Government Contractor Agrees To Pay $1M To Resolve False Claims Act Allegations For Submitting Fraudulent Bids On Prime Vendor Contracts

The U.S. Justice Department released the below information:

Johnny Buscema Jr. of New Port Richey, Florida, and his companies, S.A.F.E. Structure Designs, based in Las Vegas, and U.S.A. Manufacturing, based in New Port Richey, have agreed to pay $1,000,000 to resolve allegations that they violated the False Claims Act by causing a prime vendor for the Defense Logistics Agency (DLA) to submit fraudulent contract bids to DLA that resulted in Department of Defense (DoD) customers being overcharged for goods and related services purchased under those contracts. The settlement is based on the settling parties’ ability to pay.

Buscema owns S.A.F.E. Structure Designs, which sells safety equipment to government customers, and USA Manufacturing, a general construction company. Both companies provide third party logistics support, such as product acquisition, receiving, warehousing, transportation, shipping and returns, to military customers through DLA contracts for Maintenance, Repair and Operations (MRO) for the Northeast and Southeast regions of the United States. The MRO contracts covered by the settlement are held by a “prime vendor,” which procures for DoD agencies supplies and equipment, such as chemicals, electrical supplies, hardware, HVAC/refrigeration, prefabricated structures and a variety of small tools. The goal of the MRO program is to achieve favorable product pricing through leveraged buying, infrastructure savings, and inventory cost reductions. To obtain the best price for items procured for the government, the MRO contracts require the prime vendor to engage in a competitive bidding process, soliciting bids from two independently competing vendors for transactions below $25,000 and from three independently competing vendors for transactions at or above $25,000.

The United States alleged that, from 2016 to 2023, the settling parties conspired with other entities to rig bids for awards on the MRO contracts for the Northeast and Southeast regions of the United States. More specifically, Buscema allegedly submitted non-competitive bids, paid other vendors to submit non-competitive bids and submitted multiple bids from his own two companies on the same solicitations to assist the prime vendor to meet its obligation to obtain bids from two or three vendors and to make one of the bids appear more competitive. As a result of these alleged schemes, the United States contends it was overcharged for items purchased under the MRO contracts.

“Those who seek to do business with the government are expected to compete fairly and independently to ensure that the government receives an appropriate price,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “The department will hold accountable government contractors that engage in bid rigging or otherwise seek to defraud the American taxpayers.”

“As evidenced in this settlement agreement, these contractors gamed the system to line their own pockets,” said U.S. Attorney Joshua S. Levy for the District of Massachusetts. “They manipulated and undermined the fair and open bidding process designed to save our military — and taxpayers — money. Contractors should be scrupulous in dealing with the government, not coordinating with each other to pad their bottom line. When defense contractors collude, rather than compete, they violate the law and the public’s trust.”

“The DoD expects its contractors to compete in open and fair markets,” said Special Agent in Charge Patrick J. Hegarty of the DoD’s Office of Inspector General’s Defense Criminal Investigative Service (DCIS) Northeast Field Office. “Today’s announcement demonstrates our commitment to work with our law enforcement partners to investigate allegations of anticompetitive practices and ensure the integrity of the DoD’s procurement process.”

“Department of the Army Criminal Investigation Division works diligently to maintain the Army’s readiness and will continue to work closely with our law enforcement partners to prevent and thoroughly investigate fraudulent activity,” said Special Agent in Charge Keith K. Kelly of the Department of the Army Criminal Investigation Division (CID)’s Fraud Field Office. “CID is committed to providing expertise and capabilities supporting whole of government efforts to ensure the U.S. Army remains the most technologically advanced, capable, and ready fighting force in the world.”

The resolution obtained in this matter was the result of a coordinated effort between the Civil Division’s Commercial Litigation Branch, Fraud Section, and the U.S. Attorney’s Office for the District of Massachusetts, with assistance from DCIS, Army CID, Air Force Office of Special Investigations and the General Services Administration Office of Inspector General.

Trial Attorney Samson Asiyanbi of the Justice Department’s Civil Division and Assistant U.S. Attorneys Lindsey Ross and Brian LaMacchia for the District of Massachusetts handled the matter.

The claims resolved by the settlement are allegations only. There has been no determination of liability. 

Note: I worked for the Defense Logistics Agency (DLA) after I was separated from the U.S. Navy. 

I worked for DLA's Defense Contract Administration Region Philadelphia (DCASR Philadelphia), which oversaw defense contractors in Delaware, Eastern PA and South Jersey. 

DCASR and its field offices Defense Contract Administration Services Managment Areas (DCASMA) later became a separate agency called the Defense Contract Managment Agency (DCMA) and broke off from DLA. 

You can read about the huge bribery and contractor scandal at DLA/DCASMA via the below link:

Paul Davis On Crime: A Look Back At The Multi-Million Dollar Defense Contract Fraud and Bribery Case At The Philadelphia Quartermaster 

Man Pleads Guilty To Selling $3.5M In Counterfeit And Deficient Electronics For Use In Military Systems

The U.S. Justice Department released the below information:

A California man pleaded guilty yesterday to a scheme to defraud the Department of Defense’s (DoD) Defense Logistics Agency (DLA) by selling over $3.5 million worth of fan assemblies to the DLA that were either counterfeit or misrepresented to be new.

