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 

Government Contractor Facing Federal Indictment For Willful Retention Of National Defense Information

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

A federal grand jury returned an indictment today charging Harold Thomas Martin III, 52, of Glen Burnie, Maryland, with willful retention of national defense information.

The indictment was announced by Acting Assistant Attorney General for National Security Mary McCord, U.S. Attorney Rod J. Rosenstein for the District of Maryland and Special Agent in Charge Gordon B. Johnson of the FBI’s Baltimore Field Office.

“As a private contractor who worked on classified programs at various U.S. government agencies, the defendant was entrusted with access to sensitive government materials," said Acting Assistant Attorney General McCord. “Martin allegedly violated the trust our nation put in him by stealing and retaining classified documents and other material relating to the national defense. Insider threats are a significant danger to our national security and we will continue to work relentlessly with our law enforcement and intelligence partners to identify, pursue and prosecute such individuals.”

“The indictment alleges that for as long as two decades, Harold Martin flagrantly abused the trust placed in him by the government by stealing documents containing highly classified information,” said U.S. Attorney Rosenstein.

"The FBI investigation and this indictment reveal a broken trust from a security clearance holder," said Special Agent Johnson. "Willfully retaining highly classified national defense information in a vulnerable setting is a violation of the security policy and the law, which weakens our national security and cannot be tolerated. The FBI is vigilant against such abuses of trust, and will vigorously investigate cases whenever classified information is not maintained in accordance with the law."

According to the indictment, from December 1993 through Aug. 27, 2016, Martin was employed by at least seven different private companies and assigned as a contractor to work at a number of government agencies. Martin was required to receive and maintain a security clearance in order to work at each of the government agencies to which he was assigned. Martin held security clearances up to Top Secret and Sensitive Compartmented Information (SCI) at various times, and worked on a number of highly classified, specialized projects where he had access to government computer systems, programs and information, including classified information. Over his many years of holding a security clearance, Martin received training regarding classified information and his duty to protect classified materials from unauthorized disclosure.

The indictment alleges that beginning no earlier than 1996 and continuing through Aug. 27, 2016, Martin stole and retained U.S. government property, including documents that bore markings indicating that they were property of the U.S. and contained highly classified information, including TOP SECRET/SCI. A Top Secret classification means that unauthorized disclosure reasonably could be expected to cause exceptionally grave damage to the national security of the U.S.

Martin allegedly retained stolen documents containing classified information relating to the national defense at his residence and in his vehicle. Martin knew that the stolen documents contained classified information that related to national defense and that he was never authorized to retain these documents at his residence or in his vehicle.

If convicted, Martin faces a maximum sentence of 10 years in prison for each of the 20 counts of willful retention of national defense information. Martin’s initial appearance is scheduled for 11:00 a.m. on Tuesday, February 14, before U.S. Magistrate Judge A. David Copperthite in U.S. District Court in Baltimore. Martin remains detained.

An indictment is not a finding of guilt. An individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceedings.

Acting Assistant Attorney General for National Security McCord and U.S. Attorney Rosenstein commended the FBI for its work in the investigation and thanked the Maryland State Police for its assistance. Ms. McCord and Mr. Rosenstein thanked Assistant U.S. Attorneys Zachary A. Myers, Nicolas A. Mitchell and Harvey E. Eisenberg for the District of Maryland and Trial Attorney David Aaron of the National Security Division’s Counterintelligence and Export Control Section, who are prosecuting the case.

FBI Seeks Information in the Murder Investigation of a U.S. Government Contractor

The FBI released the below information yesterday:

WASHINGTON— The Federal Bureau of Investigation announced a reward of up to $20,000 for information leading to the identification, arrest, and conviction of the individual or individuals responsible for the May 2009 murder of James Owen Kitterman, a U.S. citizen and government contractor, in Baghdad, Iraq.

James Kitterman was last seen alive on May 21, 2009, at approximately 9:00 p.m. (2100) local time inside the Green Zone, Baghdad, Iraq. The following day, May 22, 2009, Kitterman’s body was found in his vehicle, which was located inside the Green Zone.

Kitterman was the owner and operator of Peregrine Eyes, a private construction company (now defunct) that operated in Baghdad and was contracted by the U.S. government. Peregrine Eyes was established in 2008 and began contracts in Iraq that same year. At the time of his death, Kitterman was overseeing Peregrine Eyes’ construction of a helipad at the U.S. Consulate in Baghdad inside the Green Zone. Kitterman’s office and residence were also located inside the Green Zone on a compound owned and operated by Corporate Training Unlimited (CTU), a security contracting company. Compound security was provided by locally recruited guards, some of whom reported Kitterman’s vehicle leaving the compound around 11:00 p.m. (2300) local time on May 21, 2009.

In 2009, Peregrine Eyes had approximately 45 employees with whom James Kitterman was known to interact. As is common with many U.S. government construction-related contracts on bases in the Middle East, employees were recruited from many different countries. Employees working for Peregrine Eyes in 2009 were primarily from the U.S. and the Philippines. After Kitterman’s death, Peregrine Eyes was run by another contractor until approximately late 2009 or early 2010, when the company was dissolved.

Almost five years after Kitterman’s death, the FBI continues to investigate this unsolved murder.
The FBI has created a seeking information poster and is asking anyone with information regarding James Kitterman to please contact their local FBI office or the nearest American Embassy or Consulate or to submit a tip online at tips.fbi.gov. Tips can remain anonymous.