Green Grants and Grantees are now in #GFPFE crosshairs and there is no bag limit

The Economist’s handy graph showing the breakdown of the Trump Administration’s Proposed Budget shows in stark budgetary terms what US government agencies are facing.  I have reviewed the proposed budget and have concluded that it is the strongest indicator yet that the Trump Administration intends to reinvigorate Grant Fraud and Procurement Fraud Enforcement (#GFPFE).  The graph shows a change in overall agency funding and portends an intra-agency reorientation that is likely to effect grantees or contractors that have been awarded or are currently working on Grants or Contracts awarded by Environmental Protection Agency (EPA) or Department of Energy (Energy).

Let’s review:

  • Review and Recap of Current Posture:

I have previously laid out  here out about why conditions are perfect for a renaissance in Grant Fraud and Procurement Fraud Enforcement (GFPFE). I took the Department of Energy’s enforcement temperature here, I looked at an EPA-OIG audit of laboratories here, and I noticed a NASA-OIG audit announcement of ground and ocean temperatures here. Last week there was an NPR story on case by case review of individual EPA scientists while newly minted EPA Administer Scott Pruitt made statements here questioning the connection between human activity and climate change while raising questions about the measurement of global temperatures. Then a top level EPA transition official, David Schnare, resigned, but not before acknowledging that while ” the vast majority of career staff at the EPA… are dedicated public servants,…there are a small handful “who were definitely antagonistic” to Trump and Administrator Scott Pruitt. “They’re here for some other reason. They’re here for a cause,” he was quoted as saying in The Hill.

  • Presidential Shift in Priorities Always Wins:

EPA career civil servants who think nobility of purpose protects them in the face of an overwhelming Presidential Administration shift in priorities should pay a visit to the Antitrust Division’s field offices in Atlanta, Cleveland, Dallas and Philadelphia (punch line: they no longer exist).  The Antitrust Division Criminal Program’s Senior Litigators, who woke up on 911 in the World Trade Center Marriott, eagerly supported a GFPFE initiative whose purpose was to “protect the supply chain of goods and services to the nation’s warfighter.” Their tireless work and willingness to support other components of USDOJ in GFPFE efforts became a liability when a new Presidential Administration changed the definition of success from number of cases filed to the number of cases not filed (for anyone wanting to learn about the important competition enforcement function Antitrust Division Field Offices performed can start with the dearly departed Philadelphia Field Office’s Chief Robert E Connolly’s column here). The bottom line is Presidential shift in priorities always wins over perceived nobility of purpose of career public servants.

  • Nobility of Purpose in combatting CO2 is going to be challenged

I know it will come as a shock to many, but there are many scientists–legitimate scientists–who do not come to the same conclusions about the connection between rising CO2 levels and rising temperatures.  I have no idea what the truth is, but I recognize that when you have a President and heads of the EPA and Energy who doubt the warming narrative and view expenditures in that regard to be a waste of money. It would behoove everyone in the risk assessment business to understand what they think and read what they read.  If you restrict your news to the Washington Post and the New York Times, you are flying blind.  Worse, your clients will be flying blind. It is important to recognize that the outgoing administration saw this coming and adorned future budgets with global warming money that will be hard to cut out.  That will stimulate efforts to try.

  • Let’s Look At the Proposed Budget for Department of Energy:

The preamble states:

[The Budget] reflects an increased reliance on the private sector to fund later-stage research, development, and commercialization of energy technologies and focuses resources toward early-stage research and development. It emphasizes energy technologies best positioned to enable American energy independence and domestic job-growth in the near to mid-term.

My translation: Grants for developing green technologies are drying up.  No more Solyndras.

The preamble states:

It also ensures continued progress on cleaning up sites contaminated from nuclear weapons production and energy research and includes a path forward to accelerate progress on the disposition of nuclear waste. At the same time,the Budget demonstrates the Administration’s strong support for the UnitedStates’ nuclear security enterprise and ensures that we have a nuclear force that is second to none. The President’s 2018 Budget requests $28.0 billion for DOE, a$1.7 billion or 5.6  percent decrease from the 2017 annualized CR level. The Budget would strengthen the Nation’s nuclear capability by providing a $1.4 billion increase above the 2017 annualized CR level for the National Nuclear SecurityAdministration, an 11 percent increase.

