u.s. army criminal investigation command 701st military police group ( cid)

U.S. ARMY CRIMINAL INVESTIGATION COMMAND

701ST MILITARY POLICE GROUP ( CID)

What is

FRAUD?

DEFINITIONS:

Fraud

Fraud Profile

FRAUD

A deliberate deception practiced so as to secure unfair or unlawful gain (Webster’s II Dictionary).

FRAUD

A material representation of factwhich is false

and known to be falseFalseRepresentation

FraudProfile

Motivation

Opportunity

Rationalization

BRIBERY

•CONFLICT OF INTEREST

•FALSE CLAIMS

•FRAUDULENT PROCUREMENT ACTIONS

•FRAUDULENT PROPERTY DISPOSAL ACTIONS

•FORGERY (INVOLVING LOSS OF FUNDS OR SYSTEMS TO THE GOVERNMENT)

•PERJURY/FALSE SWEARING/FALSE OFFICIAL STMT

•ORGANIZED CURRENCY MANIPULATION/MONEY LAUNDERING

Types of fraud crimes

REMEDIES:

Criminal Actions

Civil Actions

Contractual Actions

Administrative Actions

REMEDIES CONTRACT ACTIONS:

Termination for Default Termination for Default and Exemplary Damages Termination for Convenience Recision of Contract Contract Warranties Withholding of Payments to Contractor Offset Payments Due from Other Contracts Price Reduction

REMEDIES CONTRACT ACTIONS: (cont.)

Refusal to Accept Non-Conforming Goods Revocations of Acceptance Denial of Claims Submitted by Contractors. Findings of Non-Responsibility Disallowance of Contractual Costs Removal of Contractor from Solicitation List.

REMEDIES ADMINISTRATIVE ACTIONS:

Recoupment of Funds Lost Suspension of Company and Contractor Employees Debarment of Company and Contractor Employees Change in Contracting Forms and Procedures Change in Contract Administration and Payment

Controls

REMEDIES PERSONNEL ACTIONS:

Termination or Reassignment of Federal Employees

Revocation of a Contracting Officer’s Warrant

Recoupment of Funds Lost

TOPICS:

Contract Fraud

International Merchant Purchase Authorization Card (IMPAC) Fraud

Operational Issues• Time Card Fraud• Concessions/Ticket Booths• Illegal Dumping

Contract FraudIndicators

CRIMES INVOLVED IN CONTRACT FRAUD

When the Government and its programs have been defrauded or corrupted, Federal investigators and prosecutors will usually find one or more statutes that have been violated.

It the responsibility of the courts to develop conclusive evidence that shows that the statute that has been violated.

Contract Phases:

Determination of need Presolicitation phase Solicitation phase Contract Award Contract Negotiation Contract Performance

FRAUD INDICATORSIN THE PROCUREMENT PROCESS

Fraud Indicators

LEARNING OBJECTIVES

• 1. Recognize indicators of fraud in the procurement process.

• 2. Identify phases in the procurement process where fraud is most likely to occur.

FRAUD IN THE IDENTIFICATION OF THE GOVERNMENT’S NEED

Fraud may result from decisions to purchase supplies or services in excess of those actually needed, not needed at all, or waste and abuse.

Further potential for fraud is created when the needs assessment is not adequately or accurately identified or developed.

General Fraud Indicators

With respect to fraud in defining requirements, general fraud indicators include, but are not limited to:• requiring excessively high stock levels and

inventory requirements to justify the continuation of purchasing activity from a specific contractor/supplier.

• unsupported/unjustified sole source requirements.

General Fraud Indicators

• declaring items which are serviceable as excess or selling them as surplus while continuing to purchase similar/same items.

• purchasing supplies or services in response to aggressive marketing efforts by contractors rather than in response to a bonafide need.

• continuously purchasing from a selected source versus rotating sources (i.e., Blanket Purchase Agreements)

FRAUD IN THE DEVELOPMENT OF SPECS/SOW

Specifications and statements of work (SOW) are the basis for accepting and selecting sources.

Clear specs/SOW make it clear what the Governments is entitled to and agreed to in the contract.

Poorly written specs/SOW afford the contractor an opportunity to file unsupported claims/costs against the Govt.

