State Dept to Renovate Kabul’s Pol-i-Charkhi (PIC) Prison. Again.

Posted: 2:52 am EDT


The State Department has issued a Pre-Solicitation Notice of the Government’s intent to issue a solicitation for the renovation of Pol-i-Charkhi (PIC) Prison in Kabul, Afghanistan.  The project includes renovations in Blocks 1, 2 & 3 and extensive infrastructure and satellite structure improvements to the facility.  Actual solicitation documents are only accessible using the restricted portion of, so we have not been able to read the details of this renovation.

This is, however, the same prison which is the subject of an October 2014 SIGAR report, Pol-i-Charkhi Prison: After 5 Years and $18.5 Million, Renovation Project Remains Incomplete (pdf) This is Afghanistan’s largest correctional facility, funded in its initial construction by the Soviet Union in 1973.  It is designed for approximately 5,000 prisoners but housed nearly 7,400 during SIGAR’s inspection last year. Extract below from the SIGAR report:

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  • In June 2009, in response to damage caused by 35 years of neglect, Soviet occupation, and warfare, the Department of State’s Regional Procurement Support Office (RPSO) awarded an INL-funded renovation contract to W (AWCC)—an Afghan firm—for $16.1 million. Following two modifications, the contract’s overall value increased to $20.2 million.
  • In November 2010, the RPSO terminated AWCC’s INL-funded renovation contract at the government’s convenience based on unsatisfactory performance.4 Following contract termination, INL awarded Batoor Construction Company—an Afghan company—a $250,000 contract to document AWCC’s work completed under the renovation contract.
  • More than 5 years after work began, renovation of Pol-i-Charkhi prison has not been completed, and the contract has been terminated for convenience. Following the RPSO’s termination of the INL-funded contract in November 2010, Batoor Construction Company reviewed and documented AWCC’s work completed under the renovation contract. In March 2011, Batoor reported that AWCC completed approximately 50 percent of the required renovation work. Batoor’s report also noted multiple instances of defective workmanship including the lack of backfilling of trenches, not repairing/replacing broken fixtures, lack of proper roof flashing and gutters, and soil settlement issues. For example, the report noted that there were no metal flashing or gutters installed on one of the prison blocks resulting in damage to surface paint and moisture penetration in supporting walls.
  • We conducted our prison inspection on April 19, 2014, but were limited by the fact that the renovation work had been completed more than 3 years prior to our site visit. We found that the prison holding areas had been reconfigured into maximum, medium, and minimum security cells, and the cells contained the required sinks and toilets. Our inspection of the renovated industries building and kitchen facilities did not disclose any major deficiencies. We also found that AWCC procured and installed the six back-up power diesel generators, as required by the contract. However, the generators cannot be used because they were not hooked-up to the prison’s electric power grid before the renovation contract was terminated. INL officials told us that the work necessary to make the generators operational—primarily installing paired transformers—will be done under the planned follow-on renovation contract, which they hope to begin in late 2014 or early 2015.
  • INL officials told us they anticipated an award of a follow-on contract by the spring of 2015 to complete the renovation work initiated in 2009 and a separate contract to construct a wastewater treatment plant. They estimated the renovation work would cost $11 million; the wastewater treatment plant, $5 million.
  • On November 5, 2010, the contracting officer issued a Stop Work Order which noted that AWCC’s performance was deemed unsatisfactory due to its lack of progress on the project, labor unrest at the work site, and a lack of supplies to maintain efficient progress. Then, on November 26, 2012, the RPSO contracting officer issued AWCC a termination for convenience letter.
  • After a 2-year negotiation that concluded in December 2012, RPSO agreed to an $18.5 million settlement with AWCC—92 percent of the $20.2 million contract value. RPSO agreed to the settlement despite INL and Batoor reports showing that AWCC only completed about 50 percent of the work required under the contract. The contracting officer who negotiated the settlement for the U.S. government told us that the final award amount reflected actual incurred costs and not any specific completion rate. The contracting officer noted that an RPSO contract specialist and an Afghan COR10 assisted her in lengthy negotiations with AWCC and joined her for the final round of discussions in Istanbul, Turkey, which concluded with the signed settlement agreement.
  • Although the contracting officer was able to execute some oversight and issue clear warnings to AWCC regarding its performance, INL’s oversight efforts were compromised by a U.S. employee who served as the COR for the AWCC renovation contract as well as the Basirat design and project monitoring contract. The COR served in this capacity until May 2010, when he was suspended after INL and State’s Office of Inspector General found that he had accepted money from Basirat to promote the company’s interests. The COR was convicted and sentenced by a U.S. District Court for accepting illegal gratuities from Basirat.9 As a result, in August 2010, State suspended Basirat from receiving any government contracts. In August 2010, State also suspended AWCC from receiving government contracts based on receiving confidential proposal information from Basirat concerning State solicitations.
  • The contracting officer added that during these final negotiations the COR [contracting officer’s representative] concurred with many of the contractor’s assertions. In June 2013, just 6 months later, the COR’s designation was suspended amid concerns that he may have colluded with another INL contractor, an issue discussed in our May 2014 inspection report on Baghlan prison.11 As noted in that report, INL suspected this COR of enabling a contractor to substitute inferior products and materials, failing to discover substandard construction, approving questionable invoices, and certifying that all contract terms had been met at the time of project turnover to INL even though construction deficiencies remained. The COR resigned in August 2013. SIGAR investigators are currently conducting an inquiry to determine whether the contractor or other U.S. government officials were complicit in these alleged activities.