“The defendant sold counterfeit and deficient fan assemblies for use in military systems to increase his profit,” said Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division. “Criminals who cheat the U.S. military by selling deficient or counterfeit goods put our national security at risk. This case demonstrates the Justice Department’s commitment to protecting the military supply chain and Americans’ security.”

“Through his company, Kim delivered counterfeit products to our armed services and tried to pass off non-conforming products with fake invoices,” said U.S. Attorney Ismail Ramsey for the Northern District of California. “Swindling our military is a sure way to find oneself in jail. This office is always on the lookout for fraudsters and will prosecute anyone caught cheating our military by providing products that endanger our service people or compromise our readiness.”

According to court documents, Steve H.S. Kim, 63, of Alameda County, controlled Company A, which sold fan assemblies to the DLA that were either counterfeit or were used or surplus fan assemblies that he claimed were new. To trick the DLA into accepting the fan assemblies, Kim created counterfeit labels — some of which used Company B’s registered trademarks — that he attached to the fan assemblies he sold to the DLA. When the DLA questioned Kim about the origin of the fan assemblies, Kim concealed his scheme by giving the DLA fake tracing documents that he created and often signed using a false identity. Some of these counterfeit fans were installed or intended to be installed with electrical components on a nuclear submarine, a laser system on an aircraft, and a surface-to-air missile system.

“The Defense Criminal Investigative Service (DCIS), the law enforcement arm of the DoD Office of Inspector General, is fully committed to protecting the integrity of the DoD supply chain,” said Special Agent in Charge Bryan D. Denny of the DCIS Western Field Office. “Supplying counterfeit products to the DoD endangers the mission and betrays the public’s trust. This investigation demonstrates DCIS’ ongoing commitment to working with its law enforcement partners to hold individuals who defraud the DoD accountable.”

“The Naval Criminal Investigative Service (NCIS) and our law enforcement partners work diligently to thwart attempts to infiltrate the DoD supply chain with potentially damaging counterfeit product,” said Special Agent in Charge Greg Gross of the NCIS Economic Crimes Field Office. “This case highlights the efforts of the investigative team to expeditiously shut down such a scheme and prevent possible grievous harm to our ability to conduct effective combat operations.”

“This case reflects Homeland Security Investigation’s (HSI) core mission set of investigating national security threats as well as protecting global trade and government supply chains,” said Special Agent in Charge Tatum King of HSI San Francisco. “In this case, the serious risks posed to mission readiness were especially alarming. HSI appreciates the joint efforts of NCIS, DCIS, and the Army Criminal Investigation Division (Army CID), together with the Justice Department, in bringing the violator to justice.”

“The result of this joint investigation underscores the importance of our federal law enforcement partnerships and shows that by working together we can identify, prosecute, and dismantle businesses that supply the U.S. military with fraudulent parts and services,” said Special Agent in Charge Keith K. Kelly of the Army CID Fraud Field Office. “Our Army communities and the public can rest assured that we are committed to pursuing anyone that would defraud the U.S. government for their own personal gain and put combat readiness at risk.”

Kim pleaded guilty to one count of wire fraud and one count of trafficking in counterfeit goods. He is scheduled to be sentenced on July 17 and faces a maximum penalty of 20 years in prison on the wire fraud count and 10 years in prison on the trafficking in counterfeit goods count. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

DCIS, NCIS, HSI, and Army CID are investigating the case.

Assistant Chief Kyle C. Hankey and Trial Attorneys Louis Manzo and David D. Hamstra of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Katherine Lloyd-Lovett for the Northern District of California are prosecuting the case. Assistant Deputy Chief Adrienne Rose and Senior Counsels Jason Gull and Matthew A. Lamberti of the Criminal Division’s Computer Crime and Intellectual Property Section provided substantial assistance with the investigation. 

Florida Man Pleads Guilty To Bribing Public Official At Georgia Military Base

The U.S. Justice Department released the below information:

A former agent for a large national trucking company has pleaded guilty for paying bribes to officials at the Marine Corps Logistics Base (MCLB) in Albany, Georgia, in order to obtain lucrative freight-hauling business, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Acting U.S. Attorney G.F. Peterman III of the Middle District of Georgia.

Ivan Dwight Brannan, 60, of Jupiter, Florida, pleaded guilty before U.S. District Judge W. Louis Sands of the Middle District of Georgia to one count of bribery of a public official.   

During his plea, Brannan admitted that from 2006 to 2012, he provided cash and other items of value to Mitchell Potts, a former traffic office supervisor for the Defense Logistics Agency (DLA) at MCLB-Albany, to ensure that his trucking company client was awarded millions of dollars of business at MCLB-Albany.  Brannan also admitted that he directed David Nelson, a truck driver, to provide cash and other things of value to both Potts and Jeffrey Philpot, another official in the DLA Traffic Office at MCLB-Albany.  From 2006 to 2012, Brannan and Nelson paid at least $120,000 in bribes to Potts and Philpot.     