FRAUD IN THE DEVELOPMENT OF SPECS/SOW

INDICATORS:• defining the specs/sow to specifically fit a

single contractor• advance or selective release of Govt

information to a single contractor• issuing specs/sow developed by a single

contractor• designing pre-qualification standards to

exclude otherwise qualified contractors

FRAUD IN THE DEVELOPMENT OF SPECS/SOW

INDICATORS (cont’d)• splitting requirements to circumvent

acquisition thresholds • accepting supplies/services that are not

consistent with the specifications or SOW• specifications are vague - poorly defined• specifications are not consistent with

similar type requirements

FRAUD INDICATORS IN THE PRE-SOLICITATION PHASE

Unsupported or falsified sole source justifications

Utilizing unjustified restrictive specifications which limit competition

Providing preferential information or treatment of contractor personnel by Government personnel

FRAUD INDICATORS IN THE SOLICITATION PHASE

Restricting procurement to exclude a qualified contractor.

Unjustified/limited response time for the submission of bids or proposals.

Revealing information to one contractor and not another.

Failure to adequately publicize requirements pursuant to FAR Part 5.

FRAUD INDICATORS IN THE SOLICITATION PHASE

Improper communication or social contact with contractors.

Government personnel or their families acquiring stock or holding a financial interest in a contractor or subcontractor in excess of the $5,000.

Discussing potential employment opportunities with a contractor or subcontractor.

FRAUD INDICATORS IN THE SOLICITATION PHASE

Providing special assistance to a contractor or subcontractor in preparing their proposal.

Failure to amend a solicitation to include necessary changes.

FRAUD INDICATORS IN THE SUBMISSION OF BIDS OR PROPOSALS

Improper acceptance of a late bid or proposal.

Falsification of documents or certifications. Allowing changes to a bid or proposal after

offerors are made aware of bid prices. Collusion or bid rigging.

FRAUD INDICATORS IN THE EVALUATION OF BIDS OR PROPOSALS

Deliberately misplacing or loosing a bid or proposal.

Improperly disqualifying a bid or proposal. Accepting a nonresponsive bid. Unauthorized release of information to a

contractor during the evaluation phase. Favoritism towards a particular offeror. Conducting a biased evaluation.

FRAUD INDICATORS IN THE AWARD OF A CONTRACT

Providing information to a potential contractor that allows an unfair competitive advantage.

Improper release of information (i.e., price, technical proposal, proprietary information)

Failure to rely upon certified cost or pricing data submitted with the proposal.

THE MOST FREQUENTLY VIOLATED STATUES Include:

• 18 U.S.C. 1001 - FALSE STATEMENTS -– falsifying, concealing or covering up material

facts by any trick, scheme or device.– Making false, fictitious or fraudulent statements

or representations– making or using false documents or writings

• 18 U.S.C.287 - FALSE CLAIMS- – making any false, fictitious or fraudulent claim

against the Government

Defective Pricing

Defective pricing occurs when a contractor does not provide accurate, complete, and current cost or pricing data to the government on negotiated contracts which exceed $500,000.00 for the DoD and $100,000.00 for all other agencies.

Defective PricingTruth In Negotiation Act (TINA)

The cost and pricing data provision provide, in part, that a prime contractor shall be required to submit cost or pricing data, and shall be required to certify that, to the best of his knowledge and belief, the data submitted is accurate, complete, and current under certain restrictions.

FRAUD AND DEFECTIVE PRICING

Government cannot pursue both fraud and defective pricing remedies for same overpricing issue

• Legal counsel and/or investigative service can provide advice on proper course of action and required evidence.

