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| Published Monday, July 24, 2000 - Minneapolis StarTribune |
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Contractors who defrauded U.S. get plenty of new business
WASHINGTON, D.C. (AP) -- Hundreds of companies prosecuted or sued for defrauding the government can still receive federal business -- and many have gotten new contracts -- because agencies chose not to ban them, a computer analysis shows.
The companies range from a Texas company accused of selling faulty vehicles to the Army to Alliant Techsystems in Hopkins, Minn., which paid millions of dollars to settle claims that managers instructed workers to inflate the number of hours they worked on a missile contract.
The computer analysis by the Associated Press found many companies with a history of fraud turned right around and got new federal contracts. Some had multiple court cases against them.
Saybolt Inc., a petroleum products inspection company based in Houston, pleaded guilty in 1998 to submitting false lab analyses to the Environmental Protection Agency (EPA). The company also admitted to arranging a $50,000 bribe to Panama's government.
At the time of the plea, government officials spared few words for a company that they said "betrayed the public's trust and cheated all of us." But the EPA didn't ban the company from future business, even though the judge who fined it $4.9 million suggested it as a possible punishment.
A second chance
The EPA said Saybolt was given another chance because it was taken over by new management and implemented state-of-the-art technology to ensure its tests are not rigged.
The AP identified 1,020 companies that were sued or prosecuted for fraud during the past five years. The companies were identified using court records, news stories, government documents obtained under the Freedom of Information Act and inspector general reports.
The companies were checked against a master list of contractors barred from federal business. The analysis found 737 companies out of the 1,020 remained eligible for future contracts.
The AP review found numerous examples
Stewart & Stevenson Services of Houston was indicted in 1995 for conspiracy, fraud and making false statements involving a contract to provide generator equipment to the Air Force. The government temporarily suspended the company, which paid $7 million in criminal penalties and restitution.
The company got its suspension lifted by signing an "administrative agreement" and promising to change its business practices. Yet it recently ran into trouble again with the government.
After receiving a $1.4 billion contract to build 5,000 Army trucks and 1,000 trailers, the company produced trucks with faulty drive shafts that caused one truck to flip. The Army said the vehicles couldn't be driven above 30 miles per hour until Stewart & Stevenson fixed the problem. The company wants the Army to cover the $40 million repair bill.
Uneven enforcement
Federal officials offer a variety of reasons why contractors remain eligible. Some agencies are not as vigorous as others in monitoring contractors.
The Interior Department, for example, only bans a few companies every three or four years.
In contrast, the Veterans Affairs Department has banned about 700 companies and aggressively audits its contractors. If fraud is detected, "then you will get debarred," said Gary Krump, deputy assistant secretary.
At the Pentagon, contractors often have a specialty service with no competitors, and banning them is deemed to hurt national security.
Many health care companies, such as nursing homes accused of defrauding Medicare, aren't banned because some officials fear their patients will be penalized.
About 24,000 companies or individuals are barred from doing business with the government for infractions that range from drug-free workplace laws to embezzlement and contract fraud. The bans can range from indefinite to just a few years. The list is maintained by the General Services Administration, and agencies are required to check it before awarding contracts and grants.
The AP review found that bad contractors can slip through with a simple name change.
Environmental Health Research and Testing in Lexington, Ky., and one member of the Sabharwal family were banned from government business after being convicted of bribing officials in 1995. Rather than close their doors, the family drained the company's assets and went back to federal contracting under the name Environmental Chemical Corp. (ECC), prosecutors allege.
By the start of this year, ECC had secured about $55 million in new federal contracts.
The review suggests the debarment program catches many smaller companies on their first offense while larger companies with more resources preserve eligibility despite multiple lawsuits and criminal charges.
Alliant Techsystems was sued three times by the government in the 1990s. The company paid $12 million to settle environmental claims and $4.5 million to settle charges that managers instructed workers to charge inflated work hours on defense missile contracts. Separately, the company also paid $228,750 to settle allegations that it overcharged the government in an $82 million tank ammunition contract.
Alliant has received $723.6 million in new contracts in 2000 alone. The company says two cases came with subsidiaries it purchased, and all were settled to avoid expensive litigation.
The government's list of banned contractors online (Excluded Parties List).
©2000 Associated Press. All rights reserved. Reprinted for educational purposes. |
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