Thursday, May 26, 2016

Buy American Act and Berry Amendment Act Violations

The Buy American Act is a law requiring the Federal Government to buy domestic articles, materials and supplies, primarily to protect American labor. The Berry Amendment prohibits the Defense Department from spending its funds on clothing, fabrics, fibers and yarns that are not grown, reprocessed, reused or produced in the United States. The purpose of the Berry Amendment is to protect the viability of the textile and clothing production base in the United States. The Buy American Act is included in contracts by FAR Clauses 52.225-10, -11, and -12 as applicable. If you have a DoD contract, the Berry Amendment is incorporated as DFARS (DoD FAR Supplement) 252-225-7012.

Unlike many contract clauses that are seemingly for "show", the Government takes these two prohibitions and restrictions very seriously, as one, Mr Burnett can now attest to.You see, Mr. Burnett was awarded contracts to supply the Army Recruiting Command to supply hundreds of thousands of baseball caps and backpacks for promotional items to be given to recruits. Between 2005 and 2009, Mr Burnett received three contracts worth $6.2 million. Not only were the Buy American Act and Berry Amendment Act clauses in Mr. Burnett's contracts but they also included the phrase, in capital letters, that the "Product must be 100% U.S. Made."

Once Mr. Burnett had his contracts, instead of providing American-made products, he negotiated and contracted directly with suppliers from China and with American companies who he knew were procuring the products from China. He used Chinese-made products to fill orders under all three contracts. Here's how he hid the fact that the baseball caps and backpacks were produced in China. He hired workers on a cash basis to remove all the Chinese labels and repackage the items that he sent to the Army recruiting command.

After the award of the second baseball cap contractor, a competitor protested the bid, claiming Burnett could only bid so low if he were using foreign suppliers. When the Government looked in to the matter, Burnett submitted documentation - fraudulent documentation - that he was using only American-made products and that he would comply with all aspects of the Buy American Act and the Berry Amendment.

Mr. Berry has now been indicted by a Grand Jury and the indictment seeks to have Burnett forfeit all $6.2 million the Government paid him as proceeds from illegal sales. He also faces a maximum penalty of 20 years in prison and a $250 thousand fine.

The Department of Justice press release on this matter can be read here. It does not mention how the    suspected fraud came to the Government's attention.

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