Category Archives: General Services Administration

Former Regional Director of Federal Protective Service Pleads Guilty to Accepting Bribes from Government Contractor

Posted on by
Derek Matthews, 46, of Harwood, Md., pleaded guilty today to accepting bribes from a government contracting company in exchange for using his position to help the company find and win contracts.

Neil H. MacBride, U. S. Attorney for the Eastern District of Virginia, Mythili Raman, Acting Assistant Attorney General for the Justice Department’s Criminal Division, and Charles K. Edwards, U.S. Department of Homeland Security (DHS) Deputy Inspector General, made the announcement after the plea was accepted by U.S. District Judge Leonie M. Brinkema.

Matthews was charged by criminal information on April 11, 2013, with one count of conspiracy to commit bribery.  Matthews faces a maximum penalty of five years in prison when he is sentenced on July 19, 2013.

Matthews served as Deputy Assistant Director for Operations for the DHS’s Federal Protective Services (FPS) and was later promoted to FPS Regional Director for the National Capital Region.  In the fall of 2011, Matthews agreed with Keith Hedman, an executive at an Arlington, Va., security service consulting company referred to as Company B in court records, that in exchange for a monthly payment from Company B and a percentage of any new business obtained, Matthews would use his position to help Company B find and win U.S. government contracts, including with FPS.  Matthews engaged in a series of official acts, including lobbying of government officials and sharing of information with Hedman, in an effort to obtain business for Hedman and Company B. In turn, Hedman and Company B paid Matthews three monthly payments totaling $12,500.

Hedman pleaded guilty on March 18, 2013, to conspiracy to commit bribery in connection with Matthews’ scheme, along with conspiracy to commit major government fraud as part of a separate scheme to fraudulently obtain more than $31 million in government contract payments that should have gone to disadvantaged small businesses.

This case was investigated by the Washington Field Office for the DHS Office of the Inspector General (OIG), the National Aeronautics and Space Administration OIG, the Small Business Administration OIG, the Defense Criminal Investigative Service, and the General Services Administration OIG. Assistant U.S. Attorneys Chad Golder and Ryan Faulconer  are prosecuting the case on behalf of the United States.

Caddell Construction Agrees to Pay $1,150,000 to Resolve False Claims Allegations

Quote

Posted on by
United States Alleges that Company Falsely Claimed Payment For Native American-Owned Business Participation

The Justice Department announced today that Alabama-based Caddell Construction has agreed to pay to the United States $1,150,000 to settle allegations that it violated the False Claims Act by falsely reporting to the Army Corps of Engineers that it hired and mentored a Native American-owned company to work on construction projects at Fort Bragg, N.C., and Fort Campbell, Ky.

The Army Corps contracted with Caddell between 2003 and 2005 to build barracks at the two bases. As part of the contracts, Caddell represented that it would hire and mentor Mountain Chief Management Services, a Native American-owned company, under the Department of Defense’s Mentor-Protégé and Indian Incentive Programs.   The Mentor-Protégé Program reimburses companies for the time and cost of mentoring small disadvantaged businesses, while the Indian Incentive Program provides a rebate to contractors for subcontracting with Native American-owned businesses.

The United States alleged that from April 2003 to March 2005, Caddell falsely represented in its invoices and supporting documents that it was mentoring Mountain Chief and that Mountain Chief was performing work on the construction projects.   According to the government, Mountain Chief allegedly was merely a pass-through entity used by Caddell to claim payments under the two programs, and didn’t perform the work or receive the mentoring services for which Caddell received payment.

“Contractors that subvert important government programs, such as those designed to benefit small and Native American-owned businesses, will be held accountable,” said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Civil Division of the Department of Justice.  “We will work tirelessly to ensure that participants in federal programs and benefits receive only the money to which they are entitled.”

Caddell’s former director of business development, Mark Hill, and Mountain Chief’s former president, Daniel Chattin, were indicted on related charges in federal district court for the Middle District of Alabama in January 2012.   Both are awaiting trial.   In December 2012, Caddell entered into a non-prosecution agreement with the United States under which it agreed to pay the United States $2 million and to cooperate in the ongoing criminal matter.

The civil case was handled by the Civil Division of the Department of Justice, with investigative assistance provided by the General Services Administration Office of Inspector General and the Defense Criminal Investigative Service.