My translation: Grants for development of nuclear energy capabilities and military nuclear applications are back in vogue.  $6.5 billion in clean-up funds will be oriented towards nuclear.  The important factor to consider is that, in all likelihood, this changes the mix of responsive contractors.

  • Let’s look at EPA proposed budget:

The Compliance Assurance budget is lowered to $419 million, which is $129 million below the 2017 annualized CR level. It “better targets” EPA’s Office of Research and Development (ORD) at a level of approximately $250 million, which would result in a savings of $233 million from the 2017 annualized CR level. ORD would prioritize activities that support decision-making related to core environmental statutory requirements, as opposed to extramural activities, such as providing STAR grants.

It supports Categorical Grants with $597 million, a $482 million reduction below 2017 annualized CR levels. These lower levels are in line with the broader strategy of streamlining environmental protection. This funding level eliminates or substantially reduces Federal investment in State environmental activities that go beyond EPA’s statutory requirements.

It eliminates funding for specific regional efforts such as the Great Lakes Restoration Initiative, the Chesapeake Bay, and other geographic programs. These geographic program eliminations are $427 million lower than the 2017 annualized CR levels. The Budget returns the responsibility for funding local environmental efforts and programs to State and local entities, allowing EPA to focus on its highest national priorities.

It eliminates more than 50 EPA programs, saving an additional $347 million compared to the2017 annualized CR level.

My translation: Grants for development of green technologies and reducing CO2 emissions are slashed.  EPA is being oriented around traditional toxins to land, water and air.  Its administration of $100 million to fix Flint Michigan’s water problems and orientation around poisoning will help with the repositioning. 

So while Energy moves onto new contractors for a nuclear spend, EPA moves towards traditional environmental problems and even NASA will now move, happily for many, toward an ambitious space program, all three agencies move away from green and CO2 mitigation programs.  Current contractors and grantees in these areas have a dual problem.  First, the funding in these areas is drying up.  Second, any problems that are found in the award or administration of grants or contracts in these now shuttered programs have a lower risk of causing collateral damage to supporters of the new Administration and they undermine the case against shuttering those programs.  Within the investigative agent community and auditing community examining procurements and grants in these shuttered program areas, investigation carries even lower risk and even higher reward (imagine how an indictment early next week alleging a massive fraud scheme involving a company that had been administering a major grant would be received by the Administration that is looking to justify a shift in funding priorities).  Investigative agents, many of whom in the prior Administration felt professionally stunted because of managerial interference against developing fraud and corruption cases have now been unshackled.  Inquiries that could never blossom into full blown investigations using IG subpoenas and active grand juries can now be taken out from from the back of desk drawers or they can be reopened with the support of career mid-level management looking to take action that will be looked upon favorably when the permanent Inspector General arrives later in the year.

 

People for People (PFP), DOJ-OIG and #GFPFE

By Bradford.Geyer@GeyerGorey.Com

Changes in enforcement priorities dictate when grant irregularities are referred to enforcement agencies.  This case involving People for People (PFP) provides a good example of that principal.  In reviewing the reports and correspondence, it appears that the matter remained bottled up in DOJ OIG-Audit.  Had it been referred to the investigative agents within the agency you can see how the alleged conduct referenced in the 2013 audit report could have stimulated investigation perhaps with the support of a US Attorney’s Office. Here are the report’s conclusions:

“PFP did not fully comply with the grant requirements we tested. We found material weaknesses in PFP’s internal controls, expenditures, drawdowns, FFRs, progress reports, budget, and program performance resulting in the questioned costs totaling $893,445. These weaknesses resulted in PFP providing multiple sets of accounting records during the audit, even though the grants had ended. We found that PFP charged $420,729 to the grant for personnel and fringe benefit costs that were unallowable. We found that PFP charged direct costs of $34,834 to the grant for unallowable expenditures, and $9,631 to the grant that could not be adequately supported. PFP also charged indirect costs of $232,754 to the grant for unallowable expenditures. PFP drew down $195,497 in grant funds in excess of the accounting records. We found PFP could not support the amounts drawn down or reported on the Federal Financial Reports. PFP could also not provide a correct account of grant charges per grant budget category to ensure proper budget management. Additionally, we found that PFP did not have procedures in place to ensure the timely submission of Federal Financial Reports and progress reports, nor did it ensure that progress reports provided supported information. We also determined that PFP did not meet the goals and objectives of the grants.”   

