FRAUDULENT ABUSES OF THE GOVERNMENT PURCHASE CARD PROGRAM

1

• FRAUDULENT ABUSES OF THE GOVERNMENT PURCHASE CARD
  PROGRAM
• (EXTERNAL INVESTIGATIONS)

2
WHEN TO NOTIFY LAW ENFORCEMENT?
3
WHEN TO NOTIFY LAW ENFORCEMENT

• When you have identified the following indicators
  of fraud
• Cardholders who made illegal purchases, i.e. to
  pay personal loans, bills, entertainment, etc
• Cardholder accounts with incomplete records
  available for review/inspection and cannot
  account for items ordered

4
WHEN TO NOTIFY LAW ENFORCEMENT (Contd)

• Purchase pattern of cardholder
• Usually close to 2500 limit
• Multiple even dollar amounts
• Constantly hitting monthly limit
• Excessive end of year spending
• Use of card by others

5
WHEN TO NOTIFY LAW ENFORCEMENT (Contd)

• Regularly recurring split purchases, often to the
  same vendor
• Recurring purchases of high value items (profit
  generation for kickbacks) i.e. Toner Cartridges
• Questionable purchases of consumable items
  (accountability subversion)

6
WHEN TO NOTIFY LAW ENFORCEMENT (Contd)

• Similar invoices from different vendors (software
  generated)
• Company has two different names with same address
  and owner
• Cardholder preference of particular vendor(s)
  (minimal rotation)

7
WHEN TO NOTIFY LAW ENFORCEMENT (Contd)

• Subversion of current Management Controls (by
  cardholder and/or AO/BO)
• Home owned businesses (Not illegal, but AOs/BOs
  should be cautious)

8
WHEN TO NOTIFY LAW ENFORCEMENT (Contd)

• Once fraud has been suspected, notification
  should be made to the Management Control
  Administrator
• Either the BO or APC should notify their
  respective law enforcement agency or contact the
  DOD Fraud Hotline [phone])

9
WHEN TO NOTIFY LAW ENFORCEMENT (Contd)

• Law Enforcement Agencies to contact
• Department of Defense Criminal Investigative
  Service (DCIS)
• Federal Bureau of Investigation (FBI)
• Naval Criminal Investigation Service (NCIS)
• United States Army Criminal Investigation Command
  (USACIDC)
• Air Force Office of Special Investigations
  (AFOSI)

10
WHEN TO NOTIFY LAW ENFORCEMENT (Contd)

• Conduct routine checks of debarred vendors,
  reconcile with GPC billing statement.
• Check the following GSA utilities for latest
  debarment list
• http//Epls.Arnet.Gov/ - List of Parties to
  Exclude from Federal Procurement and
  Non-procurement Federal Programs
• Or contact GPO at 202-512-1800 for printed
  version (stock number 722-002-00000-8) Book is
  printed every two months

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WHEN TO NOTIFY LAW ENFORCEMENT (Contd)

• As a result of present investigations the
  Department of Defense and the Department of
  Justice are currently reviewing legal actions
  against AOs/BOs
• 31 USC 3528 Allows DOD to impose Pecuniary
  Liability. This statue allows the government to
  hold AO/BO financially responsible, if he/she is
  found negligent

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SUMMARY

• With prompt notification to law enforcement, your
  agencies will provide an atmosphere of
  deterrence. This will demonstrate that the abuse
  of the GPC will not be tolerated, and for those
  who chose to abuse it, prosecution is imminent.

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RECENT INVESTIGATIONS
14
Case Work

• We are currently working two, closely related
  IMPAC card
• fraud cases. EPA OIG was an initial partner.
  
• Each involves collusion between DoD CHs and
  the
• merchants they do business with.

-There are several schemes proven to date
involving at least eight major and several minor
individuals. -The schemes were linked through
common participants but were conducted
separately.
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• Schemes

-In one situation a merchant (Company X)
conducted bogus transactions, for which no
actual product was received, with an EPA (EPA1)
cardholder (CH) and a DoD CH (DOD1) separately.
Purchase proceeds were split evenly between
the participants.

EPA1
DOD1
P
P
COMPANY X
16

-DOD1 decided he could obtain more money by
doing his own thing. He helped an out-of-work
friend open a company (COMPANY Y) and
eventually became a silent partner in it.
They did very few bogus transactions. Instead,
they tacked on large amounts of profit to the
purchase price and delivered actual products.
The friend determined the amount of profit
earned each month because the DoD employee was
functionally illiterate. Most of the profit
was split between the two "owners" once per
month.

EPA1
DOD1
P
P
P
COMPANY X
COMPANY Y
17

-DOD1 performed all the recruiting and made all
of the payoffs to the other DoD participants
(DOD2,3 and 4). Recruitment occurred when DOD1
dropped the payment on an employee's desk and
stated "Send my girl some orders. DOD1 also
conducted payment handoffs with cooperators in
the Center Courtyard of the Pentagon.

DOD4
P

DOD3

P

DOD2
EPA1
DOD1
P
P
P
P
COMPANY X
COMPANY Y
18
-The COMPANY Y owner was introduced to an Army
MSG by a former childhood friend. She
conducted bogus and high-profit transactions
with the MSG kicking back what she felt like
based on the amount of business that the MSG
conducted with COMPANY Y. She did not involve
DOD1 in this side of her business.


DOD4
P

DOD3

P

DOD2
EPA1
DOD1
MSG
P
P
P
P
P
COMPANY X
COMPANY Y
19

-The MSG became disillusioned with the amount of
money he was receiving in the above scenario.
He helped form a company (COMPANY Z) in his
friend's name (same friend who made the
introduction above) setting himself up as a
silent partner. While they did some
legitimate business, a good portion of it was
bogus.