So  —  the previous contractor collected an $18.5 million settlement,  92 percent of the $20.2 million contract? But it only did 50 percent of the work required under the contract? Maybe we should all move to Kabul and be contractors?

And now, there will be a new $16M contract?  Which will have modifications, of course, and will not really top off at $16M.


Related items:

Here’s what it looks like in Afghanistan’s largest — and still incomplete — prison (WaPo)

America’s Unfinished Prison in Afghanistan Is a Filthy Nightmare (Medium)



Be On The Lookout Alert: State/OIG’s Inspection Reports FY2015 (Corrected)

Posted: 12:43  am EDT
Corrected: 1:19 pm EDT


The Office of Evaluations and Special Projects (ESP) in the Office of Inspector General (OIG) was established in 2014 “to strengthen OIG’s oversight of the Department and BBG, and to improve OIG’s capabilities to meet statutory requirements of the Whistleblower Protection Enhancement Act of 2012.”  ESP is also responsible for special evaluations and reviews, including responses to congressional inquiries. The work of this new office reportedly complements the work of OIG’s audits, investigations, and inspections by developing a capacity to focus on broader, systemic issues.

Note: We are correcting this post to indicate that the following reports are done by OIG’s Office of Inspection (ISP). That directorate is focused on three broad areas set forth in the Foreign Service Act of 1980: policy implementation, resource management and management controls. The following reports fall under OIG/ISP’s Special Projects and Areas of Emphasis. 

With the end of the fiscal year just two weeks away, here is a recap of the scheduled evaluations by OIG’s Office of Inspection for FY2015 (pdf). The start date of these evaluations was this fiscal year but the final reports may not necessarily be released this month.   We don’t know when these reports will be available and if all will be available publicly, but we’re on the lookout for them. State/OIG says that “our folks are committed to posting them and making them public as soon as we can.”

Cross-Functional: Program Evaluation | Inspectors will determine whether Department bureaus and missions have conducted program evaluations of foreign assistance programs, consistent with OMB Memorandum M-11-29 and the Foreign Affairs Manual (FAM), 18 FAM 300.

