The Select Committee on the Events Surrounding the 2012 Terrorist Attacks in Benghazi released an Interim Progress Update on May 8, 2015. Below is an excerpt from the report including an item on its intent to call mid-level managers from the State Department:
In the coming months, an additional 60 witnesses representing current and former officials and employees from the State Department, the White House and the Intelligence Community will be interviewed.
The Committee is nearing the end of its first round of interviews with State Department employees. Information obtained from this first round of interviews has raised additional questions of current and former State Department officials. Upon completion of these interviews, the Committee will begin a second round of interviews with additional State Department employees. This second round of interviews will consist of mid-level managers at the Department, many of whom were and are responsible for making day-to-day decisions and implementing the policy that is set by State Department leadership.
The Committee also intends to interview current and former senior State Department officials. These officials include Cheryl Mills, Jake Sullivan, Huma Abedin, Susan Rice and Patrick Kennedy, among others.
[T]he Committee intends to interview former White House and National Security Staff personnel regarding their roles in the events prior to, during and after the Benghazi attacks. These individuals include former National Security Advisor Tom Donilon, former Deputy National Security Advisor Denis McDonough, former Deputy Strategic Communications Advisor Ben Rhodes, former National Security Council spokesperson Tommy Vietor, and former Director for Libya on the National Security Staff Ben Fishman. None of these individuals have previously testified before Congress regarding their role in and including knowledge of the events prior to, during or after the Benghazi attacks.
Beginning in June, the Committee intends to interview current and former Department of Defense employees about their role in the response to the Benghazi attacks. These individuals include Secretary Leon Panetta, General Martin Dempsey and General Carter Ham, among others.
The 11-page update is available to read here (pdf).
Twin brothers Muneeb and Sohaib Akhter, 23, of Springfield, Virginia, were indicted by a federal grand jury today on charges of aggravated identity theft, conspiracy to commit wire fraud, conspiracy to access a protected computer without authorization, access of a protected computer without authorization, conspiracy to access a government computer without authorization, false statements, and obstruction of justice.
According to the indictment, beginning in or about March 2014, the Akhter brothers and coconspirators hacked into the website of a cosmetics company and stole its customers’ credit card and personal information. They used the stolen information to purchase goods and services, including flights, hotel reservations, and attendance at professional conferences. In addition, the brothers and coconspirators devised a scheme to hack into computer systems at the U.S. Department of State to access network traffic and to obtain passport information.
Related court documents and information may be found on the website of the District Court for the Eastern District of Virginia or on PACER by searching for Case No. 1:15-cr-124.
Secretary Kerry Holds 8-Month-Old on Shoulders After Addressing U.S. Military and Diplomatic Personnel at Yongsan Army Garrison in Seoul U.S. Secretary of State John Kerry holds 8-month-old Andrew Belz on his shoulders as he poses with the children of U.S. military and diplomatic personnel following a speech to them at the Yongsan Army Garrison amid a visit to Seoul, Republic of Korea, on May 18, 2015. [State Department Photo/Public Domain]
The Federal Register has published the interim final rule amending passport rules that will allow the State Department to issue an official passport to an official or employee of a state, local, tribal, or territorial government traveling abroad to carry out official duties in support of the U.S. government.
22 CFR 51.3(b) provides that an “official passport” may be issued to: an official or employee of the U.S. government traveling abroad to carry out official duties; spouses and family members of such persons; and, when authorized by the Department of State, U.S. government contractors traveling abroad to carry out official duties on behalf of the U.S. government.
Increasingly, the federal government utilizes officials or employees of state, local, tribal, and territorial governments in support of federal activities, both domestically and overseas, such as the Federal Bureau of Investigation’s Joint Terrorism Task Force. When required to travel internationally in support of such federal activities, these individuals are not currently eligible for official passports. Issuance of an official passport to such individuals signifies to foreign governments that they are carrying out official duties in support of the U.S. government. The activities undertaken by these officials are often of pressing national security, law enforcement, or humanitarian importance and occur with little advance notice. It is in the U.S. government’s interest to provide these individuals the travel documents necessary to allow them to travel in a timely manner.
Under 22 U.S.C. 211a et seq., the Secretary of State has the authority to make rules for the granting and issuance of passports. The Department is amending section 51.3(b) of 22 CFR to authorize issuing official passports to an official or employee of a state, local, tribal, or territorial government traveling abroad to carry out official duties in support of the U.S. government.
