Thursday, July 13, 2017

Poor Internal Controls Leads to Theft of Government Property

All Native Group (ANG) is the federal contracting division of Ho-Chunk, Inc, the economic development corporation of the Winnebago Tribe of Nebraska. Besides being tribally owned, ANG carries SBA 8(a) certifiication, small disadvantaged, and a HUBZone status. They provide a wide range of services to the Government including staff augmentation, editorial services, IT, logistics, and professional services. One of ANG's contracts is with the Department of State (DoS) to provide training at the State Departments Diplomatic Security Interim Training Facility in Summit Point, West Virginia.

In 2011, All Native Group hired Richard Millette to be a "special-skills tactics instructor. Earlier this month, Mr. Millette was indicted by a Federal Grand Jury on theft charges (an indictment, of course, is only an accusation. A defendant is presumed innocent unless and until proven guilty). It seems that Mr. Millette was stealing (i) ballistic vests and (ii) combat helmets from the State Department's inventory and selling them online and trading them for other items. The thefts occurred in 2016.

The stolen equipment was found posted for sale on a Facebook private-group page titled "Shooters Lounge". The name on the Facebook account used to post the items for sale was not Mr. Millette's but an investigation determined that the photos accompanying the listings were taken from Mr. Millette's office desk. Additionally, the items were marked with the State Department's information tags.

State Department special agents obtained a search warrant and went to Mr. Millette's house and found the stolen equipment - equipment that had been used by instructors for training exercises and safety demonstrations. One of the ballistic vests contained the identification of a former State Department employee.

Initially, Mr. Millette claimed that he obtained some of the equipment from the company that produced it because he was trying to start his own self-defense company. The equipment manufacturer however refuted that claim.

The Fraud Triangle is a model for explaining the factors that cause someone to commit occupational fraud. It consists of three components which together, lead to fraudulent behavior. These three components include (i) perceived unshareable financial need, (ii) perceived opportunity, and (iii) rationalization. We don't know enough of the facts of Mr. Millette's case to frame it against the fraud triangle. However, one thing is clear - there was opportunity and that opportunity was no doubt a result of poor internal controls over the accountability of Government property by All Native Group. Good internal controls would have reduced the "opportunity" risk.

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