Executive: Annual Statement of Assurance on Management Controls | Inspectors will determine whether Chiefs of Mission and Assistant Secretaries understand statement-of-assurance guidance; conduct reviews consistent with guidance; and demonstrate their support for controls verbally and through other means, communicating the importance of ethical behavior and management controls.

Political/Economic: Foreign Assistance Oversight  | Inspectors will determine whether oversight responsibilities are clearly reflected in the position descriptions, work requirement statements, and evaluations of grant officer representatives or contracting officer representatives that spend more than 25 percent of their time overseeing foreign assistance programs.

Public Diplomacy: Social Media Guidance and Clearances | Inspectors will determine whether missions have a strategic plan to guide missions’ use of various types of social media and the level of policy content in that media with respect to target audiences.

Consular: Eligible Family Member Employment in Consular Sections  | Inspectors will examine the effectiveness of eligible family member employment in consular sections and its impact on mission morale.

Information Technology: Key-Loggers  | Inspectors will determine if missions and bureaus have controls in place to detect the existence of key-loggers on mobile computing devices used with the fob.

Security: Regional Security Officer Access to Threat Information  | Inspectors will determine whether Regional Security Officers have access to all required sources of threat information, as recommended in the classified Benghazi Accountability Review Board report.

Security: Department of Defense Support for Embassy Personnel Emergencies  | Inspectors will determine whether DoD is complying with Benghazi Accountability Review Board recommendations related to supporting mission personnel in emergencies.


560 Ex-Peace Corps Volunteers Write to Secretary Kerry Urging Suspension of Aid to Dominican Republic

Posted: 3:08 am EDT


Nearly 600 former Peace Corps volunteers and three PC country directors who served in the Dominican Republic wrote an open letter to Secretary Kerry urging the suspension of aid to the Dominican Republic due to its treatment of Dominicans of Haitian descent:

It is due to our deep and abiding concern for the most vulnerable members of Dominican society that we are writing to you about the crisis of statelessness among Dominicans of Haitian descent. We urge you to end U.S. involvement in the violation of their human rights: enforce the Leahy Amendments to the Foreign Assistance Act and annual Department of Defense appropriations.

The Leahy laws state that no U.S. assistance shall be furnished to any unit of the security forces of a foreign country if there is credible information that such a unit has committed a gross violation of human rights. Given the Dominican government’s disregard for international law with respect to the status of its citizens of Haitian descent; the violent track record of Dominican security forces receiving funding and training from the United States; and the Dominican Armed Forces’ readiness to execute a potentially massive campaign of rights-violating expulsions, we ask that the United States suspend its military aid to the Dominican government.

In 2013, the Dominican Constitutional Court i​ssued a ruling (168-13) that effectively stripped hundreds of thousands of people, primarily those of Haitian descent, of their Dominican citizenship. This ruling stands in direct contravention of international human rights law—specifically the A​merican Convention on Human Rights,​which the Dominican government r​atified in 1978. This convention enshrines the right to a nationality and prohibits its arbitrary deprivation. Many Dominicans of Haitian ancestry, including those whose families have resided in the

Dominican Republic for generations, were rendered stateless and face forcible deportation to a country where many have no ties whatsoever. A subsequent Dominican law (1​69-14)​, which addressed the court’s ruling, further entrenched the negation of the right to citizenship on the basis of one’s place of birth, and retroactively conferred citizenship on the basis of the immigration status of one’s parents.

The volunteers’ letter specifically cites the security forces that “appear poised to carry out mass deportations within the country, including the U​.S.-trained border patrol agency, CESFRONT, which has r​eceived more than $17.5 million in assistance from the United States since 2013.”

“If the United States is serious about protecting universally recognized human rights, we must no longer abet such actions in the Dominican Republic, much less be complicit in an impending intensification of human rights abuses. In our view, it appears impossible for the Dominican government to move forward with the implementation of its human rights-violating, internationally condemned citizenship laws without involving its security forces in yet more widespread and severe abuses.”