The blue tourist passport is the only passport that can be used by U.S. citizens for leisure travel abroad. A no-fee passport looks identical to a tourist passport, but it can only be used for dependents who are traveling with their sponsor to an overseas duty station. Turn to page 26. If there is an amendment in the back of the passport, it is a no-fee passport. No-fee, official and diplomatic passports cannot be used for personal travel. (via army.mil)
Revise paragraph (b) of §51.3 to read as follows:
§51.3 Types of passports.
(b) Official passport. When authorized by the Department, an official passport may be issued to:
(1) An official or employee of the U.S. government traveling abroad to carry out official duties, and family members of such persons;
(2) A U.S. government contractor traveling abroad to carry out official duties on behalf of the U.S. government; or
(3) An official or employee of a state, local, tribal, or territorial government traveling abroad to carry out official duties in support of the U.S. government.
Last week, State/OIG released its inspection report of the U.S. Embassy Antananarivo in Madagascar. It’s one of those report that you read and you want to pull your hair in frustration. By the time the OIG came for a visit, there’s a new chargé d’affaires, a new staff rotated in and a new team is tasked with correcting the mess left by the previous officials assigned to post. The previous CDA identified fuel as a management control deficiency but did not see the rest of the good stuff. The OIG report notes that other vulnerabilities discussed in the report “would have been apparent if embassy leadership had conducted a comprehensive, office-by-office review of all activities with management control implications.”
The report highlights non-use of record email to effectively track important exchanges on policy and programs, use of social media to reach a mainly urban, youthful, and elite audience where only 2 percent of the Madagascar population has access to the Internet, and Meritorious Honor Awards without proper documentation. Beyond the more problematic public affairs grants and purchases discussed below, post also spent more than $10,000 on computer equipment for use in Comoros, even if — get this — there is no U.S. Government office space in Comoros in which to place that equipment.
And here’s one that’s going to make you unfriend this fella on Facebook: “The previous chargé d’affaires departed the embassy without completing six interim evaluation reports for American employees he supervised, as required for periods of 120 days or more under 3 FAM 2813.4. He did not respond to email reminders from the embassy human resources office and the Bureau of African Affairs. ”
A quick look at US Embassy Antananarivo:
The mission has a total staff of 296, with 57 U.S. direct-hire positions. In April 2010, the embassy occupied a new embassy compound (site acquisition was $3.6 million, and construction was $102.3 million), consisting of a chancery, a warehouse/shops facility, a Marine security guard quarters, and a swimming pool. Embassy housing consists of 38 leased and 2 government-owned residences, 1 of which is the Ambassador’s residence.
The good news: A recently arrived chargé d’affaires
Stephen Anderson arrived in August 2014, about two months before the OIG inspection. The OIG inspectors write:
The recently arrived chargé d’affaires has made a good start in leading the embassy during a period of profound change in the political situation in Madagascar and the subsequent restart of the bilateral relationship between Madagascar and the United States. … The chargé d’affaires, working with a collegial country team, has also demonstrated interpersonal engagement within the embassy…..The chargé d’affaires has also demonstrated his commitment to management controls within the embassy. He directed that each Department section conduct a self-assessment of its management deficiencies. At the time of the inspection, the mission had completed corrective action on 73 of the 122 action items identified and was working to close the others.
Some other good news:
1) The information management office is led by a seasoned information management officer. The section received good scores on ICASS customer surveys and OIG questionnaires, as well as A+ ratings from the Department’s network and systems monitoring software. 2) Community liaison office operations received high marks, exceeding both regional and worldwide scores in the 2014 ICASS customer satisfaction survey. 3) OIG surveys noted that parents are satisfied with the quality of education; and 4) The health unit’s ICASS customer satisfaction scores are above worldwide averages.
Now for that American Center boondoggle:
According to State/OIG, the American Center was funded with embassy public affairs funds (approximately $116,328) and by two large allotments provided in June 2012 by the Office of American Spaces in the Bureau of International Information Programs (totaling $559,062). The OIG report is careful to point out that though current staff members will play a key role in identifying a path forward on this project, they are not responsible for the existing situation. But all those responsible and accountable for this project are left unnamed in the OIG report presumably because they are no longer at post and have been successfully recycled to other posts. And since IERs (inspector’s evaluation reports) are no longer in season, none of the details from this report will ever make it anywhere near a promotion board.