New York-Based Corning Incorporated to Pay U.S. $5.65 Million to Resolve False Claims Allegations

Posted on by
Corning Incorporated has agreed to pay the U nited States $5.65 million to resolve claims that it knowingly presented false claims to the United States for laboratory research products sold to federal agencies through Corning’s Life Sciences division.   Corning, a New York based corporation, creates and makes glass and ceramic components for consumer electronics, mobile emissions controls, telecommunications and life sciences.

 

The settlement resolves claims relating to a contract entered into by Corning in 2005 to sell laboratory research products to federal government entities through the General Services Administration’s (GSA) Multiple Award Schedule (MAS) program.   The MAS program provides the government and other General Services Administration authorized purchasers with a streamlined process for procurement of commonly-used commercial goods and services. To be awarded a MAS contract, and thereby gain access to the broad government marketplace and the ease of administration that comes from selling to hundreds of government purchasers under one central contract, contractors must agree to disclose commercial pricing policies and practices, and to abide by the contract terms.

The settlement resolves allegations that, in contract negotiations and over the course of the contract’s administration, Corning knowingly failed to meet its contractual obligations to provide GSA with current, accurate and complete information about its commercial sales practices, including discounts offered to other customers, and that Corning knowingly made false statements to GSA about its sales practices and discounts .   The settlement further resolves allegations that Corning knowingly failed to comply with the price reduction clause of its GSA contract by failing to disclose to GSA discounts Corning gave to its commercial customers when they were higher than the discounts that Corning had disclosed to GSA, and by failing to pass those discounts on to government customers.   The United States alleged that, because of these improper dealings, it received lower discounts and ultimately paid far more than it should have for Corning products.

“This settlement shows that the United States expects all contractors participating in the MAS program to make full and accurate disclosures of their commercial pricing practices to the GSA and to act in good faith when dealing with the United States government,” said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Department of Justice’s Civil Division.   “The failure to make full and accurate disclosures material to the government’s contracting processes will not be tolerated.”

 “At a time when our political leaders are making tough choices about how to rein in federal spending, government contractors need to understand that they will not get away with overbilling the taxpayer,” said U.S. Attorney for the District of Columbia Ronald C. Machen Jr.  “Companies that want to take advantage of federal contracts are obligated to deal openly and fairly with their government customers.  When contractors fail to meet their obligations, we will hold them accountable and seek to make the taxpayer whole.”

“Contractors need to be honest and follow through with their promises to the federal government – or pay the consequences,” said Brian D. Miller, Inspector General for the General Services Administration.

The settlement resolves a lawsuit filed in the U.S. District Court for the District of Columbia by a former Corning Life Sciences sales representative Kevin Jones under the qui tam, or whistleblower provisions, of the False Claims Act.   Under the Act, private citizens may bring suit for false claims on behalf of the United States and share in any recovery obtained by the government.   Mr. Jones will receive $904,000 as his share of the government’s recovery.

 

This settlement was the result of a coordinated effort by the U.S. Attorney’s Office for the District of Columbia; the Department of Justice, Civil Division, Commercial Litigation Branch; and the GSA’s Office of Inspector General in investigating the allegations in this case.   The claims settled by this agreement are allegations only, and there has been no determination of liability.

Former FEMA Executive Pleads Guilty to Federal Conflict of Interest Charge Defendant Sought Job From Company That Did Work for FEMA

Posted on by

WASHINGTON—Timothy W. Cannon, 63, the former director of human resources at the Federal Emergency Management Agency (FEMA), pleaded guilty today to a charge of conflict of interest for negotiating employment with a polling and consulting services company that had a multi-million-dollar contract with FEMA, supervised by Cannon.

The plea occurred before the Honorable Amy Berman Jackson of the U.S. District Court for the District of Columbia. Sentencing is scheduled for April 9, 2013. The charge carries a statutory maximum of five years in prison.

The guilty plea was announced by Ronald C. Machen, Jr., U.S. Attorney for the District of Columbia; Assistant Attorney General Lanny A. Breuer of the U.S. Department of Justice’s Criminal Division; Debra Evans Smith, Acting Assistant Director in Charge of the FBI’s Washington Field Office; Christopher Cherry, Special Agent in Charge of the General Services Administration Office of Inspector General for the National Capital Region; and Mike Dawson, Special Agent in Charge of the U.S. Department of Homeland Security Office of Inspector General’s Washington Field Office.