A small group representing the volunteers has requested a meeting with Assistant Secretary for Western Hemisphere Roberta Jacobson.







We Meant Well, Afghanistan Edition: Ghost Students, Ghost Teachers, Ghost Schools, Ugh!

Posted: 1:16 am  PDT




Over and over, the United States has touted education — for which it has spent more than $1 billion — as one of its premier successes in Afghanistan, a signature achievement that helped win over ordinary Afghans and dissuade a future generation of Taliban recruits. As the American mission faltered, U.S. officials repeatedly trumpeted impressive statistics — the number of schools built, girls enrolled, textbooks distributed, teachers trained, and dollars spent — to help justify the 13 years and more than 2,000 Americans killed since the United States invaded.

But a BuzzFeed News investigation — the first comprehensive journalistic reckoning, based on visits to schools across the country, internal U.S. and Afghan databases and documents, and more than 150 interviews — has found those claims to be massively exaggerated, riddled with ghost schools, teachers, and students that exist only on paper. The American effort to educate Afghanistan’s children was hollowed out by corruption and by short-term political and military goals that, time and again, took precedence over building a viable school system. And the U.S. government has known for years that it has been peddling hype.
USAID program reports obtained by BuzzFeed News indicate the agency knew as far back as 2006 that enrollment figures were inflated, but American officials continued to cite them to Congress and the American public.

As for schools it actually constructed, USAID claimed for years that it had built or refurbished more than 680, a figure Hillary Clinton cited to Congress in 2010 when she was secretary of state. By 2014, that number had dropped to “more than 605.” After months of pressing for an exact figure, the agency told BuzzFeed News the number was 563, a drop of at least 117 schools from what it had long claimed.

Last week, we were looking for clinics.

What’s next … ghost soldiers? Oops, that’s already an old story?


Burn Bag: Fly the Friendly Skies Via Helo For 2.2 Miles Between Embassy Kabul and Kabul International Airport

Via Burn Bag:

“After nearly 14 years, $1 trillion, and more than 2,300 lives, the security situation in Kabul is such that the Embassy is using helicopters to transport its staff the 2.2 mile distance to the international airport.”




Gayle Smith For USAID Gets a Confirmation Hearing, a Protestor, an Open Letter to End Famine

Posted: 12:13 pm  PDT


On June 17, the Senate Foreign Relations Committee held a confirmation hearing on the nomination of Gayle Smith as the next USAID Administrator:

Ms. Gayle Smith Of Ohio,
To Be Administrator Of The United States Agency For International Development
Download Testimony (pdf)


Then this happened:






Burn Bag: NEA’s Assistance Coordination office is a complete disaster?

Via Burn Bag:

When will someone on the 7th floor realize that the emperor is naked and NEA’s Assistance Coordination office is a complete disaster? Money wasted, FTEs wasted, and  …  no one knows what they do.


NEA/AC – Bureau of Near Eastern Affairs/Office of Assistance Coordination
FTE – Full-time employees
7th Floor – the location of the Secretary of State and his immediate and senior staff in the   HST building
Two grants online: Increasing Employment in the MENA Region (est. total funding $5M) and Entrepreneurship in the MENA Region ( funding $7M).
MENA – Middle East and North Africa region

USAID’s Arab Spring Challenges in Egypt, Tunisia, Libya, Yemen: The State Department, It’s No.2 Challenge

Posted: 12:10 am EDT


USAID’s Office of Inspector General (OIG) conducted a survey (pdf) to identify the challenges USAID faced during the early transition period (December 2010-June 2014) in Egypt, Tunisia, Libya, and Yemen. USAID/OIG identified and interviewed 31 key USAID officials from various parts of the organization who have worked on activities in these countries.It also administered a questionnaire to supplement the information gathered from the interviews. Together, 70 employees from USAID were either interviewed or responded to the questionnaire. It notes that the while the survey collected the perspectives of a number of USAID employees, it is not statistically representative of each office or USAID as a whole.