FRAUD AND DEFECTIVE PRICING

Defective pricing example identified by GAO:• Contract found to be overpriced by $1M due

to company’s failure to disclose lower prices on 7 material items

– As negotiation concluded, material estimating department provided firm’s negotiator an update showing substantially lower prices for 3 items

– Negotiator did not disclose lower price to Contracting Officer

FRAUD AND DEFECTIVE PRICING

Repetitive findings of defective pricing in same firm may be strong indicator of fraud

Additional indicators• Failure to correct known system deficiencies• Failure to update cost or pricing data with

knowledge that past activity showed decrease in prices

Fraud and Defective Pricing

Additional indicators (cont’d)

• Specific undisclosed knowledge of significant cost issues that reduce proposed costs

– Reflected in price revisions of major subcontract, settlement of union negotiations resulting in lower increases on labor rates than projected

FRAUD AND DEFECTIVE PRICING

Additional indicators (cont’d)• Utilization of unqualified personnel to develop

cost or pricing data used in estimating process• Indications of falsification or alternation of

supporting data• Distortion of overhead accounts or base

information by transfer of charges or accounts that have material impact on Government contracts

FRAUD AND DEFECTIVE PRICING

Additional indicators (cont’d)• Failure to make complete disclosure of known

data by responsible contractor personnel• Protracted delay in release of data to the

Government to preclude possible price reductions

• Employment of people known to have previously perpetuated fraud against the Government

FRAUD AND DEFECTIVE PRICING

Contracting officers and specialists as well as auditor and investigators should be aware of indicators

Establishment of intent should be function of trained criminal investigators, auditors, contracting officials• no assumptions should be made that

defective pricing results from unintentional conduct

FRAUD AND DEFECTIVE PRICING

Example where legal counsel should be consulted:• Government may be entitled to penalty

amounts equal to overpayment because contractor knowingly failed to update cost or pricing data

• Contractor’s knowing failure to update also appears to be evidence of intent to defraud

FRAUD AND DEFECTIVE PRICING

The “intent” of the contractor is critical in defective pricing cases and should be documented

Deliberate concealment, or even misrepresentation of single significant cost element could constitute a prosecutable crime

CONTRACT FRAUDCASE STUDY:

A communications system contractor was awarded a sole source Army contract for antennae and dual capacity servo control units to be used in the Jam Resistant Secure Communications System. Contractor received multiple vendor quotes for the material, which was included in purchasing records. During a review by the QAR it was discovered that the contractor always bought from the lowest priced vendor, even though it had proposed the highest quote to the government. The contractor also failed to disclose to the government its intent during contract negotiations to use a sub-contractor for the servo units, at a substantially lower cost then presented to the government. The sub-contractors cost proposal reflected a per unit cost of $16,000.00, but the prime’s cost was $54,000.00.

RESULTS: Contractor pd $2,053,000.00 in restitution, $2,053,000.00 in punitive damages and $200,000.00 in Investigative costs. The servos cost was determined to be $15,000.00

CONTRACT FRAUDCASE STUDY:

A contractor had a series of prime and sub-contracts with DoD for the development, production and sale of aircraft instrumentation, radar equipment and other material hardware. The contractor engaged in the following schemes to defraud the government:

-quoted one vendor’s prices in estimating cost, but never purchased from that vendor.

-Solicited vendors to quote inflated prices, with the quotes being used to justify the contractors prices.

- Solicited and received rebates and kickbacks from vendors.

- Obtained blank forms, then filled in inflated prices and forged vendor’s signatures

- Sought and received quotes for unit prices of items, bought the items in bulk, receiving discounts, then billed at single unit price.

RESULTS: Contractor fined $3 million and ordered to pay $5.7 million in restitution.

Cost Mischarging

Cost mischarging occurs whenever the contractor charges the Government for costs which are not allowable, or which cannot be directly or indirectly allocated to the contract. Most mischarging occurs in Cost-Type contracts.

Cost Mischarging

Cost mischarging is one of the most common abuses found in the procurement system.

Congressional hearing found that many contractors know that even if unallowable costs are detected, the Government’s only readily available remedy was disallowance.