DOD4
P

DOD3

P

DOD2
EPA1
DOD1
MSG
P
P
P
P
P
P
COMPANY X
COMPANY Y
COMPANY Z
20
-A second company (COMPANY ZZ) was later formed
by the same two in order to split the business
between the two companies, lessening the
appearance of favoritism. Purchases were made
from other companies as well.


DOD4
P

DOD3

P

DOD2
EPA1
DOD1
MSG
P
P
P
P
P
P
P
COMPANY X
COMPANY Z
COMPANY Y
COMPANY Z
COMPANY ZZ
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-The MSG also recruited two Army SFC's (SFC1 AND
2) to make purchases from his companies. They
made the purchases themselves or allowed their
IMPAC cards to be used by the MSG. The MSG
kicked back money to the SFC's according to what
he felt appropriate.


DOD4
P
SFC2

DOD3


P
P
SFC1


DOD2
EPA1
DOD1
MSG
P
P
P
P
P
P
P
P
COMPANY X
COMPANY Z
COMPANY Y
COMPANY Z
COMPANY ZZ
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-The civilian COMPANY Z/ZZ owner paid himself by
withdrawing funds from the companies accounts
as he needed it. He paid the MSG his cut by
writing checks to at least six of the MSG's
friends who either cashed the checks and gave the
money to the MSG or deposited the money in bank
or investment accounts under his control.


DOD4
P
SFC2

DOD3


P
P
SFC1


DOD2
EPA1
DOD1
MSG
P
P
P
P
P
P
P
P
COMPANY X

COMPANY Z
COMPANY Y
COMPANY Z
COMPANY ZZ


MSG


BANKS
F2


F1 F3
INVESTMENTS

F6 F4
CAH
F5
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• CRIMINAL OFFENSES INVOLVED
• STATUTE PRISON TERM CRIMINAL FINE
• 18 USC 201 BRIBERY 15 YEARS 250,000
• 18 USC 208 CONFLICT 5 YEARS 250,000
• 18 USC 287 FALSE CLAIMS 5 YEARS 250,000
• 18 USC 371 CONSPIRACY 5 YEARS 250,000
• 18 USC 641 THEFT 10 YEARS 250,000
• 18 USC 654 CNV G-FUNDS 10 YEARS 250,000
• 18 USC 922,g 924 ACCA 15 TO LIFE 250,000
• 18 USC 1001 FALSE STMTS 5 YEARS 250,000
• 18 USC 1341 MAIL FRAUD 5 YEARS 250,000
• 18 USC 1343 WIRE FRAUD 5 YEARS 250,000
• 18 USC 1956 LAUNDERING 20 YEARS 500,000
  OR 2X
• 31 USC 5324 STRUCTURING 5, 10 YEARS 2X

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ADJUDICATION CHART
INDIVIDUAL PLED GUILTY TO
SENTENCED TO
RESTITUTION
AMT IN PLEA EPA1 1 CT OF CONSPIRACY
6 MONTHS HOME CONFINEMENT
68,300 36
MONTHS PROBATION
500 HOURS COMMUNITY SERVICE ___________________
__________________________________________________
__________________________________________________
_____ COMPANY X OWNER 1 CT UNLAWFUL GUNS
(ACCA) 15 YEARS JAIL W/O PAROLE
93,333.07 1 CT CONSPIRACY TO
DEFRAUD 5 YEARS JAIL (CONCURRENT) ___________
__________________________________________________
__________________________________________________
_____________ DOD1 1 CT BRIBERY 14
MONTHS JAIL 120,000 1 CT WIRE FRAUD 3
YEARS SUPERVISED RELEASE ________________________
__________________________________________________
__________________________________________________
DOD2 1 CT BRIBERY 12 MONTHS PROBATION

CRIMINAL FINE 5,000 __________________
__________________________________________________
__________________________________________________
______ DOD3 1 CT BRIBERY (GRATUITY) AWAITING
SENTENCING ____________________________________
__________________________________________________
______________________________________ COMP
ANY Y OWNER 1 CT CONSPIRACY 24 MONTHS
PROBATION 72,500 ___________________________
__________________________________________________
_______________________________________________
MSG 1 CT MONEY LAUNDERING 41 MONTHS
JAIL 400,000 JOINTLY 1 CT BRIBERY 3
YEARS SUPERVISED RELEASE SEVERALLY WITH 1 CT
CONSPIRACY COMPANY
Z/ZZ OWNER _______________________________________
__________________________________________________
___________________________________ COMPAN
Y Z/ZZ OWNER 1 CT BRIBERY 27 MONTHS
JAIL 400,000 JOINTLY 1 CT CONSPIRACY
SEVERALLY
WITH MSG _________________________________
__________________________________________________
__________________________________________
SFC1 1 CT CONSPIRACY 2 YEARS PROBATION
70,000 6 MONTHS ELECTRONIC MONITORING
______________________________________________
__________________________________________________
_____________________________ SFC2 1 CT
CONSPIRACY 12 MONTHS 1 DAY 120,000
2 YEARS SUPERVISED RELEASE _______________
__________________________________________________
__________________________________________________
___________
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QUESTIONS ?
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POINT OF CONTACT

• Special Agent Special Agent Special
  Agent
• Dexter C. Wells Roger Campbell Thomas H.
  Errion II
• Washington Metro RA Washington Metro Office
  Mid-Atlantic Office
• USACIDC FBI DCIS
• 6010 6th Street 7799 Leesburg Pike, Suite 200
  1111 Jefferson Davis Hwy
• Fort Belvoir, VA 22060 Falls Church, VA 22043
  Suite 712
• Comm [phone] [phone]
  Arlington, VA 22202
• DSN 656-0471 [phone]
• Wellsd_at_belvoir.army.mil