A former embassy public affairs officer in 2011 proposed an American Center for the capital on the basis of a public-private partnership model. The concept initially envisioned a partnership of the English Teaching Program (ETP), a restaurant, Voice of America, a telecommunications company, and a publisher of a free entertainment monthly. A memorandum of understanding was drafted and signed by some of the prospective partners in June 2013 after lengthy delays. However, two prospective partners failed to sign on and a final partnership memorandum never entered into force.
Disregard of policies and procedures concerning grants and cooperative agreements have put at risk the embassy’s approximately $700,000 project to establish an American Center in Antananarivo. The OIG team noted that the decisions and actions that led to the American Center problems predate the arrival of the employees presently assigned to the embassy.
The embassy initiated a massive public relations campaign and announced the start of construction at a press conference in April 2012 attended by the former chargé d’affaires and the deputy coordinator of the Bureau of International Information Programs.
Welcome to the new American Center. In a few months time this space will be transformed into the most modern and technologically advanced space that Madagascar has ever seen. It will be a place to learn, to explore, and to connect. It will not be your traditional cultural center. This initiative is an innovative collaboration between the American Embassy, our private sector partners, and the English Teaching Program. It is this ambitious vision for a cultural center based entirely on the model of a public-private partnership that has brought the person in charge of American centers worldwide for the State Department to Madagascar. I would like to acknowledge Michelle Logsdon, the Deputy Coordinator for International Information Programs who has joined us today to learn more about this important initiative.
As you will see in the presentations that each partner will be delivering shortly, they have not only embraced the potential of this center, they have developed it in ways we would have never dreamed possible. VIMA plans to put on some of the most spectacular shows Antananarivo will have ever seen. Orange and Teknet will make the latest technology accessible to a new generation of Malagasy, while the Cookie Shop will create a new environment for learning, exchanging, and of course some great brownies.
We will organize trainings, cultural programs, and conferences with our partners that connect them and their clients to individuals, information, and opportunities from around the globe. We will also have a team dedicated to finding the latest information, technology, and developments for the Center. While many of the services at the Center will be fee-based, just like at an internet café or a theatre, the Embassy will ensure that there will be more resources and events than ever that are available to the public for free.
This is going to be a fee-based center in a country where the per capita gross domestic product is only $1,000 (2013 est.), with 92 percent of the population living on less than $2 a day. Who’s going to be the audience for these programs? The same urban, youthful, and elite audience that belongs to the 2 percent of the Madagascar population with access to the Internet?
I Dreamed a Dream … a Cookie Shop and Some Great Brownies
The OIG team inspected Embassy Antananarivo from October 7–29, 2014. At that time, the team visited the proposed American Center site in a shopping mall and observed the following:
[A]fter almost 2 years of construction, the site, covering 1,200 square meters (or 12,917 square feet), was a shell. Rooms were laid out, but lighting, flooring, doors, and other infrastructure were absent. A small bathroom shared with the rest of the mall was located at some distance from the site on the other side of the mall. Other problems included the lack of storage space, ceilings below standard height on the mezzanine level, and inadequate provision for air conditioning. On a weekday afternoon, some minor construction work was underway. However, no agreement had been reached on a final design or construction plan, including where the U.S. Government portion of the facility might be located.
Storage in seven 40-ft container for nearly two years?
As the American Center is not ready for occupancy, much of the furniture and equipment ordered for it has been stored in seven 40-foot containers located in the embassy parking lot, some of it for nearly 2 years. The OIG team spot-checked the contents of the containers and did not observe water or insect damage.
The embassy did not have a plan (which details needed resources, deadlines, partners, and costs) that could lead to a decision whether to close or salvage this project. Without such a plan, the embassy runs the risk of repeating past mistakes and failing to make the best use of funds already expended.
No Bona Fide Need for Much of Equipment Procured for American Center
According to information the embassy provided the OIG team, the embassy has expended approximately $400,000 to date on furniture and equipment for the American Center project. However, the embassy failed to establish a bona fide need for many of these procurements. This failure—and the subsequent misuse of some of the furniture and equipment—constitutes a management control weakness.
A notable example of a questionable procurement is a $47,938 telescopic theater-style seating system, which the embassy purchased even though the prevailing wage of workers who could set up and remove chairs is $10 a day. The shipping cost for this item alone was estimated at $19,175.
Other examples of questionable procurements abound and include the following (costs are rounded and do not include shipping):
Twenty-five 46-inch televisions ($21,500) and six 70-inch televisions ($24,600).