According to the government’s evidence, from July 2007 through February 2009, Cannon was the director of FEMA’s Human Capital Division. In 2007, Cannon had discussions with a firm, identified in court papers as “Company A,” about FEMA hiring the firm to provide consulting services on human resources matters at FEMA. The work would be done through a project that would eventually be called the “BEST Workforce Initiative.”

In March 2008, the chief executive officer of Company A e-mailed another Company A employee, stating Cannon “said he has done everything to get a job at [Company A] because he believes so much in our products…said he wants to do a real good job at FEMA and that mabye [sic] he would try again….” On April 22, 2008, Company A’s CEO e-mailed another Company A employee that “…if [Cannon] gets us a big deal at FEMA…i [sic] think we should hire him…because he will be a ‘client’ hire…which might be good[.]” Later in the same e-mail chain, Company A’s CEO asked, “[I]s the ink dry yet on our deal with fema [sic] [?]” The Company A employee replied, “[N]o might be mid-May.” Company A’s CEO then stated, “[W]e should wait of course to see if we win a big quality deal here[.]”

On August 12, 2008, Company A was hired to administer the BEST Workforce Initiative at FEMA. The contract was valued at approximately $6 million over five years.

On November 18, 2008, a Company A employee advised Company A’s CEO in an e-mail, “I talked to Tim today. He asked for a job.” Company A’s CEO then stated, “What about ethics…are we okay with all of that…he is a significant client…am sure you know the rules…gee he seems like a winner to me…I don’t think these guys are as expensive as one might think…and he has a military background[.]”

In December 2008 and January 2009, Cannon requested additional funding for the BEST Workforce Initiative. On January 6, 2009, in an e-mail to a Company A employee, Cannon stated, “[A]h yes, I got another 500k put on the contract. Cool huh?”

On January 12, 2009, Cannon had an employment interview with Company A in Washington, D.C. On February 9, 2009, Company A sent an employment offer letter by e-mail to Cannon. The letter offered Cannon “the opportunity to join [Company A] as a Partner with our Government Division in Washington, D.C.” and guaranteed him a minimum annual salary of $175,000 for the first two years of employment. Cannon responded to the e-mail the same day, stating, “I am very excited about joining [Company A] and I look forward to working with you….” Following Cannon’s acceptance of Company A’s employment offer, Cannon continued to oversee and work on the BEST Workforce Initiative at FEMA.

Cannon retired from FEMA effective on February 27, 2009. On his public financial disclosure report, known as Form SF-278, Cannon indicated that he did not have any agreements or arrangements for “future employment” and he specifically did not list his future employment with Company A. On February 27, 2009, Cannon requested that Company A provide him with an offer letter dated after February 27, 2009, so that it would falsely appear that Cannon received Company A’s employment offer after he had resigned from FEMA. On March 2, 2009, Company A sent an updated version of the offer letter, with the new date of March 2, 2009, to Cannon. Cannon signed this updated version of the offer letter on March 3, 2009, and returned it to Company A.

In March 2009, a Company A employee voiced concerns internally about Cannon’s hiring. In addition, on March 25, 2009, a Company A employee stated in an e-mail to another Company A employee, “Well, I just got a call from and am getting more red flags about Tim Cannon. Apparently, word is getting around about his departure and joining [Company A]. There is speculation among is [sic] co-workers that this is improper. They are pretty mad. This may get in the way of future business with FEMA….This, plus the bankruptcy, plus appearance of ethics violations, both on [Company A] and FEMA side. This is not good….I think we are getting too many sign[s], and I do not think this will work.” On March 26, 2009, Company A informed Cannon that Company A’s offer of employment was being withdrawn. Company A told Cannon that he did not meet the background check requirements.

Later, on September 17, 2009, Cannon sent an e-mail to Company A’s CEO advising that Cannon had joined a consulting firm and asking to have lunch. Company A’s CEO forwarded that e-mail to other Company A employees stating, “This is a guy that was our sponsor at FEMA…he is so [Company A] gung ho…when he was applying we broke some of the rules of the U.S. Gov on the ‘how’ we do it…so we had to let him go….”