THE MOST FREQUENTLY VIOLATED STATUES (cont’d)

• 18 U.S.C.1341 - MAIL FRAUD AND 18 U.S.C. 1343 - WIRE FRAUD

– it is illegal to engage in any scheme to defraud in which the mail or wire communications are utilized

• 18 U.S.C.201-209 - BRIBERY, GRATUTIES AND CONFLICTS OF INTEREST

– prohibits anyone from offering or giving a bribe to a Federal employee or agent and the employee or agent from accepting a bribe or gratuity. Also prohibits conflict of interest during and after Federal employment

BriberyJurisdiction Guidelines & Statutes

A DoD / DOJ MOU requires FBI coordination on significant bribery allegations

Title 18 USC 201 (b)(1) - Offering a Bribe

Title 18 USC 201 (b)(2) - Seeking or Accepting a Bribe

Bribery

Bribery Investigations

Whoever directly of indirectly gives, offers or promises anything of value to an official; or

gives anything of value to any other person or entity with the intent to influence such official to

commit or aid in committing any fraud in the United States; or to induce such official to do or

omit to do any action violation of their lawful duty is guilty of the crime of bribery (18 USC

201).

BriberyPeople offer and accept bribes for a variety of different reasons.

To Secure competitive information Cover up errors Financial need or cover up To influence decision making Secure economic advantage (tax deduction, etc.)

BriberyCommon Methods of Bribery Payments

Cash Gifts (Vacations, Scholarships, Appliances,

etc.) Privileges (use of auto, clubs, discounts, etc.) Opportunities (employment, rigging contests,

etc.) Other (Credit, Loans, Free Samples,

Contributions)

Contract Fraud Contract Fraud Case StudyCase Study::

January 2000 -- A four-count indictment was returned against an individual charging him with bribery in connection with his employment as a chemist with the U.S. Army Corps of Engineers (USACE). This individual reviewed laboratory test results provided by companies having contracts and subcontracts with the USACE relating to the removal of hazardous materials from DoD facilities. On or about December 31, 1998, he allegedly solicited a bribe from a USACE subcontractor, telling the subcontractor he would help them obtain additional subcontracts and in exchange for a percentage of the value of the subcontracts, and would guarantee smooth processing of the subcontractor's work. During February and April 1999, he allegedly solicited bribes from a second subcontractor in exchange for assistance in obtaining additional subcontracts. In October 1999, he allegedly was paid $18,300 by the second subcontractor for assistance in obtaining the specific subcontract. The USACE placed this individual on administrative leave pending outcome

of the investigation.

THE MOST FREQUENTLY VIOLATED STATUES (cont’d)

• 18 U.S.C. 1905 TRADE SECRETS ACT– prohibits unauthorized release of any

information a Federal employee receives confidentially in the course of employment.

• 18 U.S.C. THEFT, EMBEZZLEMENT OR DISTRUCTION OF PUBLIC MONEY PROPERTY OR RECORDS -

– prohibits the theft, embezzlement or destruction of any money, property or records of the U.S. or the receiving or concealing of such.

Contract Fraud Contract Fraud Case StudyCase Study::

February 2000 --An individual was sentenced to 4 months home detention, 3 years probation, and ordered to pay restitution of $25,000. He previously pled guilty to conversion of money by an employee of the United States. This person was formerly employed by the U.S. Army Corps of Engineers, Los Angeles District, as the resident engineer on the Santa Ana River Mainstem Project, a flood control project funded jointly by the Federal and local county governments. He used his authority to cause contractor payments of $25,000 to be diverted to himself.

THE MOST FREQUENTLY VIOLATED STATUES (cont’d)

• 41 U.S.C. 51, 54 - ANTI-KICKBACK ACT-– prohibits the payment of any fee,

compensation, gift or gratuity from a subcontractor to a prime contractor on any negotiated Government contract

• 15 U.S.C. 1 - SHERMAN ANTITRUST ACT -

– prohibits any agreement to restrain trade in interstate commerce and includes price fixing, bid rigging or bid rotation schemes.

ANTITRUST VIOLATIONS

COLLUSIVE BIDDING AND PRICE FIXING, BID RIGGING:• commonly these terms are used

interchangeably.• these terms describe many forms of illegal

anti-competitive activities.• the commonality is that they involve either

formal or informal agreements among independent competitors which limit competition.

ANTITRUST VIOLATIONS

Indicators:• qualified bidders fail to submit bids or

proposals.• certain contractors continually bidding

against one another and certain contractors do not.

• successful contractors repeatedly subcontract to companies that submit higher priced bids or proposals.

