpayer dollars into the future. I urge all my colleagues to support this important legislation.  Mr. President, I yield the floor.   Floor Statement of Sen. Richard Durbin of Illinois Introduction of the False Claims Act Correction Act of 2007 Tuesday, September 11, 2007   Mr. DURBIN. I am pleased to join my colleague Senator Grassley in introducing the False Claims Act Correction Act of 2007. This bipartisan legislation takes important steps to modernize and strengthen the federal False Claims Act and will help protect the government and taxpayers from waste, fraud and abuse of government funds.    During the Civil War, President Abraham Lincoln saw the need for a law that would prevent war profiteers and other unscrupulous government contractors from defrauding the government and the nation's taxpayers.  Lincoln urged the passage of legislation that would allow the government to seek damages and penalties against perpetrators of fraud, and that would permit whistleblowers with information about false or fraudulent claims to file qui tam lawsuits on the government's behalf in exchange for a share of the recovered funds. In 1863, Congress heeded Lincoln's call and enacted the federal False Claims Act (FCA), which became known as " Lincoln 's Law."   Lincoln 's Law is still in effect today and it is still much-needed. In recent years, there have been alarming reports of waste, fraud and abuse of government funds in the war and reconstruction effort, in the recovery from Hurricane Katrina and other disasters, in military and homeland security procurement contracts, and in federal healthcare programs. We need strong laws that can expose and root out such fraudulent practices.     The last major update of the FCA took place in 1986, when Senator Grassley and Congressman Berman sponsored amendments that revitalized the FCA and its qui tam provisions in response to widespread reports of defense contractor fraud. Since 1986, the federal government and qui tam relators have worked together to recover over $20 billion in monies that would otherwise have been lost to fraud, waste or abuse in government programs. The recovery of this enormous sum is a victory for taxpayers, and a demonstration of the success of the FCA and its qui tam model.     It has now been twenty-one years since the enactment of the 1986 FCA amendments, and during that time changes in the interpretation of the Act and in the nature of government contracting have threatened to limit the FCA's effectiveness. In particular, several recent court decisions have weakened the intent and application of Senator Grassley's 1986 amendments to the FCA and have limited the FCA's ability to reach certain types of fraud and abuse involving government programs.    The False Claims Act Correction Act seeks to correct these court decisions and to ensure the FCA's utility as an effective tool against fraud. It does so in several ways.     First, the False Claims Act Correction Act clarifies the "presentment requirement" in the FCA. In 2004, the D.C. Circuit Court of Appeals held that liability under the FCA can only be found if the allegedly fraudulent claim is "presented to an officer or employee of the United States Government." This interpretation has been used by courts to dismiss a number of FCA cases where abuses of federal government funds were clearly evident but where the false claims were submitted to grantees or agents of the federal government (such as the Iraq Coalition Provisional Authority) and not directly to government employees. Our legislation would make clear that FCA imposes liability if a person presents a false or fraudulent claim for federal government money or property, and that the claim need not be directly presented to a government employee.     Our legislation also clarifies the applicability of the FCA's "public disclosure bar." The FCA currently allows a relator's FCA case to be dismissed if the case is based on information that was publicly available at the time of the filing, unless the relator was the "original source" of the public information. In its 2007 decision in Rockwell Int'l Corp. et al. v. United States, the Supreme Court held that the public disclosure bar prevents a relator from recovering money unless the relator was an original source for all the claims that are settled or upon which a verdict is rendered. The Rockwell holding is troubling because relators often file actions based on facts which prove to be the tip of the iceberg, and upon further investigation DOJ discovers more fraud and ends up settling or winning the case on the grounds of the latter fraud.    The Rockwell court's interpretation of the public disclosure bar might discourage whistleblowers from filing legitimate FCA cases and alerting DOJ to fraud. Our legislation would preclude a relator from recovery under the public disclosure bar only where the relator derived knowledge of all essential elements of the claim from public disclosure. Thus, only relators who truly contributed no new information to the case would be barred.   Among its other provisions, the False Claims Act Correction Act resolves a split among the federal circuit courts by allowing a government employee to act as a qui tam relator when the employee learns of fraudulent conduct on the job, provided that the employee has first taken steps to report the fraud internally. Our legislation also strengthens the protections in the FCA for whistleblowers, so that whistleblowers who are government contractors and agents can receive the same anti-retaliation protection as employees of the company perpetrating the alleged fraud. Our bill further simplifies the FCA statute of limitations with a clear 10-year standard for all cases, and also makes technical changes to enhance DOJ's usage of the civil investigative demand process in DOJ investigations of potential FCA violations.    The changes that our legislation would make to the FCA are narrowly tailored, and are designed to clarify the FCA's scope in keeping with the intent of the authors of the 1986 FCA amendments.  I commend Senator Grassley, the Senate architect of the 1986 FCA amendments, for his devotion to ensuring the effective functioning of the FCA, and I am proud to join him in introducing this legislation to better combat waste, fraud and abuse of government programs.    In sum, the False Claims Act Correction Act will enhance whistleblowers' ability to shine a light on fraudulent conduct involving government funds, and to hold the perpetrators accountable through legitimate qui tam claims. The bill's reforms will ensure that the FCA can continue to serve as a viable tool for recovering taxpayer funds lost to fraud, waste or abuse. The legislation we are introducing today will strengthen the legacy of Lincoln 's Law, and I am pleased to serve as its lead cosponsor. I urge my colleagues to support its passage.

