News | Sept. 4, 2018

DoD OIG Newsletter September 2018

The DoD OIG newsletter summarizes the reports and investigations released by the Department of Defense Office of Inspector General in the previous month and those we anticipate releasing in the coming month. I encourage you to read these reports and to access our website, which lists reports and investigations by year, subject, and DoD component. You'll also find our project announcements and additional news releases highlighting investigations conducted by the Defense Criminal Investigative Service. Thank you for subscribing to our newsletter.



Significant reports expected to be issued within the next 30 days include:

Audit of the Accuracy of Data in the Secret Internet Protocol Router Network Information Technology Registry

This audit determines whether DoD Components reported accurate information technology system data in the Secret Internet Protocol Router Network Information Technology Repository systems.  The Secret Internet Protocol Router Network Information Technology Repository is the authoritative classified inventory of the DoD’s mission‐critical and mission‐essential information technology systems.  Missioncritical information technology systems are defined as systems that if lost or compromised would prevent warfighter operations or direct mission support of warfighter operations.  Missionessential information technology systems are defined as systems that are basic and necessary to accomplish an organization’s mission.

Audit of DoD Incident Response Capability for Mission-Critical Control Systems
This audit determines whether the DoD has an effective program to detect, report, and respond to security incidents on mission critical control systems.  Mission critical controls systems are computer resources, both hardware and software, that are physically part of, dedicated to, or essential to the mission performance of systems providing essential infrastructure services such as electricity, building automation or fuel distribution.  This report will be classified.  

Audit of the Management of Prepositioned Stock in the U.S. European Command
This audit determines whether the U.S. Army and U.S. Marine Corps are effectively managing the storage and maintenance of prepositioned stocks in the U.S. European Command area of responsibility.  Prepositioned stock is war-reserve material and equipment strategically located to facilitate a timely response in support of Combatant Commander requirements during the initial phases of an operation, such as combat vehicles, spare parts, munitions, and medical supplies.

Audit of Military Sealift Command’s Maintenance of Prepositioning Ships
This audit determines whether the Military Sealift Command ensured that Government-owned, and contractor operated, prepositioning ships received required maintenance.  Prepositioning ships provide quick and efficient movement of military equipment and supplies between operating areas without reliance on other nations' transportation networks.  Preventative maintenance is required on a periodic basis to sustain this equipment.  In addition, overhaul maintenance, such as refurbishment and renewal of cargo cranes is generally performed every 3 to 5 years.

U.S. and Coalition Efforts to Train, Advise, Assist, and Equip an Iraqi Police Hold-Force in Support of Stability Operations
This evaluation determines whether U.S. and Coalition efforts to train, advise, assist, and equip Iraqi Police Hold Force units supported their mission of securing liberated areas and preventing a future insurgency in Iraq.  As Operation Inherent Resolve transitions from the physical defeat of ISIS to the lasting defeat of the terrorist organization, U.S. and Coalition efforts are transiting from supporting offensive operations against ISIS to helping build Iraqi security functions.  To support this transition, the U.S. and Coalition are helping build the capacity of the Iraqi Police Hold Force.  The Iraqi Police Hold Force includes Federal Police, Local Police, Energy Police, and Border Guard units.

Armed Forces Retirement Home Support Functions
This evaluation determines whether the Armed Forces Retirement Home support functions operated in accordance with applicable statutes and the Armed Forces Retirement Home agency directives.  We evaluated the Armed Forces Retirement Home compliance with Chapter 10, title 24, United States Code, “Armed Forces Retirement Home”, other Federal standards pertaining to support functions, Armed Forces Retirement Home Agency directives, and standard operating procedures required to operate the Home.  These support functions include security, human resources, information technology, facilities operations and maintenance, admissions and eligibility, recreation and resident services, and estate matters. 

Followup on DoD OIG Report No. DODIG-2013-099, “Compliance with Electrical and Fire Protection Standards of U.S. Controlled and Occupied Facilities in Afghanistan,” July 18, 2013 at Kandahar Airfield
This evaluation determines whether U.S. Forces – Afghanistan implemented corrective actions concerning electrical and fire protection issues at Kandahar Airfield in response to recommendations made in a prior OIG report, Report No. DODIG-2013-099, “Compliance with Electrical and Fire Protection Standards of U.S. Controlled and Occupied Facilities in Afghanistan,” that we issued July 18, 2013.

