@StateDept Contractor to Pay $1.65 Million to Resolve Criminal and Civil Fraud Allegations

Posted: 3:09 am EDT
[twitter-follow screen_name=’Diplopundit’ ]

 

In May 2015, Tony Chandler, 68, of Severn, Maryland, and Marvin Hulsey, 52, of Stafford, Virginia, were indicted by a federal grand jury  on charges of conspiracy to commit wire fraud and wire fraud.

According to the indictment, Chandler was employed by the U.S. Department of State with duties as a contracting officer’s representative in the Bureau of Overseas Buildings Operations.  In that capacity, Chandler was responsible for oversight of the contractor that employed Hulsey as a program manager. Apart from his government employment, Chandler was an authorized distributor of nutritional supplements for a multi-level marketing company.  From 2008 and continuing into 2010, Chandler earned a commission of sales for nutritional supplements that were sold to employees under Hulsey’s supervision.  The employees were reimbursed by Hulsey’s employer for the cost of the nutritional supplements, after which Hulsey, through agreement with Chandler, caused fake invoices to be created and submitted to the U.S. Department of State.  Knowing that the cost of nutritional supplements was not an allowable cost, Chandler approved many of the fake invoices in his official capacity, causing the U.S. Department of State to make fraudulent payments back to Hulsey’s employer. Chandler earned a commission from the multi-level marketing company for each sale of nutritional supplements.

On March 21, 2016, USDOJ announced the following:

Coastal International Security, Inc., based in Upper Marlboro, Maryland, agreed to pay a total of $1.65 million to resolve criminal and civil allegations that the company defrauded the State Department during performance of a security contract and later concealed the fraud from contracting officials, and civil allegations that the company improperly obtained and used competitors’ pricing information to underbid competitors on government task orders.

The government’s investigation focused on the relationship between Marvin Hulsey, a former program manager for Coastal International Security, and Tony Chandler, a former contracting official of the State Department. According to court documents, Hulsey and Chandler conspired together to submit false invoices to the State Department for unallowable costs of nutritional supplements. Chandler, as an authorized distributor of the nutritional supplements, received commissions from the approximate $170,000 in fraudulent nutritional supplement billings. Independent of this scheme, Hulsey admitted to causing approximately $140,000 in additional fraudulent billings through a company owned by his wife.

The government discovered during its investigation that Curtis Wrenn, in his capacity as president of Coastal International Security, learned of Hulsey’s and Chandler’s nutritional supplement scheme.  Wrenn knew that he had a responsibility under the Federal Acquisition Regulation to timely disclose to the government credible evidence of fraud, but instead intentionally omitted facts related to the fraud from a letter delivered to the State Department.

Chandler and Wrenn both pleaded guilty on June 12, 2015, and were both sentenced on Sept. 18, 2015. Chandler was sentenced to six months in prison, while Wrenn was sentenced to one year of probation for the false statement to the State Department.  Hulsey pleaded guilty on July 24, 2015, and was sentenced on Oct. 30, 2015, to one year and one day in prison and two years of supervised release.

Under the terms of the agreement entered into between Coastal International Security and the United States to resolve the criminal allegations, the United States agreed not to bring criminal charges against the company related to the conduct that is the subject of the agreement in part because of the significant changes to the company’s ethics and compliance program.  Coastal International Security has agreed to accept responsibility for the conduct of its former employees, continue its cooperation with federal investigators, pay a monetary penalty of $150,000 and maintain an effective ethics and compliance program, with particular attention to employee training, federal reporting requirements for suspected fraud, and whistleblower protection.  The U.S. Attorney’s Office may seek to prosecute Coastal International Security for the admitted conduct of its employees, or to assess a further penalty of up to $500,000 if during the two year term of the criminal agreement, an executive management official commits federal crimes as outlined in the agreement, and the company fails to report the misconduct to the U.S. Attorney’s Office.

Coastal International Security simultaneously agreed to pay $1.5 million to resolve civil claims under the False Claims Act for the above conduct, as well as claims under the Procurement Integrity Act arising out of Coastal International Security’s knowledge and use of a competitor’s publicly unavailable bid proposal information.  The competitor’s information allegedly enabled Coastal International Security to underbid the competition on bids that Coastal International Security made between Nov. 4, 2008, and Oct. 7, 2011, in connection with various Department of State task orders.

The civil claims settled by Coastal International Security and the United States are allegations only. There has been no determination of civil liability.  The resolutions obtained were the result of parallel investigations by the criminal and civil divisions of the U.S. Attorney’s Office for the Eastern District of Virginia.

Dana J. Boente, U.S. Attorney for the Eastern District of Virginia; Steve A. Linick, Inspector General for the U.S. Department of State and Broadcasting Board of Governors; and Paul M. Abbate, Assistant Director in Charge of the FBI’s Washington Field Office, made the announcement after the agreements were released.  Special Assistant U.S. Attorney Brian D. Harrison and Assistant U.S. Attorney Grace L. Hill prosecuted the criminal case.  Assistant U.S. Attorney Gerard Mene handled the civil case.

This case was investigated by the U.S. Department of State, Office of Inspector General (DOS-OIG) and the FBI’s Washington Field Office. Substantial assistance was provided by the Criminal Analysis Branch of the DOS-OIG.

The case is Case No. 1:15-cr-137 and 1:15-cr-150.

 

Related items:

 

Advertisements