The highest addressee on this report is USAID/Middle East Bureau Assistant Administrator, Paige Alexander. It includes no State Department official nor congressional entities.

Below is an excerpt:

In 2013 OIG conducted a performance audit of USAID/Egypt’s economic growth project1 and found that the changes of the Arab Spring severely affected the project’s progress. Approximately midway through implementation, the project had not made significant progress in seven of the ten tasks in the original plan mainly because of changes in the Egyptian Government’s counterparts and priorities. To adapt to the environment, the project adjusted its plan and identified three new areas of work to focus on. In another audit that year,2 OIG found similar challenges at USAID/Yemen when one of that mission’s main projects had to adjust its approach after the Arab Spring started (page 16).

Beyond project delays, we found a host of other challenges common to all four countries that revolve around three broad categories:

  1. Security
  2. Increased influence from the State Department
  3. Host-countryreadiness

1. Security.

One of the most commonly cited challenges was the difficulty of operating in a volatile environment. Security dictated many aspects of USAID’s operations after the Arab Spring started, and it was not uncommon for activities to be delayed or cancelled because of security issues.
In addition to access, security also disrupted operations because employees were evacuated from the different countries. U.S. direct-hire employees at USAID/Egypt were evacuated twice in 3 years. In USAID/Yemen, employees were evacuated twice in 3 years for periods of up to 6 months.3 In our survey, 76 percent of the respondents agreed that evacuations made managing projects more difficult.
Because of the precarious security situations, strict limits were placed on the number of U.S. direct hires who were allowed to be in each country. Employees said the Agency did not have enough staff to support the number of activities. This problem was particularly pronounced in Tunisia and Libya, where for extended periods, USAID had only one permanent employee in each country

2. Increased Influence From State Department.

According to our survey results, the majority of respondents (87 percent) believed that since the Arab Spring the State Department has increased its influence over USAID programs (Figure 3). While USAID did not have activities in Libya and Tunisia before the Arab Spring, staff working in these countries afterward discussed situations in which the State Department had significant influence over USAID’s work. A respondent from Tunisia wrote, “Everything has been driven by an embassy that does not seem to feel USAID is anything other than an implementer of whatever they want to do.”

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While there is broad interagency guidance on State’s role in politically sensitive environments, the specifics of how USAID should adapt its operations were not entirely clear to Agency employees and presented a number of challenges to USAID’s operations. In Yemen, the department’s influence seemed to be less of an issue (page 17), but for the remaining countries, it was a major concern. As one survey respondent from Egypt wrote:

[State’s control] makes long-term planning incredibly difficult and severely constrains USAID’s ability to design and execute technically sound development projects. A path forward is agreed, steps taken to design activities and select implementation mechanisms, and then we are abruptly asked to change the approach.

State’s involvement introduced a new layer of review and slowed down operations. USAID employees needed to dedicate additional time to build consensus and gain approval from people outside the Agency.

USAID employees also described challenges occurring when State employees, unfamiliar with the Agency and its different types of procurement, made requests that were difficult to accommodate under USAID procedures. One respondent wrote that State “think[s] programs can be stopped and started at will and that we can intervene and direct partners in a manner that goes far beyond the substantial involvement we are allowed as project managers.”

Beyond operational challenges, many people we interviewed expressed frustration over the State Department’s increased role, particularly when State’s direction diverted USAID programming from planned development priorities and goals. This was an especially contentious issue at USAID/Egypt (page 7).

This difference in perspectives caused some to question State’s expertise in development assistance, particularly in transitional situations. A USAID official explained that countries in turmoil presented unique challenges and dynamics, and embassies may not have experts in this area. Others said USAID was taking direction from State advisers who were often political appointees without backgrounds in development.
State was not the sole source of pressure; employees said other federal entities such as the National Security Council and even the White House had increased their scrutiny of USAID since the start of the Arab Spring. As a result, mission officials had to deal with new levels of bureaucracy and were responding constantly to different requests and demands from outside the Agency.