ANTITRUST VIOLATIONS

Indicators (cont’d)• apparent pattern of low bids occurring in a

specific geographic location.• failure of an original bidder to rebid or an

identical ranking of bids or proposals.• appearance of identical calculations or

spelling errors in two or more competitive bids or proposals.

ANTITRUST VIOLATIONS

Indicators (cont’d)• competitors regularly socializes or holds

meetings shortly before bid openings.• bid or proposal prices drop whenever a

new offeror submits a bid or proposal. • assertions by employees or former

employees that bid rigging practices exist.

INDICATORS OF FRAUDINDICATORS OF FRAUDDuring Contract PerformanceDuring Contract Performance:

• Contractor that is not using proper material as required in the contract (i.e. cutting corners)

• Not performing work requirements to proper standards in the contract (i.e. improper testing)

• Work not being done in accordance with contract (Statement of Work (SOW) requires two days of service and contractor works only one)

PRODUCT SUBSTITUTION

Refers to attempts by contractors or subcontractors to knowingly deliver supplies or services that do not conform to the contract requirements.

Product substitution sometimes involve Government employees - a bribe or a gratuity accepted by a Government inspector for accepting a nonconforming supply or service.

PRODUCT SUBSTITUTION

Product substitution possibilities are greater when the Government relies on the contractor’s integrity to ensure that the Government receives supplies or services that are in conformance with the contract requirements i.e., Standard Inspections

Product Substitution

A report published by the DoD IG reflected that in 22 of 24 DoD product substitution investigations, the contractors intentionally and knowingly delivered or planned to deliver products that were not in conformance with contract requirements.

Product SubstitutionCases of product substitution include

Inferior quality raw materials Materials not tested as required Providing inferior foreign made products

when US made products were required Using untrained workers when skilled trained

workers were required

Product SubstitutionIndicators of Product Substitution

Switching Products after Inspection False Test Data Failure to Test Buy American Act Violations Misrepresentation to avoid Inspection Substandard Raw Materials

CONTRACT FRAUDCASE STUDY:

A company located in Auburn, NY was awarded a contract, which required specific performance testing or igniters used in Military Aircraft. The company elected to alter the product by painting on a graphite and kerosene mixture to insure positive test results. Once discovered it was determined the altering of the product had shortened the life of the igniters by half. These igniters sole purpose was to ignite a stalled engine.

RESULTS: In lieu of criminal prosecution a civil settlement was reached in which the contractor agreed to pay $600,000.00 in damages. The contractor was also required to agree not to engage in certain practices underlying the fraud claims.

CONTRACT FRAUDCASE STUDY:

A company out west falsely represented that the values it provided for the safety eject system for the F-4 Jet was manufactured by an approved source. Investigation revealed the values supplied by the company were manufactured using outdated specifications and could have resulted in serious injury or death. Further it was determine that the company also supplied defective nozzles for fire equipment that was determined to have a 70% failure rate. This resulted in a loss to the Government of $433,254.00.

RESULTS: The president of the company entered a plea of not guilty. The jury found him guilty and sentenced him to 15 years confinement and ordered him to pay the $433,24.00 in restitution.

CONTRACT FRAUDCASE STUDY:

A company was awarded numerous contracts for the production of .45 caliber pistol barrels, breach bolts for the M-60 and M-85 machine guns, and guidance fins for the Sidewinder missile, the primary air-to-air missile used by U.S. Fighter pilots. The contractor was suppose to heat treat the parts, test fire the parts, and perform magnetic particle inspections on each part following the test fires, to ensure that the parts were free of defects. Investigation determined the contractor failed to perform the required testing firing and magnetic particle inspections and did not properly heat treat the parts. Instead the Corporate Officer instructed that falsified test certifications reflecting the tests results confirmed to contract specs be submitted. This resulted in a loss to the Government of $500,000.00.

Results: The Corporate Officer plead guilty to conspiracy to defraud the government. He was sentenced to 6 months confinement, 4 1/12 years probation and the company was ordered to pay $890,000.00 in restitution.

CONTRACT FRAUDCASE STUDY:

A contractor located in Owego, NY submitted false statements and false claims, when they failed to perform required quality test for residual chlorides on vendor supplied dip brazed parts. These parts included circuit boards and AP-102 control boxes (traffic cops for helicopters).

