According to the government’s complaint, between April 2004 and December 2008, DynCorp knowingly allowed subcontractors Corporate Bank Financial Services and its affiliate, Sandi Group, to charge “excessive” and “unreasonable” rates for support services they provided on the State Department’s civilian police (CIVPOL) contract to train Iraq’s civilian police force. The government alleges DynCorp also added its own markup to the subcontractors’ inflated bills. The complaint states DynCorp ultimately received more than $135 million for the subcontractors’ services—lodging, translators, trainers, security guards, and drivers—but it does not specify how much of that resulted from the alleged fraud.
Something about this case sounded familiar, so we checked our Federal Contractor Misconduct Database. Sure enough, we found an instance from five years ago when DynCorp paid $7.7 million and Sandi Group paid $1 million to settle another False Claims Act lawsuit involving the CIVPOL contract. That lawsuit, filed by two ex-Sandi Group employees, alleged DynCorp submitted inflated invoices for construction services and Sandi Group billed for hazard pay its employees in Iraq never received.
Both lawsuits offer reasons why this particular contract has such a troubled history.
The first reason is simple greed. According to the recent government complaint, “DynCorp’s senior management…viewed Corporate Bank as a ‘strategic partner’ that would help DynCorp grow its business in Iraq and elsewhere.” As a result, “DynCorp chose to protect its relationship with Corporate Bank at the expense of the public fisc.” The prior lawsuit’s complaint likewise alleged “DynCorp feared that reporting or even restraining Sandi might jeopardize DynCorp’s own CIVPOL performance, and risk the loss of a billion-dollar prime contract.”
Another reason for this repeated abuse is the State Department’s awarding of CIVPOL task orders to DynCorp on a noncompetitive, sole-source basis. According to the government, DynCorp, in turn, awarded the subcontracts without seeking other bids, even though it knew Corporate Bank/Sandi Group had “contract performance issues” including the “inability to perform basic administrative functions, including accounting for costs and submitting timely and accurate invoices.” In the tumultuous environment of Iraq after the U.S. invasion, when oversight was often lacking, a sole-source contract was an open invitation to fraud and other abuses.
DynCorp’s subcontractors have run afoul of the government before. In 2013, the Department of Labor fined The Sandi Group/Corporate Bank Financial Services $75,000 for failing to timely report the injuries and deaths of 30 employees in Iraq between 2003 and 2005.