System Review Report of the Air Force Audit Agency’s Special Access Program Audits
This review determines whether the Air Force Audit Agency’s system of quality control for audits of Special Access Program provided reasonable assurance of conformance to government auditing standards.  The Air Force Audit Agency is responsible for establishing and maintaining a system of quality control that is designed to provide reasonable assurance that the organization complies with professional audit standards and applicable legal and regulatory requirements. 

Recently issued Reports of Interest (
to view report, if available, please click on title)

Air Force Space Command Supply Chain Risk Management of Strategic Capabilities
This audit determined that Air Force Space Command did not fully implement the DoD supply chain risk management policy for the Space Based Infrared System.  DoD supply chain risk management policy requires DoD organizations to identify critical information and communications technology components, purchase those components from trusted suppliers, and test and evaluate critical components for malicious threats.  The Space Based Infrared System protects the U.S. and its allies by detecting missile and space launches, and nuclear detonation.  In addition, this audit identified similar concerns with three other Air Force Space Command critical systems.  By not fully complying with DoD supply chain risk management requirements, an adversary has opportunity to infiltrate the Air Force Space Command supply chain, and maliciously introduce an unwanted function, or otherwise compromise the design or integrity of critical components.

Lead Inspector General for Operation Freedom's Sentinel | Quarterly Report to the United States Congress | April 1, 2018 – June 30, 2018
This report was the 13th Lead Inspector General (Lead IG) quarterly report on Operation Freedom’s Sentinel (OFS) detailing the overseas contingency operation.  The report summarized significant events involving OFS and describes completed, ongoing, and planned Lead IG and partner agency oversight work.  During this quarter, the Lead IG agencies and their partner agencies had 34 ongoing audits, evaluations, and investigations related to OFS.  Lead IG agency investigations this quarter resulted in 4 criminal convictions, and 33 criminal investigations were ongoing at the end of the quarter.

Lead Inspector General for Operation Inherent Resolve and Operation Pacific Eagle-Philippines | Quarterly Report to the United States Congress | April 1, 2018 - June 30, 2018
This was the 14th Lead IG quarterly report on Operation Inherent Resolve (OIR), the overseas contingency operation to combat the Islamic State in Iraq and Syria (ISIS), and the 3rd report on Operation Pacific Eagle-Philippines (OPE-P), which supports the Philippine government’s fight against ISIS affiliates and other terrorist organizations.  The report summarized the quarter’s key events for both OIR and OPE-P.  During this quarter, the Lead IG agencies and oversight partners released 16 oversight reports related to OIR and 1 report related to OPE-P.  Lead IG investigations related to OIR resulted in 1 arrest, 2 criminal charges, 29 personnel actions, 3 suspensions, and 12 debarments.

United States Marine Corps Aviation Squadron Aircraft Readiness Reporting
This audit determined that Marine Corps Aviation squadron commanders did not accurately report aircraft readiness.  In addition, Marine Corps officials did not provide oversight to ensure squadron commanders accurately reported their aircraft readiness.  As a result, Marine Corps officials do not have an accurate assessment of current aircraft capabilities, which could negatively affect training and operations by assigning a mission to an aircraft incapable of meeting mission performance standards.  This could potentially put mission accomplishment and personnel at risk.

Hotline Allegations Regarding the Acceptance and Testing of the MQ9 Reaper Aircraft
This evaluation is in response to DoD Hotline allegations regarding the acceptance and testing of the Air Force MQ-9 Reaper aircraft.  The MQ-9 Reaper is an unmanned aircraft equipped with weapon and surveillance systems.  This evaluation determined that the Air Force had appropriately categorized and accepted nonconforming material (which is a supply or service that does not meet all contract requirements).  The evaluation also determined that the Air Force performed acceptance flight tests when outside air temperatures were within the range specified in the contract.  Therefore, the evaluation did not substantiate the allegations.  The evaluation did however determine that the Air Force did not have two key required documents, an official memorandum to delegate Air Force engineers the authority to accept nonconforming material, and a comprehensive critical safety items list, which could result in the inappropriate acceptance of major or critical nonconforming material.

Air Force C-5 Squadrons' Capability to Meet U.S. Transportation Command Mission Requirements
This audit determined whether the U.S. Air Force C-5 squadrons had adequate mission capable aircraft and training to support U.S. Transportation Command’s mission readiness requirements.  The U.S. Air Force provides strategic airlift capabilities using its C-5 Galaxy fleet.  The C-5 Galaxy is the largest airframe available U.S. Transportation Command for strategic airlift.  This report is classified.