Results: In lieu of criminal charges a civil settlement agreement was reached where the contractor paid $200,000.00 for failure to complete the required testing. Additionally, an extended warranty valued at $500,000.00 for repair and/or replacement for any parts which failed to function IAW the performance requirements as a result of the residual chloride.

CONTRACT FRAUDCASE STUDY:

A contractor was awarded a $2.5 million Army contract for the manufacturing of artillery shell parts, specifically a steel column segment as part of a metallic and non-metallic hardware set, which is a component of the 155 mm howitzer shell. The contract required the components be of a specific hardness, so there was a built-in cost for the hardness. The contractor requested and obtained additional funding to allow for the needed heat treatment, which verifies the hardness. The contractor then elected to skip the heat treatment and instead obtained the parts from a vendor, who purported the parts in their Certificates of Conformance (COC) to meet the desired hardness.

Results: Contractor fined $70,000.00 and order to make restitution of $326,000.00. The President was sentenced to 3yrs confinement and fined $5,000.00.

CONTRACT FRAUDCASE STUDY:

A contractor who manufactures castings primarily used in aerospace applications. The castings are tested for external defects, such as surface cracks, using magnetic particle or flourescent penetrant process. The castings are classified Class 1-4, with Class 1 being most critical and requires a 100% x-ray inspection. Any failure at 100% then the part must be discarded. Class 2 and 3 require sampling. Class 4 parts do not require x-rays. When the contractor tested 2 & 3 parts and they initially failed, they replaced defective parts and re-shot the x-rays. They continued this until the entire sample lot passed. Only passing x-rays were maintained. On occasion the contractor returned defective parts to the lot which were shipped to the customers, with false certifications, indicating the parts were properly tested.

Results: Contractor pled guilty to 3 felony count of mail fraud and paid $1.5 million in fines.

Contract FraudPoints to Note:

Contractor oversight is key to getting the product that the government is purchasing.

The more fraud indicators (inferior materials, not completing scope of work , etc.) under a particular contract the greater the likelihood that the contractor is committing fraud against the government.

Report potential fraud immediately to your supervisory staff and your local CID office!

IMPAC Cards

IMPAC Card Fraud:

Merchant or Vendor

Cardholders

IMPAC Card Fraud IndicatorsCARDHOLDER

unauthorized use of credit card (i.e. personal purchases)

exceeding purchasing limits ($2,500)

splitting purchases to remain below $2,500 limit

IMPAC Card Fraud IndicatorsMERCHANT or VENDOR

unauthorized purchases on the card

conspiring with cardholders to make purchases that appear legitimate through submitting receipts, etc.

IMPAC Card FraudPoints to Note:

With an increase in use of credit cards government-wide there are increased opportunities for credit card fraud to occur--particularly in more remote sites with little oversight.

Difficult to identify these frauds which may appear “invisible” to the system.

There are always ways around the system for those motivated to steal the government’s resources (i.e. paper documents can be forged or falsified).

No Agency is immune from FRAUD. Review monthly statements and report questionable activity

immediately to your supervisory staff and your local CID office!

IMPAC Card Fraud Case Study:

March 2000---An individual pled guilty to theft of Government funds. An investigation determined this individual, chairman of the Armed Forces Sports Office, Arlington, VA, falsely charged expenses to his Government I.M.P.A.C. credit card and accepted kickbacks totaling $16,303. He used false receipts and invoices issued to various vendors to obtain cash from his account.

Operational Issues

Operational Issues:

Time Card Fraud

Concessions/Ticket Booths

Timber Harvesting

Illegal Dumping

Time Card Fraud Time Card Fraud

Operational IssuesTime Card Fraud:

Employees that clock in at the job site and leave for a large portion of the day only to return to clock out.

Employees putting in for overtime when it was not worked.

Concession/Ticket Booths

Operational IssuesConcessions Contracts/Ticket Booths:

Do a daily cash count of money received and compare to receipts or tickets issued--look for discrepancies.

Is the same persons cash box/register consistently short? Some cash sales may not be punched on the register. Don’t leave the cash box/register unattended. Keep cash locked and secured at all times. Since the government may get a portion of the proceeds the

concessionaires may under-report sales to avoid payment to the government.

