Crooked contractors fall prey to greed
Stephan Boggs of Clintonville was confident the 41-cent nut made of zincplated carbon steel would work just as good as the $6.62 cadmium-plated stainless-steel nut the government engineers wanted.
The nuts were critical items because they were for the the catapult and arresting gear for planes taking off and landing on aircraft carriers. Government engineers specified cadmium-plated nuts because they withstand the salt-water environment.
Jerome Rabinowitz of Great Neck, New York, sold the U.S. decades-old, surplus military parts instead of new electronics for use in aircraft and submarines.
Both are contractors who cheated the Department of Defense, got caught and were sent to prison for “procurement fraud.”
Boggs and Rabinowitz were tried in federal court in Columbus because their contracts were written by the Defense Logistics Agency at the Defense Supply Center in Columbus.
Rabinowitz, 74, was released from prison in 2016 after four years; Boggs, 64, was sentenced to two years in prison in June 2017. Rabinowitz was ordered to pay the government $492,000 in restitution; Boggs must pay $280,000.
Sean Clayton, Columbus resident agent-in-charge for the Defense Criminal
“Such disregard for the safety and performance of his own country’s soldiers should not be taken lightly.”
— Assistant U.S. Attorney Mike Marous, in a sentencing memorandum
Investigative Service, said greed is one reason a contractor will risk the lives of troops at home and in war zones with substandard or nonconforming parts.
“Instead of making 50-cent profit on a part, they make $5,” said Clayton, who oversees DCIS special agents in Ohio and the eastern sections of Michigan and Kentucky.
He discovered another motivation after interviewing unscrupulous contractors.
“I think they’ve lost sight of why they got into this in the first place,” he said.
Most contractors want to do the right thing, Clayton said. “They have the American flag hanging up in their warehouse. Their employees know they’re supporting the sons and daughters out there.”
But things happen in people’s lives, he said, such as a divorce or a downturn in business, that to them justifies cheating the government, Clayton said.
“Once you rationalize it to yourself, you’re not thinking about the soldier on the battlefield,” he said. “You’re thinking about yourself.”
Clayton said he doesn’t know of a time when military personnel were killed or injured because of the wrong part. That might be difficult to determine, he said.
He investigated a case in which a cannon barrel exploded on a firing range because a contractor supplied the wrong ammunition.
“It just went up the barrel and exploded inside,” he said. “Fortunately, no one was injured.”
Assistant U.S. Attorney Mike Marous prosecuted Boggs, as he does most local procurement-fraud cases.
“Such disregard for the safety and performance of his own country’s soldiers should not be taken lightly,” he wrote in his sentencing memorandum to the court.
Boggs testified during his trial, “Do you not consider me an expert?” Marous said that illustrated Boggs’ lack of remorse. A jury convicted him on all 25 charges.
Boggs had been a “trusted” contractor after years of supplying equipment. It wasn’t until one of his parts was randomly tested in the field that he was investigated. DCIS found that 46 of his contracts between 2010 and 2014 involved nonconforming parts.
“The functioning of the process depends on the integrity of those who do business because the volume is so big,” Marous said. It’s also why, he said, “I have an unlimited supply of cases.”
The temptation is great for contractors, he said. “If they were in the private marketplace, they would have markups of 5 and 10 percent. In a lot of these fraud cases, I’ve seen markups of 50 and 60 percent because they were able to get outdated parts from surplus dealers and parts from overseas.”
He said competing contractors will tip off officials to possible scams. “They’ll say, ‘There’s no way Joe Smith could have supplied that part for the price.’”
Sometimes a government employee is the focus of an investigation, Clayton said..
“They’ll release information to a contractor on the side, or they’ll look the other way when they know that part is not made to specifications,” he said.
In addition to procurement fraud and counterfeit parts, the DCIS investigates public corruption, fraud against Tricare — which provides civilian health-care benefits to active-duty and retired military personnel and dependents — and the illegal transfer of sensitive technology.
The Department of Defense operates the Fraud, Waste and Abuse Hotline: 1-800-424-9098 or www. dodig.mil/hotline, which received 7,030 contacts from Oct. 1, 2016, to March 3, 2017. Plant workers have called when they learn nonconforming parts are being made. Contractors call to snitch on other companies, or to make sure they’re providing the correct part.
During the same period, DCIS nationwide worked 1,593 ongoing investigations, opened 227 cases and closed 250 cases. So far this year, the agency has reached $1 billion in “recoverables,” which involve fines, the value of forfeitures, penalties and civil settlements or avoidance of prosecution.