Potts and Philpot both previously pleaded guilty to one count of bribery of a public official and were sentenced to 10 years and seven years in prison, respectively, for their roles in the conspiracy.  Nelson pleaded guilty to one count of bribery of a public official on Oct. 7, 2014, and awaits sentencing.  

The U.S. Army Criminal Investigation Command, the Naval Criminal Investigative Service and the Defense Criminal Investigative Service are investigating the case.  Trial Attorney John Keller of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney K. Alan Dasher of the Middle District of Georgia are prosecuting the case.  

Owner Of Defense Contracting Company Charged With Wire Fraud Conspiracy For Providing Nonconforming Parts To Government

The U.S. Attorney for the District of New Jersey released the below information:

TRENTON, N.J. – The former president of a Burlington, N.J.,-based defense contracting business was arrested and charged today with allegedly stealing $3 million through fraudulent contracts with the U.S. Department of Defense, U.S. Attorney Paul J. Fishman announced.

Richard Melton, 44, of Moorestown, N.J., was charged by complaint with one count of conspiracy to commit wire fraud for receiving $3 million from 2008 to 2009 as a result of allegedly fraudulent contracts with the U.S. Department of Defense (DoD). Melton is scheduled to make his initial court appearance this afternoon before U.S. Magistrate Judge Tonianne J. Bongiovanni in Trenton federal court.

According to documents filed in this case and statements made in court:

Melton was the founder, owner, and president of Partz Network LLC (Partz Network), a company located in Burlington. Melton owned and operated Partz Network from April 2003 to December 2009. Partz Network contracted with the government to supply the DoD with parts on small-dollar contracts. The majority of the contracts were for replacement parts for military rolling stock: trucks, trailers, and engineering equipment. The majority of Partz Network’s DoD contracts required that the items provided be manufactured by DoD-recognized qualified manufacturers. 

Melton and his conspirators allegedly lied on Partz Network’s bids for DoD contracts, stating that they would be providing the “exact product” sought by the DoD, meaning that the product was manufactured by a DoD-recognized qualified manufacturer. In fact, Partz Network was allegedly providing parts made by unapproved, and oftentimes unknown, sources.

In 2007, the Defense Logistics Agency (DLA), a DoD contracting agency, became aware of reports of nonconforming parts being received from Partz Network. As a result, DLA required Partz Network to provide “traceability documents” to confirm that the items it was supplying were actually being manufactured by DoD recognized qualified manufacturers. Partz Network provided traceability documents and invoices to DLA regarding items provided under the DoD contracts.  When DLA researched the traceability documents supplied by Partz Network, DLA learned that the documents were either altered or completely fictitious.

 For example, on Nov. 15, 2007, Partz Network submitted a bid electronically through the DoD’s internet bid system to supply the DoD with 1,400 oil pans for $53.85 per item. Partz Network represented that the company was providing the exact product manufactured by one of the two DoD-recognized qualified manufacturers. Partz Network was subsequently awarded the contract for 1,400 oil pans for a total contract price of $75,390. Both the request for quotation (RFQ) and the final contract included the language that the exact product was required. The items ultimately provided by Partz Network were not the exact products required under the contract because the items were not manufactured by a qualified manufacturer. In fact, on Nov. 10, 2007, five days prior to Partz Network submitting its bid for the contract, Melton sent an e-mail to a Partz Network employee with a link to the DoD RFQ that stated the following: “Bid these (1400) HMMWW oil pans at $53.85 and I will have them made overseas by [a company located in the People’s Republic of China] or another overseas firm, 200-day lead time.” Based on Partz Network documents related to that contract, Partz Network purchased the oil pans that were provided to the DoD from a company located in India in January 2008.

On Aug. 27, 2009, Partz Network was awarded a contract to supply the DoD with 887 bearing half sets for a total contract price of $16,010.35. Partz Network certified that the items would be the exact product required under the contract. The items ultimately provided by Partz Network under the contract were not the exact products required because the items were not manufactured by the qualified manufacturer. DoD ultimately inspected the items and determined that the items were manufactured by an unapproved source. 

The wire fraud conspiracy count with which Melton is charged carries a maximum potential penalty of 20 years in prison and a fine of $250,000, or twice the gain or loss from the offense. 
 
U.S. Attorney Fishman credited special agents of the U.S. Department of Defense, Criminal Investigative Service, under the direction of Director James Burch; special agents of Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HIS), under the direction of Special Agent in Charge Andrew M. McLees, with the investigation leading to today’s arrest.

The government is represented by Assistant U.S. Attorneys Fabiana Pierre-Louis of the U.S. Attorney’s Office Criminal Division in Trenton and Evan Weitz of the Office’s Asset Forfeiture Unit in Newark.

The charge and allegations contained in the complaint are merely accusations, and the defendant is considered innocent unless and until proven guilty.