The Grantee here received grant payments from the government for $893,445 based on unallowable and unsupported grant expenditures.  This would have been seen by agents as a major problem. The “multiple sets of accounting records” (whether or not ultimately defensible) would have attracted attention.   Agents might have seen another red flag and opportunity in what seems to be a reference in the audit report to a redacted executive who abruptly exited the grantee.  A quick interview of this exited executive or some interviews around the subject of the exit would be seen as possibly carrying a beneficial reward risk ratio.   We can’t know for sure, but the file doesn’t seem to indicate that agents were copied on the correspondence or reports so they may not have known about it.   

Under many enforcement regimes the conclusions above might have caused an immediate referral  from audit to investigative agents within the OIG and likely to a US Attorney’s Office.  Instead, People for People was permitted to implement what looks like an informal corporate integrity agreement drafted by the government while it was permitted to pay back one half million dollars over a period of years.  As someone who represents grantees I understand how honest, ethical and well-intentioned grantees can find themselves in situations comparable to this one,  but investigative agents within enforcement agencies are rarely persuaded by benign explanations for otherwise suspicious conduct.  I also can see how this result may have been extraordinarily evolved while it maximized public welfare benefits.  It is just I know from first hand experience that agents and prosecutors rarely seem to be motivated by such notions.  

It would be interesting to understand the factors that were considered within DOJ-OIG that dictated that this matter to remain “in house” within an audit component rather than being referred to the US Attorney’s Office or USDOJ Criminal Division.  While patience and forgiveness are wonderful traits we don’t often see those traits exhibited as strongly as they seem to have been exhibited here and matters like these when reviewed by new leadership could contribute to a view that there was somewhat lax enforcement of grant spending in recent years.

Update: DOJ OIG Audit of People for People, Inc., Results in Repayments Totaling More Than $554,000 Department of Justice (DOJ) Inspector General Michael E. Horowitz announced today that People for People, Inc., of Philadelphia, PA, has made cash repayments of more than $554,000 to the DOJ as a result of a DOJ Office of the Inspector General (OIG) grant audit. The OIG’s audit report, which we released in 2013, assessed People for People’s management of two grants from the DOJ Office of Justice Programs (OJP). These grants were intended to fund mentoring programs for children of prisoners. We concluded that People for People had not complied with various grant requirements, and we identified $893,445 in unallowable and unsupported grant expenditures. The report included 13 recommendations to improve People for People’s grant management and address these questioned costs. Since the audit, People for People has worked closely with OJP to implement all of our recommendations for management improvements and provided us with additional documentation sufficient to address approximately $339,000 of the questioned costs. The more than $554,000 in cash repayments announced today were made to address the balance of the questioned costs, which primarily related to expenses for which accounting records were insufficient, salary payments that were unallowable, and payments for rent, telephone bills, and other indirect costs that had not been approved by OJP. The OIG’s August 2013 report is available on the OIG’s website at the following link: https://www.oig.justice.gov/reports/2013/g7013007r.pdf.

 

USDOJ Grants and Grantees now in the Crosshairs

We see continuing signs of reinvigorated grant fraud enforcement.  The latest submisison involves a long simmering dispute that has resurfaced involving corporate fines that are recovered, allocated and spent by USDOJ.  USDOJ grants have been a source of frustration for supporters of the current Administration and some believe that white collar enforcement suffered as perverse incentives encouraged the offsets of criminal cases and terms of imprisonment in favor of large recoveries of fines from corporations (Does anyone from the cartel world recall the furious whispers about this case?).  Now there seems to be Trump Administration-led push to shine a media spotlight on USDOJ grants.  Typically, this foreshadows official actions:

Last night Former Arkansas Governor Mike Huckabee was on Fox News discussing the issue speaking in bellicose terms. This accompanied various news articles that covered various aspects of the dispute.