In announcing the guilty plea, U.S. Attorney Machen, Assistant Attorney General Breuer, Acting Assistant Director in Charge Smith, Special Agent in Charge Cherry, and Special Agent in Charge Dawson commended the outstanding investigative work of agents of the FBI’s Washington Field Office, Assistant Special Agent in Charge Floyd Martinez of the GSA OIG and agents of the DHS OIG, as well as agents and auditors of other federal investigative agencies that assisted with this case. They also praised the efforts of members of the U.S. Attorney’s Office and the Criminal Division Fraud Section, including Paralegal Specialists Diane Hayes and Nicole Wattelet; Legal Assistant Jamasee Lucas; Information Technology Specialist Joshua Ellen; forensic accountants in the Fraud and Public Corruption Section; and Assistant U.S. Attorney David Johnson, Trial Attorney Brian Young, and former Trial Attorney James Graham, who have prosecuted the case.

Caddell Construction Co. Commits to Pay $2 Million Penalty in Agreement to Resolve Criminal Fraud Violations

Posted on by

WASHINGTON – Caddell Construction Company Inc., a major commercial and industrial federal government construction contractor based in Montgomery, Ala., has entered into an agreement with the Department of Justice to resolve criminal fraud violations arising from Caddell’s intentional overstating of developmental assistance provided to a disadvantaged small business as part of a Department of Defense (DoD) program.  The agreement, including a $2 million penalty to be paid by Caddell, was announced today by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division.

According to the non-prosecution agreement (NPA) between the government and Caddell, in February 2003, Caddell entered into an agreement with Mountain Chief – which is certified as a Native American, woman-owned and economically-disadvantaged small business – to participate in the DoD’s Mentor-Protégé Program, in which major DoD contractors (mentor firms) contract with and provide developmental assistance to disadvantaged small businesses (protégé firms) and are reimbursed by the DoD for related costs.

Around the same time, Caddell began participating with Mountain Chief in DoD’s Indian Incentive Program, which provides incentives – in the form of a rebate of 5 percent of the total dollar amount of work – for major DoD contractors to engage Native-American-owned businesses as subcontractors and suppliers.  Caddell and Mountain Chief participated in these programs in connection with two DoD construction contracts at Fort Bragg, N.C., each worth approximately $65 million and a DoD construction project at Fort Campbell, Ky., worth approximately $34 million.

According to the NPA, from February 2004 to March 2005, Caddell submitted more than 20 requests for payment to the DoD in connection with the Mentor-Protégé Program that significantly overstated the amount of developmental assistance Caddell had provided Mountain Chief.  In addition, Caddell filed documents falsely stating Mountain Chief’s size and income, as well as the status of Mountain Chief’s technical capabilities and business infrastructure.  From April 2003 to October 2004, Caddell also submitted at least eight requests to the DoD for the Indian Incentive Program, for rebates based on services purportedly performed on subcontracts Caddell gave to Mountain Chief.  Mountain Chief performed few, if any of these services, and the invoices were created solely to support Caddell’s applications for payment.

As part of the NPA, Caddell will pay a $2 million criminal penalty, and must cooperate with the Department of Justice for the two-year term of the agreement.  The agreement recognizes Caddell’s voluntary disclosure; thorough self-investigation of the underlying conduct; and full cooperation with the department and remedial measures already undertaken and to be undertaken, including employment actions and improving reporting systems, corporate governance, and compliance training and oversight.  As a result of these factors, among others, the department agreed not to prosecute Caddell for the improper pay requests, provided Caddell satisfies its ongoing obligations under the agreement.

In January 2012, Daniel W. Chattin, 50, of Granite Bay, Calif., the son of Mountain Chief’s owner and a project manager and consultant for Mountain Chief, and Mark L. Hill, 57, of Montgomery, Ala., the Mentor-Protégé Program Coordinator and a director of business development at Caddell, were indicted in the Middle District of Alabama on three counts of major fraud against the United States stemming from the same scheme.  In addition, Hill was charged with one count of making a false statement to the DoD.  Chattin and Hill await trial, which is scheduled to begin on April 22, 2013.  The charges and allegations against Chattin and Hill are merely accusations and they are considered innocent unless and until proven guilty.

This investigation is being conducted by the General Services Administration – Office of Inspector General, and the DoD’s Defense Criminal Investigative Service.  This case is being handled by Assistant Chief Albert B. Stieglitz Jr. and Trial Attorney Thomas B.W. Hall of the Criminal Division’s Fraud Section.