Monday, June 23, 2014

Plea Agreement in Timecard Fraud

The Tri-City Herald reported last week that a former DOE contractor employee has plead guilty to timecard fraud. That former employee, according to the plea agreement now faces four months in prison, three years of probation, a $20 thousand fine, and has agreed to cooperate with prosecutors in trials of other defendants in a huge timecard fraud scheme.

The timecard fraud is not a new story. We reported on it more than a year ago when the allegations were first reported. See here and here, for example. The contractor has already settled up with the Government on its role by paying back $18.5 million. However, the Justice Department is pursuing criminal fraud charges against 10 employees who also participated and personally benefited from the scheme.

This case involved payments of overtime for hours not worked. At the DOE site, overtime was voluntary but in order to get workers to volunteer for overtime, the contractor promised them eight hour shifts, regardless of how long it took to perform the actual work. In many cases. the work did not require the full eight hours so employees left their work sites early, while still charging the Government for eight hours of overtime work. Additionally, timecard fraud occurred during regular shifts when it was noted that a "steady stream of workers" began leaving work at 2:30 p.m. for shifts that should have lasted until 4:30 p.m.

One very interesting disclosure that wasn't reported earlier (or at least we didn't pick up on it from earlier news accounts and DOJ press releases), was the Government's use of GPS devises. The Tri-City Herald reported:
Global positioning system surveillance showed the workers were not at Hanford during those hours.
That can only mean one thing - Government investigators planted tracking devices on the individuals or their automobiles - most likely their automobiles. That, in our mind, is a little bit scary. There must have been probably cause for a judge to approve that tactic.

One of the failures in this case was the lack of effective oversight by contract auditors. DOE representatives told us that DCAA, who had been performing contract audits on behalf of DOE for many years, completely botched their risk assessment. Even at DOE's behest, DCAA would not focus on areas where DOE felt the highest risk. This was a contributing factor into DOE effectively firing DCAA for its contract audit effort. Instead, DOE now contracts primarily with commercial firms for its contract audit services.

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