Today on Fox News there is a lengthy piece on the subject with sub links:

“It’s clear partisan politics played a role in the illicit actions that were made,” Rep. John Ratcliffe, R-Texas, told Fox News. “The DOJ is the last place this should have occurred.

Findings spearheaded by the House Judiciary Committee point to a process shrouded in secrecy whereby monies were distributed to a labyrinth of nonprofit organizations involved with grass-roots activism.”

To see how far some have delved into this issue, check out this google search.  You have to go to less established media sources like this InfoWars article referencing State Department grants to get a sense of where this could lead (some will need to don protective suits–oh what we have to do for risk analysis!).  Since there was not as much reporting as there could have been, it is likely this issue could get significant play now. There is also likely to be a convergence effect when problems in one grant tranch from one agency  spills over into other grant programs.

This latest resurfacing of this issue by White House allies suggests a trend and it will likely add to calls for a significant realignment of DOJ on the left side of the org chart and also in its mission in terms of how it helps victims. Particularly vulnerable to significant reform are CRS, OJP, COPS, Office of Violence Against Women (grants) (biannual report) and Office of Access to Justice.  Obviously, grants and grantees will be a subject of interest as well.

I have referenced a prior DOJ IG 2016 civil case here.  Designating an enforcement priority can change whether a case is criminal or civil because criminal investigation assets redeploy and there is often a multiplier effect because the combination of criminal and civil enforcement assets allows for parallel investigations.  Overnight,  a larger swath of FBI agents start trolling for footholds in grants or procurement areas.  Not good.  When investigators expand the duration or number of grants reviewed, when they send agents to do coordinated interviews while serving grand jury and inspector general subpoenas and when AUSA’s start calling witnesses before traditional grand jury investigations, things can change fast.

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Procurement Fraud and Grant Fraud enforcement programs are likely to be revitalized by the Trump Administration.

It’s no shock that a political change in the Executive Branch leads to an increase in grant fraud and procurement fraud enforcement. The reason? There is low risk in scrutinizing grants and contracts awarded by the outgoing administration. Whatever shenanigans are discovered by a new Administration will have occurred during the term of the previous administration and any negative economic impacts from pulling a grant or imposing a fine, will only impact the grant recipient and, potentially, its subcontractors, who are often presumed by an incoming Administration to have stronger ties to its predecessor.

Imagine you are a high-level Department of Justice official in a new administration positioned to deploy resources toward matters you believe most merit investigation and possible prosecution.  You will need to work on accomplishing the new Administrations mission as well as continue to satisfy your existing management chain with positive results.  What is the best way to move forward in this environment.

The most obvious way is to go after the low-hanging fruit: to aim the enforcement initiative at situations in which there is a high risk/reward ratio. Nowhere in white collar enforcement, is this ratio more favorable than in the realm of grant fraud and procurement fraud enforcement (GFPFE). Contributing to the richness of this area from an enforcement standpoint is that since 2009 the enforcement apparatus adopted a rigid prevention model, decreased the number of federal agents developing cases, increased barriers between the investigations and audit components of the Office of Inspector Generals (OIG’s) and made it more difficult to engage in aggressive or effective GFPFE.[1] This shift away from effective GFPFE in 2009 coincided with the largest spending increase in government history so it stands to reason there will be plenty of cases worth developing.

* * * Click Here for the Rest of the #GFPFE Analysis * * *

 

Department of Energy OIG Enforcement under a Trump Administration

The United States Department of Energy (DOE) is a Cabinet-level department of the United States Government. Its responsibilities include the nation’s nuclear weapons program, nuclear reactor production for the United States Navyenergy conservation, energy-related research, radioactive waste disposal, and domestic energy production. It also directs research in genomics; the Human Genome Project originated in an iniative between DOE, NIH and international collaborators.  DOE sponsors more research in the physical sciences than any other U.S. federal agency, the majority of which is conducted through its system of National Laboratories.

