Thursday, June 4, 2015

Obstructing a Federal Auditor Could Cost You Fines and Prison Time

An Army contracting officer working for the Army Contracting Command - Redstone is in a heap of trouble for obstructing a federal auditor. Her arraignment is set for later this month, at which time she will plead guilty.

18 USC 1516 - Obstruction of Federal Audit makes it unlawful to obstruct, or attempt to obstruct a federal auditor. The statute dates back to 1988 during a time when the Government was auditing significant allegations of contractor fraud, waste, and abuse. We don't know how often this statute has been used to prosecute audit obstruction cases but probably not often.

The Statute states:
Whoever, with intent to deceive or defraud the United States, endeavors to influence, obstruct, or impede a Federal auditor in the performance of official duties relating to a person, entity, or program receiving in excess of $100,000, directly or indirectly, from the United States in any 1 year period under a contract or subcontract, grant, or cooperative agreement, ... shall be fined up to $250,000 for an individual or $500,000 for an organization or imprisoned not more than 5 years, or both.
For purposes of this section, the term Federal auditor means any person employed on a full or part-time or contractual basis to perform an audit or a quality assurance inspection for or on behalf of the United States.
 The defendant was a contracting officer assigned to the Army Contracting Command - Redstone (ACC-Redstone). Company 1 was a US company located in Alabama that contracted with the Government. Company 2 was a Lithuanian company that subcontracted with Company 1.

In September 2011, ACC-Redstone awarded a $9 million task order to Company 1 to perform cockpit modifications on Russian -made Mi-17 helicopters. In April 2011, ACC-Redstone modified the contract by $12.8 million for overhauling five Pakistan Mi-17 helicopters. In May 2011, the defendant modified the contract again, this time adding $9 million for replacement parts in the event that parts on the aircraft could not be overhauled.

In September 2011, Company 2 submitted to Company 1 a list of parts it proposed to provide Company 1 under the parts contract. The proposed price was $7 million. In December 2011, Company 1 submitted submitted to the defendant a proposal to purchase the parts set forth on that list at the quoted prices. Company 1's proposal was in excess of $8 million and consisted of $7 million to be paid to Company 2 plus other fees.

No written analysis was ever performed by Government personnel as to whether the parts on Company 1's December 2011 proposal were needed and/or would be needed and/or whether the prices Company 1 proposed paying Company 2 for those parts were fair and reasonable. The Government paid Company 1 approximately $8 million in 2012.

In December 2011, the Department of Defense Office of Inspector General (DoD-IG) began an audit of the contract to determine whether the Government paid a reasonable price for the parts, whether the parts that were purchased were needed, and whether the contracting officer and contracting personnel followed correct contracting procedures in connection with executing and implementing the parts contract.

Between January and August 2012, the defendant, with the intent to deceive and defraud the US, endeavored to influence, obstruct, and impede a Federal auditor, that is, auditors of the DoD-IG in the performance of their official duties.

In June 2012, the contracting officer directed a contracting specialist to prepare a pre-negotiation objective memorandum and back date it to May 6, 2011 and to prepare a price negotiation memorandum and back date it to May 7, 2011. There were many other altered documents as well. The dates on Company 1's price proposal was altered. So were the dates of a Government technical evaluation.

The statute was originally intended to prevent contractors from obstructing an audit. Here, it has been used to prosecute a Government employee who obstructed an audit.

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