Friday, August 17, 2007

When it has to get there overnight: War profiteers charge almost a million bucks to ship two 19¢ washers

A story by Tony Capaccio of Bloomberg News, posted yesterday on Yahoo! News, recounts how the Pentagonpaid $999,798 to ship two 19¢ washers from South Carolina to Texas.

That's the bad news. The good news, according to Capaccio's article, is that the company that sent the bill, C&D Distributors of South Carolina, and its surviving owner, Charlene Corey, pleaded guilty yesterday in a Columbia, South Carolina Federal court to one count of conspiracy to commit wire fraud and one count of conspiracy to launder money.

Corey may receive 20 years in jail on each count.

I submit she may have gotten off lightly.

If Capaccio's story is accurate, Corey and her late sister billed $20.5 million in fraudulent shipping costs over a six-year period. Again, according to Capaccio's story, citing Pentagon records, Corey's company "also billed and was paid $455,009 to ship three machine screws costing $1.31 each to Marines in Habbaniyah, Iraq, and $293,451 to ship an 89-cent split washer to Patrick Air Force Base in Cape Canaveral, Florida."

C&D was apparently able to milk American taxpayers in this way because of what Capaccio politely calls a "flaw in an automated Defense Department purchasing system." Citing Cynthia Stroot, a Pentagon investigator, Capaccio reports that "bills for shipping to combat areas or U.S. bases that were labeled 'priority' were usually paid automatically."

Investigator Stroot is also quoted in the article as saying that C&D got more "aggressive" over time in the amounts billed for shipping. Capaccio supplies some perspective: The cost of the parts shipped seldom reached even $100 -- a total of $68,000 billed over the same time that the contractor was billing $20.5 million for shipping those same parts. The outrageous charges were paid because (Capaccio quoting Stroot), "The majority, if not all of these parts, were going to high-priority, conflict areas." In order to evade oversight, all one needed to do was to claim that the shipment was "priority."

According to Capaccio, C&D's ride on the taxpayer gravy train finally came to a halt when a purchasing agent finally noticed -- and rejected -- a $969,000 bill for shipping two more 19¢ washers. That's when the government figured out it had just paid $998,798 for shipping two other 19¢ washers.

How brain-dead must one be to let that kind of charge sail through without so much as even a polite inquiry? Yes, send Ms. Corey to jail. Throw away the key. But fire the people who were paid to pay these charges, too.

Capaccio's story mentions nothing about the fate of any Pentagon procurement personnel.

He did say that, according to Stroot, fraudulent billing is not a "widespread problem." Although other questionable billing has been spotted during a review prompted by the belated identification of C&D, the next-highest contractor is suspected of only $2 million in questionable transport costs. The word "only" is mine. And it is inserted, like a dagger, dripping with intended sarcasm.

C&D was caught, apparently, because it was so incredibly outrageous that, finally, even the government noticed it. After six years.

Capaccio's article concludes with Investigator Stroot explaining that the Pentagon hopes to get some of that $20.5 million back "by auctioning homes, beach property, jewelry and 'high- end automobiles'" which the Corey sisters bought with taxpayer money. But, she says, they also "took a lot of vacations." So I guess we can forget about a 100% return.

American kids have died in Iraq and Afghanistan because they didn't have newer, safer helmets, or better-armored vehicles. Funds weren't available for these things -- particularly for National Guard units which, in the traditional view, were expected to operate behind the lines, providing support for regular Army or Marine units.

But there aren't any 'front lines' in Iraq or Afghanistan. And the $20.5 million that C&D bilked out of the Pentagon would have bought a lot of helmets and vehicle armor.

Ms. Corey and the people in the Pentagon who let her billing slide didn't just cheat American taxpayers; they helped kill American kids.

Of course, C&D was a small-time contractor. It didn't bill a lot for parts (only $68,000, remember) so, in order to score serious money, it couldn't just "pad" its bills -- it had to pile on heaping helpings of lard.