Former Governor of Texas Rick Perry has been nominated as the next Secretary of Energy, and a vote is anticipated in the next few weeks.  April Stephenson currently serves as Acting Inspector General United States Secretary of Energy and will continue to head the department,  unless Secretary Perry makes a change. As a practical matter, DOE is unlikely to get a permanent Inspector General installed for many months. This means that its roughly 70 investigative agents in roughly 12 US cities will engage in enforcement that is somewhat skewed by perceptions about what a future Secretary of Energy will want.  For these reasons, I would project that investigative agents will believe they will ultimately receive more overhead support for investigations developed now.

Based on basic familiarity with DOE contracts and DOE-OIG investigative activity in the past as well as reasonable assumptions about how agents will interpret statements made by Trump Administration officials, I see three primary areas where agents will likely focus current efforts to develop cases:

1) Clean-up Sites.

Clean-up sites are viewed as cash cows with poor oversight.  I have lost track of how many there are, but there are  more than half a dozen prime ones including Hanford, Idaho Falls and Savanah River.  The Hanford site is an example of a site that has had longstanding troubles.  CH2MHill took a hit back in 2013 for an $18.5 million qui tam and, just recently, at the same site, BNI and URS agreed to  pay $125 Million for false claims regarding deficient nuclear quality procurements and improper payments to lobby Congress.  Internal conjecture is that there are more false claims being made at these and at other clean-up sites and it would behoove any companies involved at these sites to brush up on compliance and internally investigate around vulnerabilities or weaknesses.

2) Management and Operational (M&O) Contracts

Management Operations Contractors, whether deserved or not, are a source of frustration to enforcers.  These are huge, large dollar volume contracts that are viewed by enforcers as having poor oversight.  Other sources of frustration is that enforcers believe that they have no visibility with indirect contractors.  This feeling is even generally held in regard to direct contractors where transparency is lacking and contractors are perceived as foot dragging.  Because of lack of appetite in some US Attorney’s Offices for these complex investigations, there was less support in the past few years than perhaps there could have been, but I believe this will begin to change as the Trump Administrations enforcement priorities becomes more clear.

3) Green Grants

Although these are smaller dollar volume contracts, legal theories are easier to fashion around bite-sized grants and the story around each is usually more accessible to prosecutors and potential juries.  There is lingering resentment that politics adversely affected investigations that adversely impacted potential prosecutions (see Solyndra as an often cited example in the opinion of some) and there is a view among enforcers that investigations involving more than $2 billion in green grants and associated loans guaranteed by the government were never pursued appropriately.

* * * * * Here for the Rest of the Story * * * * * 

 

Founder of Non-Profit Charged with Bribing Former Prince George’s County Official in Exchange for Grant Funds

A Maryland man has been charged with bribery and making false statements as part of an alleged scheme to obtain government grants for a charitable organization of which he was the founder. The  case was brought via a criminal complaint filed by the United States Attorney for the District of Maryland. It alleges that the defendant made three annual payments of $5000 each to a member of the Prince George’s County Council to secure annual grants of $25,000 for the Salvadoran Business Caucus, which claimed to award scholarships to high school and college students.
The agent affidavit accompanying the criminal complaint describes conversations  that allegedly occurred between the council member and  the defendant in sufficient detail as to indicate that tape recordings of the conversations exist.
Department of Justice
U.S. Attorney’s Office
District of Maryland

FOR IMMEDIATE RELEASE
Wednesday, February 1, 2017

Greenbelt, Maryland – A criminal complaint has been filed charging

, of Rockville, Maryland, late yesterday with bribery and making false statements in connection with a scheme to engage in bribery in order to influence a public official in the performance of his official duties in Prince George’s County. Ayala’s initial appearance is scheduled today at 1:45 p.m. before U.S. Magistrate Judge Timothy J. Sullivan in U.S. District Court in Greenbelt, Maryland.

