Fraud Convictions and Settlements Won't Staunch Flow of Pentagon Contract Dollars

A new Pentagon report finds that the Department of Defense (DoD) has awarded hundreds of billions of dollars to companies found guilty of, convicted of, or that settled charges of contract fraud. In total, DoD awarded $1.1 trillion to these companies and their parent companies.

The report found that from 2000 to 2010, DoD awarded more than $250 million to 54 companies that were convicted of a crime in connection with a DoD contract. It awarded $33 million of that to companies after they had been convicted. At the same time, DoD awarded more than $570 billion to more than 300 companies that were found liable or settled charges of a civil violation in connection with a DoD contract. In regard to civil wrongdoing, it appears DoD was much more forgiving: nearly $400 billion of the total was awarded after the companies had settled or were found liable.

POGO's Scott Amey issued a statement this morning, pointing out that the report confirms what we already knew about the consequences for defense contractors accused of fraud: they're basically nonexistent.

Since fiscal year 2001, DoD has awarded nearly $400 billion in subsequent contracts to companies that were accused of fraudulent practices that led to criminal convictions, civil judgments, or out-of-court settlements.

The vast majority of these contractors were not suspended or debarred by DoD. The amount of money given to these companies is staggering, but what is really mind-boggling is the willingness of the DoD to provide additional taxpayer dollars to the same bad actors again and again.

Senator Bernie Sanders (I-VT), who requested the report, said it highlighted fundamental problems with the Pentagon's procurement approach:

"The ugly truth is that virtually all of the major defense contractors in this country for years have been engaged in systemic fraudulent behavior, while receiving hundreds of billions of dollars of taxpayer money....It is clear that DOD's current approach is not working and we need far more vigorous enforcement to protect taxpayers from massive fraud.

His office also noted that the Pentagon appears to be singing a different tune than it did after it published preliminary findings on contract fraud in January:

The Pentagon said sanctions already are in place. "It is not clear, however, that these remedies are sufficient ... to deter and punish fraud when it is detected." That tone was different than what the Pentagon said in a preliminary report last January, which declared that ‘the department believes that existing remedies with respect to contractor wrongdoing are sufficient."

Over on Battleland, Time Magazine's Mark Thompson pointed out that there was something all too familiar about the report's accompanying list of contractors that have been convicted of fraud or have settled cases alleging it:

Funny thing about that second list: it looks an awful lot like the annual roster of the Pentagon's top contractors.

Read the report for yourself here and find accompanying tables showing criminal convictions; civil settlements & judgments; parent company obligations, and data on suspension and debarment from the government's Excluded Parties List System—much of which is "not found"—here.

Sen. Sanders' office has also prepared a helpful summary of the report.

Now might also be a fine time to check in with POGO's Federal Contractor Misconduct Database, which we just updated.