A former employee of a U.S. Government contractor in Afghanistan pleaded guilty earlier this month to accepting over $250 thousand in kickbacks from an Afghan subcontract. What did this Government contractor employee have to do to get his $250 thousand kickback? He assisted the subcontractor in obtaining subcontracts - the classic kickback scheme.
The employee admitted that he and an Afghan executive agreed that in exchange for illicit kickbacks, the employee would ensure that the Prime Contract awarded lucrative subcontractors to the executive's companies. The employee repeatedly told his supervisors that these companies should be awarded sole source subcontracts, which allowed them to supply services to the prime contractor without have to competitively bid on them.
The kickbacks represented roughly 15 percent of the subcontract values. The employee carried the cash payments back to the States himself and began depositing them in amounts less than $10,000 to avoid scrutiny.
As typical of Justice Department press releases, unless there is a whistleblower involved, there was no indication of how the fraud was uncovered.
Similar to yesterday's fraud posting, this incident screams a lack of internal controls. Obviously there was insufficient sole-source justification to award subcontracts to the particular Afghan subcontractor. The guy told his boss that they needed to be awarded sole source. What kind of purchasing policy is that? Where is the inherent internal control that would catch this kind of scheme. Was the boss culpable as well? What was the contractor paying the boss's salary for if all he does is nod when someone comes and tells him something.
Contractors, if you're not focusing on internal controls in your organization, you could be the next one fighting off a criminal investigation.
You can read the full Justice Department Press Release here.
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