The criminal complaint was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge Gordon B. Johnson of the Federal Bureau of Investigation, Baltimore Field Office; Acting Special Agent in Charge Thomas J. Holloman of the Internal Revenue Service – Criminal Investigation, Washington, D.C. Field Office; and Chief Hank Stawinski of the Prince George’s County Police Department.

According to affidavit filed in support of the criminal complaint, Ayala was an accountant and founder of Ayala and Associates Public Accountants in Washington, D.C. Ayala was also the founder of the Salvadoran Business Caucus, a non-profit organization also known as the Caucus Salvadoreno Empresarial, Inc. (CSE). CSE’s website stated that CSE awarded scholarships to high school and college students.

The affidavit alleges that Ayala paid bribes to former Prince George’s County Council Member Will Campos in exchange for grant funding. Specifically, the affidavit alleges that Ayala paid Campos $5,000 for each of County fiscal years 2012 through 2015, in exchange for $25,000 in grants to CSE in each of those years. For example, on August 13, 2014, Campos met with Ayala for lunch in Washington, D.C. During the meeting, Ayala asked Campos what would happen after Campos left his position on the County Council and assumed his position within the Maryland General Assembly. According to the affidavit, Ayala advised, “The arrangement is still on,” and Campos asked if Ayala had anything for Campos. Ayala asked Campos to give him two weeks, and “I [Ayala] call you and I’ll say let’s, let’s have a drink and you know what it’s for.” Campos asked for $5,000, “like last time,” and Ayala agreed.

According to the affidavit, on September 23, 2014, Ayala had dinner with Campos at a restaurant in Silver Spring, Maryland, and discussed the grant money. Specifically, Campos advised that he would push for Ayala to still receive grant money after Campos left office. At the conclusion of the meal, Ayala walked Campos out of the restaurant and allegedly handed Campos an envelope bearing a label for CSE and containing a cashier’s check for half the agreed upon amount. The affidavit alleges that Ayala explained, “I was unable to obtain cash. It’s better like this. This comes from – from a third party who knows me, so it’s better.” Campos joked that Ayala was paying “half now, half later,” and Ayala responded, “I would say that.”

According to the affidavit, on January 8, 2015, Ayala met with Campos at Ayala’s office in Washington, D.C. Ayala reached into his desk and retrieved an envelope. Ayala handed the envelope to Campos, who asked if it was “the rest that we talked about? 2,500?” and Ayala responded, “Yeah.” The affidavit alleges that inside the envelope, Ayala had placed $2,500 in cash.

On January 5, 2017, Ayala was interviewed by federal law enforcement agents. The affidavit alleges that Ayala denied providing anything of value to Campos in exchange for receiving Prince George’s County grant money for CSE. Thereafter, agents showed Ayala still photographs from videos taken while Ayala was making bribe payments to Campos on September 23, 2014 and January 8, 2015.

If convicted, Ayala faces a maximum sentence of ten years in prison for bribery, and a maximum of five years in prison for false statements. An individual charged by criminal complaint is presumed innocent unless and until proven guilty at some later criminal proceedings.

United States Attorney Rod J. Rosenstein commended the FBI, IRS-CI, and Prince Georges County Police Department for their work in the investigation. Mr. Rosenstein thanked Assistant U.S. Attorneys Thomas P. Windom, Mara Zusman Greenberg, and James A. Crowell IV, who are prosecuting the case.

Latest GrantFraud.Com post involves a $200 million credit card fraud scheme

Bradford L. Geyer is reading enforcement agency tea leaves and he is seeing signs of enhanced enforcement involving grant fraud and procurement fraud at grantfraud.com.  His latest note regarding an extensive credit card fraud scheme can be found here.