3. Host-Country Readiness.

In each of the four countries, employees reported problems stemming from award recipients’ ability to implement assistance programs. According to one employee, local capacity in Libya was a major problem because the country did not have a strong workforce. Moreover, local implementers had not developed the necessary technical capacity because development assistance was not a priority in Libya under Muammar Qadhafi’s closed, oil-rich regime. Activities in Tunisia and Yemen encountered similar issues because neither have had long histories of receiving foreign development assistance. In Egypt, employees reported that some of the nongovernmental organizations (NGOs) working on the mission’s democracy and governance program also lacked sufficient capacity.

On Egypt:  More than 85 percent of the employees surveyed who worked on activities related to USAID/Egypt agreed that the State Department had increased its influence over USAID programs since the start of the Arab Spring (Figure 5). A number of respondents said State steered Agency programs to address political rather than development needs. This dynamic had a profound effect on the mission’s ability to follow USAID’s guidance on designing and implementing developmentally sound projects. […] Some mission officials questioned the value of adhering to USAID’s project design procedures when the State Department had already decided a project’s fate. […] In this example, State’s desire to award education scholarships to women in Egypt was difficult to justify because university enrollment data showed that higher education enrollment and graduation rates for women are slightly higher than for men.  […] With so many differing voices and perspectives, USAID employees said they were not getting clear, consistent guidance. They described the situation as having “too many cooks in the kitchen.” One survey respondent wrote:

State (or White House) has had a very difficult time making decisions on USAID programming for Egypt . . . so USAID has been paralyzed and sent through twists and turns. State/White House difficulties in decisions may be expected given the fluid situation, but there has been excessive indecision, and mixed signals to USAID.

On Tunisia: The State Department placed strict restrictions on the number of USAID employees allowed to be in-country. As a result, most Agency activities were managed from Washington, D.C. … [O]ne survey respondent wrote, “I have been working on Tunisia for nearly 3 years now, and have designed programs to be carried out there, but I’ve never been. I don’t feel like I have been able to do my job to the best of my ability without that understanding of the situation on the ground.”

On Libya: The attacks in Benghazi on September 11, 2012, had a profound impact on USAID operations in Libya. According to one interviewee, after the attacks USAID did not want to attract too much political attention and put a number of Agency activities in Libya on hold. The period of inactivity lasted from September 2012 to September 2013. It was not until October 2013, after Prime Minister Ali Zeidan was abducted, that the U.S. Government refocused attention on Libya and funding for activities picked up again.

Before the attacks, USAID had five employees in the country; afterward, only one was allowed to remain. Although his main priority then was to manage USAID/OTI projects in Libya, he also was asked to oversee four to five additional activities managed out of Washington—a stretch for any employee. As one survey respondent wrote, “The lack of people in the field in Libya (small footprint) means that DC overwhelms the field. People in the field are worked ragged.”

On Yemen: USAID/Yemen did not suffer from the challenges of unclear strategy that other USAID missions did in the region; 70 percent of respondents who worked on activities in Yemen believed that the Agency had a clear strategy for its post-Arab Spring activities (Figure 12). This is a stark contrast to responses related to USAID/Egypt, where only 22 percent believed that USAID had a clear strategy. …[O]ur survey also found a strong working relationship between USAID/Yemen and the State Department; the two often agreed on what needed to be done. […] Some respondents said the collaborative atmosphere was due to individual personalities and strong working relationships between USAID and State officials. One employee said because employees of both organizations lived and worked together in the close quarters, communication flowed freely as perspectives could be exchanged easily. …[O]ne senior USAID/Yemen official said, some of what needed to be done was so obvious that it was difficult for the two agencies not to agree.