A motorized theater curtain system ($7,150).
Twenty iMacs ($22,935), 16 HP TouchSmarts ($14,247), 20 Wii stations ($4,230), 20 Apple TVs ($1,920), and 10 iPods ($1,790).
Fifty home theater chairs ($26,600).
A replica of the Seattle Space Needle, painted wall mural, and totem pole ($4,810).
Decorations, including more than a dozen fish and turtle sculptures ($5,400).
Whatsadoing with a $5,500 coffee grinder/espresso maker?
The OIG report says that records the team reviewed indicate that the public affairs section recommended specific vendors to the procurement unit, most often identified through Amazon.com. Looks like no one bothered to make a distinction between government shopping and personal shopping, and folks were in a hurry to spend end-of fiscal year funds:
No documentation in the procurement files shows that procurements greater than $3,000 were properly competed, as required. A number of the items ordered were not part of the original equipment lists submitted in support of the request for funds. For example, the original request did not include any food preparation equipment, yet the embassy purchased items such as a wine cooler, a $650 residential blender, grills, a $5,500 coffee grinder and commercial espresso maker, refrigerators, and other kitchen items.
Property Control Does Not Comply with Regulations, No Kidding
The amazing thing here is there is no discussion why USG properties were lent to two private businesses without documentation. Who signed them out? Who approved these loans? What did the USG get for this sweet arrangement? Did those companies just come by the embassy, pick up the USG properties and the embassy guards just waved “bye, come back soon?”
As the American Center was (and still is) not ready for occupancy, much of the furniture and equipment has been stored in seven 40-foot containers located in the embassy parking lot, some of it for nearly 2 years.
Other furniture and equipment was loaned to two private businesses for their use without any documentation. The embassy loaned at least $42,000 of computers and office equipment to one telecommunications firm alone. These items included 12 iPads, 16 iMacs, and 2 70-inch and 3 46-inch televisions. The embassy purchased a $6,700 eBoard from this company and then lent the item back to it. The embassy told the OIG team that these items were retrieved from the firm in February 2014 after a year or so in use, though the lack of documentation makes the timing unclear. The other firm, a restaurant chain, was lent at least $5,000 worth of U.S. Government property. The embassy warehouse unit retrieved these items, including a refrigerator installed in the restaurant owner’s private residence, on September 15, 2014—3 weeks prior to the OIG team’s arrival. These deficiencies were not, but should have been, included in the 2014 chief of mission statement of assurance signed by the previous chargé d’affaires on August 11, 2014.
Who Bears Responsibility For This Project, Anyways?
Short answer from OIG: Bureau of African Affairs, Bureau of International Information Programs, and Embassy Bear Responsibility. Here is the longer answer:
The lack of accountability for the American Center project extends beyond the embassy because additional management controls exist for projects of this scale. The Bureau of International Information Programs and its regional information resources office in Nairobi approved two large American Spaces funding requests despite warning signs. These included the requests’ hyperbolic language (“the possibilities are endless”) and the questionable suitability of such a large, public-private project in a very poor country, especially when the project would be managed by a public affairs officer and section lacking the necessary business and accounting acumen and grants management experience. The Bureau of African Affairs approved the project despite the fact that it had not received the necessary project details from the embassy and despite the many flaws in the grants documents that they did receive. The embassy did not caution the Department that the project’s prospective partners had never cooperated in such a joint venture, had no understanding of its public purpose, and had no record of such cooperation with the embassy in the past. The Department should have drawn on its technical and regional expertise and understanding of public-private partnerships to identify flaws in the initial plan before it was approved and funds were allotted.
Note that the new Ambassador to Madagascar Robert Yamate was only confirmed by the Senate in November 2014, and did not get to post until December 2014, five months after his nomination was announced and two months after this OIG inspection. The previous ambassador appointed to Madagascar was R. Niels Marquardt who departed post in June 2010.
On May 8, President Obama announced his intent to nominate Ann Calvaresi Barr, as the next Inspector General for the United States Agency for International Development (USAID). The WH released the following brief bio:
Ann Calvaresi Barr is the Deputy Inspector General of the Department of Transportation, a position she has held since 2010. Ms. Calvaresi Barr joined the Department of Transportation as Principal Assistant Inspector General for Audits and Evaluations in 2009. She served at the Government Accountability Office (GAO) as Director of Acquisition and Sourcing Management from 2004 to 2009, Assistant Director for Strategic Issues from 2002 to 2004, and Assistant Director for Health Care Issues from 1998 to 2002. Ms. Calvaresi Barr held several roles as an analyst and senior analyst at GAO from 1984 to 1998, including a five year tour in GAO’s former European Office.