GrantFraud.Com: Former DHS Employee Inprisoned for Stealing USDA Funds

As part of our effort to track white collar enforcement trends with the new Administration we will be tracking developments in grant fraud enforcement and procurement fraud enforcement over at GrantFraud.Com that is under construction and open.  You may click the title below to see a new USDA grant fraud case filing.  For a variety of reasons that Brad Geyer will be blogging about, we are projecting emboldened grant fraud and procurement fraud enforcement moving forward

Former DHS Employee Sentenced to Prison in Scheme to Steal USDA Funds Intended to Feed Hungry Children & Little Rock Man Pleads Guilty in Same Scheme

 

 

 

CCC: Recommended Blog: “Grand Jury Target”

Recommended Blog: “Grand Jury Target”

I’ve been following a blog for a while that I find informative and interesting: Grand Jury Target: Tracking Federal Prosecutions of Corporate Executives.  The blog is by Sara Kropf, a trial lawyer in Washington, D.C.  A March 8th post was titled:  “Why Are we Falling for the Department of Justice’s Sales Pitch?  The blog recounted Ms. Kropf’s experience at the recent White Collar Crime seminar, including the constant pitches by DOJ officials to rush in to confess.

This approach—to quickly rush to DOJ to win cooperation credit—seems to be the sad reality of current white collar practice when you represent large companies. (Don’t even get me started in the antitrust amnesty program and the problematic incentives that program creates.)

Check out the blog.  I think you’ll be well rewarded for your time.

Thanks for reading this one too!

Big Brothers Big Sisters of America to Pay $1.6 Million to Resolve Allegations of False Claims For Federal Grants

– Big Brothers Big Sisters of America Corporation (Big Brothers) has agreed to pay the United States $1.6 million to resolve allegations of false claims for funds under Department of Justice grants awarded to help children at risk, announced United States Attorney Zane David Memeger and Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. Big Brothers is a not-for-profit organization that provides mentoring services to boys and girls throughout the United States. The organization, originally based in Philadelphia, Pennsylvania, now is headquartered in Tampa, Florida.
Big Brothers is a national organization that acts through approximately 300 independent affiliate agencies across the United States. Since 2004, Big Brothers has received millions of dollars in grants from the Justice Department to support initiatives on behalf of children at risk. As a condition of those grants, Big Brothers was required to maintain sound accounting and financial management systems in accordance with federal regulations and guidelines designed to ensure that grant funds would be properly accounted for and used only for appropriate purposes.
The United States alleges that Big Brothers violated these regulations and guidelines with respect to three grants awarded by the Justice Department from 2009 to 2011, by commingling the grant funds with general operating funds, failing to segregate expenditures to ensure that the funds for each grant were used as intended, and failing to maintain internal financial controls to safeguard the proper use of grant funds. These allegations were documented in a 2013 audit of the three grants performed by the Department of Justice Office of the Inspector General. Since 2013, Big Brothers has replaced its management team and begun implementing policies aimed at correcting deficiencies in its management and accounting of federal grant funds.
“The US Attorney’s office is committed to protecting federal grants and ensuring that the funds are appropriately spent,” said Memeger. “Federal grant recipients must administer these grants with transparency and diligence, and the compliance measures implemented pursuant to this settlement agreement will help to achieve those goals.”

“Organizations such as Big Brothers have an obligation to the populations they serve as well as to the taxpayer to ensure that government grant funds are used for their intended purpose,” said Mizer. “The settlement announced today exemplifies the Department’s commitment to hold those who mishandle such funds accountable.”
“We appreciate the support of the U.S. Attorney for the Eastern District of Pennsylvania and the Civil Division in working with us on these kinds of cases,” said Department of Justice Inspector General Michael E. Horowitz. “The OIG’s auditors and investigators will continue to work with each other closely to uncover misuses of grant funds, and with our law enforcement partners to ensure that justice is served.”
In addition to paying the United States $1.6 million, Big Brothers has agreed to institute a strict compliance program that requires the organization to engage in regular audits, both internally and by independent auditors; establish a compliance team, an employee code of conduct, whistleblower policies, and a disciplinary policy for employees who engage in or fail to disclose abuses of federal grant funds; provide regular employee training on these policies; and employ risk assessment tools to detect abuses that might otherwise go undetected.

The investigation was conducted by the Department of Justice Office of the Inspector General. The settlement was handled by Assistant U.S. Attorneys Joel M. Sweet and Scott W. Reid in coordination with Trial Attorney David W. Tyler of the Justice Department’s Civil Division, Commercial Litigation Branch. The claims resolved by this settlement are allegations only; there has been no determination of liability.