Lessons Learned

The report offers 15 lessons learned including the development of a USAID transition plan at the country level, even if it may change. USAID/OIG says that by having a short-term transition plan, the Agency “would have a better platform to articulate its strategy, particularly when it disagrees with the decisions of other federal entities.”It also lists the following:

  • Resist the urge to implement large development projects that require the support of host governments immediately after a transition.
  • Prepare mission-level plans with Foreign Service Nationals (FSNs)—locally hired USAID employees who are not U.S. citizens—in case U.S. direct hires are evacuated. Evacuation of U.S. staff can be abrupt with only a few hours’ notice. People we interviewed recommended that U.S. staff develop plans with the mission’s FSN staff ahead of time, outlining roles, responsibilities, and modes of operation to prevent a standstill in operations in the event of an evacuation.
  • Get things in writing. When working in environments where USAID is getting input and instructions from organizations that are not familiar with Agency procedures, decisions made outside of USAID may be documented poorly. In such circumstances, it is important to remember to get things in writing.


Conspired to Defraud Uncle Sam? Be Very Afraid. We’re Gonna Put You in Home Confinement!

Posted: 9:40 am EDT


Remember the USAID nonprofit contractor IRD? (See Dear USAID OIG — That Nonprofit Contractor Mess Really Needs a Fact Sheet). Well, here’s another one.  This is a case where the CEO of a major USAID contractor gets feather-slapped by the court.

A 2011 ranking of private USAID partners by lists LBG as the third largest USAID private-sector partner that has contracted some of the government’s largest post-conflict redevelopment projects in Iraq and Afghanistan. According to Bloomberg, Louis Berger International, a unit of Louis Berger Group, got about $736 million to modernize a power system and rehabilitate the Kajakai Dam in Afghanistan.  Whoa! We thought that dam only cost $305.5 million! Plus cost of fuel that  US taxpayers also had to shoulder.

What is missing from this announcement? How much was the total contracts that LBG received in the last 20 years? Who’s paying the independent monitor? And for heaven’s sake, what lessons are we sending to other reconstruction capitalists doing awesome work for love of god and country?


The former president, chief executive officer, and chairman of the board of a New Jersey-based international engineering consulting company was sentenced today to 12 months of home confinement and fined $4.5 million for conspiring to defraud the U.S. Agency for International Development (USAID) with respect to billions of dollars in contracts over a nearly 20-year period, U.S. Attorney Paul J. Fishman announced.

Derish Wolff, 79, of Bernardsville, New Jersey, previously pleaded guilty before U.S. District Judge Anne E. Thompson to a superseding information charging conspiracy to defraud the government with respect to claims. Judge Thompson imposed the sentence today in Trenton federal court.

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

Wolff, the former president and CEO of Morristown, New Jersey-based Louis Berger Group Inc. (LBG), and the former chairman of LBG’s parent company, Berger Group Holdings Inc. (BGH), led a conspiracy to defraud USAID by billing the agency on so-called “cost-reimbursable” contracts – including hundreds of millions of dollars of contracts for reconstructive work in Iraq and Afghanistan – for LBG’s overhead and other indirect costs at falsely inflated rates.

USAID, an independent federal government agency that advances U.S. foreign policy by supporting economic growth, agriculture, trade, global health, democracy, and humanitarian assistance in developing countries, including countries destabilized by violent conflict, awarded LBG hundreds of millions of dollars in reconstruction contracts in Iraq and Afghanistan as well as in other nations. LBG calculated certain overhead rates and charged USAID and other federal agencies these rates on cost-reimbursable contracts, which enabled LBG to pass on their overhead costs to the agency in general proportion to how much labor LBG devoted to the government contracts.

From at least 1990 through July 2009, LBG, through Wolff and other former executives, intentionally overbilled USAID in connection with these cost-reimbursable contracts. The scheme to defraud the government was carried out by numerous LBG employees at the direction of Wolff.