Case StudyConcession Contracts: The sales manager of Loe's Highport, Inc., Pottsboro, TX, was found guilty of

defrauding the Government through schemes to conceal substantial amounts of income. Loe's Highport, Inc., leased land on Lake Texoma from the Tulsa District Corps of Engineers where they owned a commercial concession that included over 950 boat slips, nightclubs, retail stores, as well as boat sales and repair services. This U.S. Army Corps of Engineers (USACE) marina is the largest inland marina in the continental United States. Under terms of the lease contract, Loe's Highport, Inc., was required to pay the USACE a percentage of total receipts (gross income) from the business operations conducted on the premises. Between 1990 and 1995, Loe's Highport, Inc., and the corporate principals, conspired to under-report more than $18 million in boat sales and other gross income to the USACE. The under-reporting of income also resulted in the filing of false income tax returns on the part of these subjects. This individual is currently serving a 6½-year sentence in Federal prison and his conspirator is serving a 2-year sentence. They were also ordered to pay fines,

restitution, penalties and forfeitures of approximately $13 million.

Illegal Dumping

Operational IssuesIllegal Dumping:

Known as “midnight dumping” Disposal of waste in an unpermitted area May contain hazardous and/or nonhazardous materials Usually occurs in locations that are close enough to

metropolitan areas but remote enough that the risks of being discovered are minimal

Motive of the dumper is to avoid disposal fees or the time and effort of proper disposal

Operational IssuesIllegal Dumping:

If you are overseeing a government contract that requires demolition or disposal of debris be thinking about where the material is going.

Make sure that the contractor is not disposing of it illegally on government property and avoiding contract responsibilities for disposal.

Operational IssuesIllegal Dumping:

Materials dumped typically include:

• construction and demolition waste (such as drywall, roofing shingles, bricks, concrete, etc.)

• auto parts, scrap tires, abandoned autos

• furniture

• white goods (appliances)

• medical waste

• yard waste

• furniture

• household trash

Operational IssuesIllegal Dumping:

Illegal Dumpers can include the following:• construction, demolition, remodeling, roofing, or

landscaping contractors• waste management companies or general hauling

contractors• automobile repair or tire shops• scrap collectors• operators of transfer stations or junkyards

Operational IssuesIllegal Dumping:

What factors contribute to the problem?

• Physical Characteristics• unsecured properties• poorly lit access roads• remote locations

Operational IssuesIllegal Dumping:

If you observe an illegal dumper you should:• attempt to identify make, model, and license plate of

vehicle• get a physical description of the subject(s)• make a note of phone numbers, business names on side

of vehicle (if it is a commercial vehicle)• report to supervisory staff and law enforcement channels• attempt to not disturb the scene

Operational IssuesIllegal Dumping/Case Study:

September 1997 -- In U.S. District Court for the District of Oregon in Portland, an individual pleaded guilty to two counts of criminally transporting and disposing of ignitable hazardous waste in violation of the Resource Conservation and Recovery Act. In 1994, he was hired by C&I Coatings Inc., a paint company in Portland, to dispose of 21 drums of ignitable hazardous waste that had accumulated on site. The individual transported and illegally stored the drums at a residence near Junction City, Ore. A year later, he again transported and abandoned the drums at two sites -- one owned and managed by the Bureau of Land Management (BLM).

SUMMARY FORDETECTING FRAUD

DETECTING FRAUD

-Identify high risk areas (these may differ depending on your work location or job duties)

-Maintain an attitude of “professional skepticism”

-Learn to distinguish situations which may involve fraud (honest mistake vs. potential fraud)

REASONS FOR FAILINGTO DETECT FRAUD

-Failure to review high risk areas because they are considered not “material”

-Not aware of fraud indicators

-Accepting, without verification, explanations of apparent problems

-Don’t want to find fraud (It couldn’t happen here!)

Questions

?

Who We Are

Syracuse Fraud RA Tel: (315) 449- SA Pete Seguin ext:

1609 SA Mark Parah ext:

1509 SA Don Patterson

ext: 0782 Fax: (315) 449-1610