SIGIR Investigation Summaries Posted

New documents obtained under the Freedom of Information Act (FOIA) provide dozens of summaries of investigations completed by the Special Inspector General for Iraq Reconstruction (SIGIR) from October 1, 2005 to the present: click here and here to see them. Lots of raw material here to chew on for investigators on the Iraq beat. Of course, redactions cover up tantalizing details as is often the case with documents received under FOIA. These documents come to POGO from a friend and private citizen who frequently shares such documents with the public. According to him:

SIGIR has plenty of investigation reports - both full reports and summary reports - that are not included here.  They don't usually care to release the full reports because they then are obliged to review them for redaction, but they will provide such reports if you insist.

In short, SIGIR has a wealth of reports that are not posted on their website.

For more information, or to submit a request for other documentation including copies of recent investigation reports, contact:

Kristine Belisle
Director for Public Affairs
Special Inspector General for Iraq Reconstruction
2011 Crystal Drive, Suite 1101
Arlington, VA  22202
703-428-1100
fax:  703-428-0818
kristine.belisle@sigir.mil

-- Beth Daley

Whistleblowers Expose Corruption at Inspectors General

The first stop for many federal employees seeking to blow the whistle on fraud, corruption or abuse of power is usually their agency’s Inspector General. That is why it is particularly troubling that numerous Inspectors General (IG) are either under investigation, or have been forced out under a cloud in recent years.

In recent years, dark clouds hovered over the departures of Department of Health and Human Services IG Janet Rehnquist and Postal Service IG Karla Corcoran. There are currently controversies surrounding Inspectors General for the Department of Commerce, Environmental Protection Agency, NASA, and Iraq Reconstruction. In almost every case, whistleblowers or insiders exposed the problems to Congress or other oversight bodies.

The House Energy and Commerce Committee has been leading the charge in two cases:

1) Johnnie Frazier, U.S. Department of Commerce IG, who is accused of numerous alleged violations, including taking trips with no apparent official purpose at government expense, retaliating against employees who objected and refused to sign the travel vouchers, and destroying emails after he was informed of an investigation into his travel.

2) Bill A. Roderick, Acting IG of the Environmental Protection Agency who is attempting to get rid of 60 full-time staff members in his office out of a total of 360 and giving himself a $15,000 bonus, (making him possibly the only government bureaucrat on the face of the planet who ever voluntarily tried to shrink his agency).

The Integrity Committee of the President’s Council on Integrity and Efficiency (PCIE) has recently been investigating:

3) Stuart Bowen, Special IG for Iraq, who, according to the NYT, is facing accusations into “fairly narrow issues: a payment to a contractor that the employees believed was unjustified; a project to produce a type of report on reconstruction that they maintain is outside the Congressional mandate of the office; and what the employees contend is an inflated estimate of how much money investigations by the office have saved American taxpayers.” Not surprisingly, Virginia Republican Tom Davis has also opened an investigation (pdf) into Bowen as well. Probably few individuals have better undermined Tom Davis’ agenda of handing out goodies to defense and IT contractors than Stuart Bowen  who has exposed billions of dollars in contractor pilfering. We can hear the squeals of glee from here.

4) Finally, NASA IG Robert Cobb was the subject of the PCIE’s recently completed investigation. Because of the incriminating report, senior Democrats last week called on President Bush to fire Cobb and threatened to hold hearings.

-- Danielle Brian & Beth Daley