It couldn't happen here, could it?
C&D Distributors, a small parts distributor based in Lexington, South Carolina, has been found guilty of fraudulent billing following the discovery of the fact that $20.5 million has been paid by the Pentagon in the past six years, for parts worth less than $70,000.
The fraud came to light in September 2006 when a purchasing agent at the Pentagon noticed a bill from the company of $969,000 for shipping two washers worth 19 cents each.
A review of previous billings from C&D showed that payment of $998,798 had been made earlier in the month for the shipping of two washers to Fort Bliss, Texas. Further investigations revealed payments by the Pentagon of $455,009 to send three machine screws – total cost $3.93 – to a Marines base in Habbaniyah, Iraq and of $293,451 for an 89 cent washer to be sent to Patrick Air Force Base in Cape Canaveral, Florida.
It is reported that CD Distributors – owned by twin sisters, one of whom died last year – exploited a flaw in an automated Defense Department purchasing system. Cynthia Stroot, a Pentagon Defense Criminal Investigative Services agent, is reported as explaining the loophole: "Bills for shipping to combat areas or US bases that are deemed to be ‘priority’ usually are paid automatically. The majority, if not all, of these parts were going to high-priority areas. If the item was designated ‘priority’ and was destined for the military in Iraq, Afghanistan, or certain other locations the bill got paid. There was no oversight."
The bulk of the individual orders from the Pentagon cost less than $100. It is estimated that since 2000 purchases from C&D reached a total cost of $68,000 compared with payments of 20.5 million. "As time went on C&D got more aggressive in the amounts they put in", says Cynthia Stroot. "C&D was a rogue contractor. While other questionable billings have been uncovered, nothing has come close to its figures. A review of paid shipping invoices shows that fraudulent billing is not a widespread problem."
The surviving owner of the company, Charlene Corley, and two other C&D employees pleaded guilty to conspiracy to commit fraud and conspiracy to launder money.
They face a maximum prison sentence of 20 years on each count.
The Pentagon is hoping to recoup its losses by auctioning homes, beach properties, jewellery, and automobiles purchased by the sisters.
Taken from a UK trade magazine