How much easier it would be for a contractor with a larger contract to add an extra $100 here or $50 there -- and maybe clear more, in the aggregate, than Ms. Corey ever dreamed. She forgot the old rule: Pigs get fat, hogs get slaughtered.

Is anybody really looking for fraud in military procurement?

How can we believe pious assertions along these lines when it took six years to pick up this scheme?

I don't care if you like or dislike American policy in the Middle East. I don't care if you marched in the streets to protest the invasion of Iraq or whether you TiVo Fox News while you're at work, just so you don't miss anything.

This isn't a matter of right or left.

It's a matter of right and wrong.


Empress Bee (of the High Sea) said...

well my word curmy! that just nicks my knickers! gets my panties in a wad! sigh...

reminds me of a story i once heard. about procurement. seems sam sold shirts. abe bought shirts. every time abe got a shipment of shirts from sam he claimed a shortage. finally abe got wise. sam got his bill and was hollering about being six shirts short and demanding they be sent at once. abe smiled and sent the shirts. seems abe had been sending sam bills only, no shirts. now i may not be telling this the best way but you get the gist. it's all in the invoice. yup, that's where to look...

smiles, bee

katherine. said...

Having worked for a short period of time in the public sector…I would guess that pentagon approvals happened at several levels…but was driven by a software application…which may not present the shopping charges to the approvers. That doesn’t excuse anything. Someone screwed up big time. (I’d be looking to Accounts Payable) I only know California labor law (which is a total clusterfuck) but here…if everyone involved was fired…you couldn’t make that public. Unless they are charged with a crime…then you can tell the world.

I agree Corey is getting off far too lightly.

Maybe she should have been charged with treason?

Jean-Luc Picard said...

Now we know where taxes go!

Linda said...

This isn't a matter of being right or wrong, this is a matter of just flat-out wrong. Funny how there are people out there who are able to find the tiniest loopholes and jump through them with no qualms at all and then to continue jumping through them.

What I would like to know is how did they know that they could get away with something like this in the first place? Where did the idea come from to charge the Government an outrageous amount of money for shipping and see if it would fly? And then when it did, let's see how many more times it could fly. Something is truly rotten in Denmark and I don't think it's cheese.

susan said...

Simply disgusting. I can't wrap my mind around how people go to sleep at night thinking that bilking the system is somehow okay. That loopholes are an invitation for criminality. Guess that's part of the reason I could never make it in any sort of corporate setting. I just can't acquire the taste for drinking the blood of the people I'd have to mow down and step over on my way to the top.

Shelby said...

Empress bee made me laugh with her "knicks my knicker."

I needed to laugh.

By the way - thanks so much for your sensible comment to me today. Of course you're right. I was/just really steamed. You react the way I should act when a potential crazy client comes to see me one day.

Anyway, I got a hotel room so I'm good for now. Just waiting on the guy who is supposed to come today by 5 pm. He's got 3 more hours before I get mad again :)

- oh and I'm turning in my hotel receipt(s) for reimbursement.

MommasWorld said...

Mmm, how to say this without giving too much information…I worked as a contractor to the government in the DC area. If my billing was off by one penny I had to fill out a report to the likes you have never seen before. I had to not only account for the penny but all of my time, including my free time -weekends and such. The government officials went through all the billing for that project with a fine tooth comb! It amazes me that these Sisters got away with the outlandish scam for so long. I agree with you, whom ever was on the paying end of those invoices should also receive similar punishment that was dolled out to Mrs Corey.

Dave said...

"It's a matter of right and wrong."

Yes. But, the system, as you allude to with its even bigger contracts, invites the fraud. What responsible buyer, government or otherwise, orders two washers? And then sets up a system that does not include a purchase order, and and an acknowledgment,and someone looking at all of it. Stupid people and entities get ripped off. Just like the feds did on the Katrina spending.

I've dealt with the government and businesses for many years. Bureaucracy is the bane of intelligence.

rdl said...


landgirl said...

That kind of greed is always upsetting but with tragic overtones it beggars my ability to express the sadness it causes.

No_Newz said...

I also was wondering what happened to the employees who ALLOWED that bill to be paid. That's crazy!!!