Ms. Calvaresi Barr received a B.A. from Dickinson College and an M.P.A. from American University.
Screen capture from c-span
Click here for a video of Ms. Calvaresi Barr during a congressional hearing on Amtrak in 2012. If confirmed, she would succeed Donald A. Gambatesa who resigned three and a half years ago after a five year tenure. The OIG position at USAID has been vacant for 1,310 days according to the OIG Tracker put together by POGO (see Where Are All the Watchdogs?)
The State Department announced today the availability of evacuation flights for U.S. citizens in Burundi departing on Sunday, May 17, from Bujumbura to Kigali, Rwanda. Like all evacuation flights, American citizen passengers are expected to sign a promissory note promising to later reimburse the U.S. government for the cost of the evacuation.
22 U.S.C. 2671(b)(2)(A) provides that “Private United States citizens or third-country nationals, on a reimbursable basis to the maximum extent practicable, with such reimbursements to be credited to the applicable Department of State appropriation and to remain available until expended, except that no reimbursement under this clause shall be paid that is greater than the amount the person evacuated would have been charged for a reasonable commercial air fare immediately prior to the events giving rise to the evacuation.” (via FAM – pdf)
Below is an excerpt from the US Embassy Bujumbura announcement:
The U.S. Department of State wishes to inform U.S. citizens interested in departing Burundi that we are planning charter evacuation flights for Sunday, May 17, from Bujumbura, Burundi, to Kigali, Rwanda. Those wanting to travel should plan to arrive at Bujumbura International Airport no later than 10:00 a.m. Sunday morning. After that time we cannot guarantee you a flight.
The cost will be approximately $620.00 per passenger. Please note that you will be asked to sign a form agreeing to reimburse the U.S. government for your evacuation costs. As indicated in the May 15 Emergency Message, this option is open only to U.S. citizens and their immediate family members. There is a luggage allowance of 20 kilograms per traveler. Pets may be allowed on a case by case basis, provided they have a veterinary certificate, kennel (cage), and will be carried in the cargo hold of the aircraft. The weight of the pet in the kennel will count against the 20 kilograms per traveler. In addition, travelers should be prepared to pay $30 in cash for a Rwandan visa upon arrival in Kigali.
U.S. Embassy Bujumbura requests U.S. citizens who plan to use this option to depart Burundi to contact us at BurundiEmergencyUSC@state.gov to confirm your plans and obtain additional flight information, even if you already contacted us to express your interest.
The Embassy also asks U.S. citizens who are not in possession of a valid U.S. passport and who may need emergency passport services in order to leave the country to please contact the Consular Section at BujumburaC@state.gov or 22-20-7066 or 79-95-1666 with their contact information. Emergency consular services will be available at the Embassy between 7 a.m. and 9:30 a.m.
You can alert us to U.S. citizens affected by the situation in Burundi, including yourself, by visiting https://tfa.state.gov/ccd, selecting “2015 Burundi Unrest” and providing as much information as possible. You can also contact us at 1-888-407-4747 (From the United States and Canada), +1-202-501-4444 (From all other countries), and email BurundiEmergencyUSC@state.gov if you have additional questions or concerns.If you are currently in Burundi and do not have the ability to access the internet or send email,you may contact the Embassy’s consular section at +257-22-20-7000.
“If a T-wall tips over in Baghdad but there’s no media around to hear it, will it make a sound? What if it crushes a local national contractor working on a USG facility— will anyone mention the man’s death, or can we expect radio silence as usual? It’s becoming clear that no one back home really cares about what’s going on over here….it’s like 2004 all over again.”
U.S. Soldiers of Headquarters and Headquarters Company, Brigade Special Troops Battalion, 3rd Brigade Combat Team, 82nd Airborne Division, guide a concrete barrier into a new position at Joint Security Station Loyalty, eastern Baghdad, Iraq, on May 17, 2009. Photo by Staff Sgt. James Selesnick
Note: “T-Walls” or Texas barriers can reached upwards of 12 to 18 feet in height. Some of the tallest reach 24 feet. According to army.mil, t-walls of the larger variety became symbols of life in Iraq although several variations of shapes and sizes also abound around Iraq. Read more here.
A 2011 ranking of private USAID partners by devex.com 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.