Wolff targeted a particular overhead rate, irrespective of what the actual rate was, and ordered his subordinates to achieve that target rate through a variety of fraudulent means. From at least as early as 1990 through 2000, Wolff ordered LBG’s assistant controller to instruct the accounting department to pad its time sheets with hours ostensibly devoted to federal government projects when it had not actually worked on such projects.

At an LBG annual meeting in September 2001, Salvatore Pepe, who was then the controller and eventually became chief financial officer (CFO), presented a USAID overhead rate that was significantly below Wolff’s target. In response, Wolff denounced Pepe, called him an “assassin” of the overhead rate and ordered him to target a rate above 140 percent, meaning that for every dollar of labor devoted to a USAID contract, LBG would receive an additional $1.40 in overhead expenses supposedly incurred by LBG.

In response, Pepe and former controller Precy Pellettieri, with Wolff’s supervision, hatched a fraudulent scheme from 2003 through 2007 to systematically reclassify the work hours of LBG’s corporate employees, including high-ranking executives and employees in the general accounting division, to make it appear as if those employees worked on federal projects when they did not. At his plea hearing on Dec. 12, 2014, Wolff admitted that Pepe and Pellettieri, at Wolff’s direction, reclassified these hours without the employees’ knowledge and without investigating whether the employees had correctly accounted for their time, and at times did so over an employee’s objection.

In addition to padding employees’ work hours with fake hours supposedly devoted to USAID work, Wolff instructed his subordinates to charge all commonly shared overhead expenses, such as rent, at LBG’s Washington, D.C., office to an account created to capture USAID-related expenses, even though the D.C. office supported many projects unrelated to USAID or other federal government agencies.

On Nov. 5, 2010, Pepe and Pellettieri both pleaded guilty before then-U.S. Magistrate Judge Patty Shwartz to separate informations charging them with conspiring to defraud the government with respect to claims. Also on that date, LBG resolved criminal and civil fraud charges related to Wolff’s and others’ conduct. The components of the settlement included:

  • a Deferred Prosecution Agreement (DPA), pursuant to which the U.S. Attorney’s Office in New Jersey suspended prosecution of a criminal complaint charging LBG with a violation of the Major Fraud Statute; in exchange, LBG agreed, among other things, to pay $18.7 million in related criminal penalties; make full restitution to USAID; adopt effective standards of conduct, internal controls systems, and ethics training programs for employees; and employ an independent monitor who would evaluate and oversee the company’s compliance with the DPA for a two-year period;
  • a civil settlement that required the company to pay the government $50.6 million to resolve allegations that LBG violated the False Claims Act by charging inflated overhead rates that were used for invoicing on government contracts; and an administrative agreement between LBG and USAID, which was the primary victim of the fraudulent scheme.

In the settlement, the government took into consideration LBG’s cooperation with the investigation and the fact that those responsible for the wrongdoing were no longer associated with the company.

Click here for the original announcement (pdf).


Related posts:

Related items:

Tweet of the Day: The Truth Behind The Afghanistan ‘Success Story’

Posted: 1:32 am EDT



Looking at an American intervention that’s going to end, not with a bang, but on a deadline, it can be tough to find the silver lining.

This week Forbes contributor Loren Thompson tried to do that in a piece called “Five Signs Afghanistan Is Becoming An American Success Story,” making the case that staying the course in Afghanistan is “paying off.” His premise that Americans can hold their head high on Afghanistan is based on five points: the solid performance of Afghan forces, the country’s improved political climate, Islamabad’s renewed interest in cooperating with Kabul, a booming Afghan economy, and popular support for Afghanistan’s national institutions. It’s a concise, readable assessment, with one problem: The country Thompson describes doesn’t exist.

Gary Owen is a veteran, development worker, and blogger at “Sunny in Kabul.” He is also a regular contributor to the Afghan Analysts Network and Vice News. Gary Owen is a pseudonym. Follow Gary Owen on Twitter @elsnarkistani.