U.S. Africa Command and U.S. European Command Integration of Operational Contract Support
This audit determined whether U.S. Africa Command and U.S. European Command adequately integrated operational contract support into ongoing operations and operational planning.  Operational contract support is the process of planning for and obtaining supplies, services, and construction from commercial sources in support of combatant commander directed operations.  This report is classified.

DEFENSE CRIMINAL INVESTIGATIVE SERVICE HIGHLIGHTS (to view DOJ press release, if available, please click on title)

Former U.S. Navy Captain and Two Chief Petty Officers Latest to be Indicted in International Navy Bribery and Fraud Scandal
On August 15, 2016, Navy Captain (Retired) David Williams Haas was indicted by a Federal grand jury in San Diego on charges that he received at least $145,000 in bribes from Leonard Francis, a foreign defense contractor and owner of Glenn Defense Marine Asia (GDMA).  GDMA provided services such as tugboats, security, fuel, food, water, and trash removal to Navy ships during port visits in Asia Pacific.  The indictment alleged that Francis supplied Williams with parties at luxurious hotels, prostitutes, alchohol, and food.

In separate indictments, Master Chief Petty Officer (Retired) Ricarte Icmat David and Chief Petty Officer (Retired) Brooks Alonzo Parks were charged with honest services fraud for receiving cash, luxury travel, lavish hotel suites, dining, and the services of prostitutes from Francis.  According to the three indictments, the three officers reciprocated by using their influence within the Navy’s Seventh Fleet to approve inflated invoices by GDMA, to steer ships to GDMA-controlled ports, and otherwise advance the interests of Francis and GDMA.  The indictment further alleges that they and their co-conspirators used their access to slip vGDMA classified and proprietary Navy information, and helped GDMA recruit other Navy officers to join the conspiracy.  So far, 32 defendants have been charged and 20 have pleaded guilty in connection with his investigation.  This is a joint investigation with the Defense Criminal Investigative Service (DCIS), Navy Criminal Investigative Service (NCIS), and the DCAA.

Early Autism Project, Inc., South Carolina's Largest Provider of Behavioral Therapy for Children with Autism, Pays the United States $8.8 Million to Settle Allegations of Fraud
On August 2, 2018, the Department of Justice (DOJ) announced a settlement in which Early Autism Project, Inc. (EAP) paid the Government $8,833,615 to settle allegations regarding a False Claims Act investigation.  The settlement related to allegations that EAP billed TRICARE and South Carolina’s Medicaid program for Applied Behavioral Analysis therapy services for children with autism that either misrepresented the services provided or where the services were not provided at all.  The U.S. contended that EAP allowed its therapists to regularly “pad” the hours it billed for therapy services to the TRICARE program and to South Carolina Medicaid, such that these programs regularly paid for therapy services that were not provided.  This was a joint investigation with the DCIS, the Health and Human Services Office of Inspector General (HHS OIG), and the Medicaid Fraud Control Unit of South Carolina’s Attorney General’s Office.

Northwest ENT Associates, P.C. To Pay Approximately $1.2 Million To Resolve False Claims Act allegations
On August 3, 2018, the DOJ announced that Marietta, Georgia based Northwest ENT Associates, P.C. (Northwest ENT) agreed to pay $1,195,361 to resolve allegations that it violated the False Claims Act by submitting claims for sinus dilation procedures in which it re-used balloon catheters that were intended for single use only.  Pursuant to a Non-Prosecution Agreement with the U.S., Northwest ENT accepted responsibility for its actions.  It entered into a three-year Integrity Agreement with the HHS OIG.  Under the agreement, an independent organization will review Northwest ENT’s claims quarterly for medical necessity, accurate coding, and safe and appropriate use of medical devices.  This was a joint investigation with the Defense Criminal Investigative Service, the HHS OIG, the Food and Drug Administrative OIG, and the Office of Personnel Management OIG.

Two Marine Maintenance Companies Pay $2.8 Million to Settle False Claims Act Investigation
On August 7, 2018, the DOJ announced that International Marine and Industrial Applicators, LLC (IMIA) and Marine Equipment Supply, LLC (MES), owned by the IMIA executives, will pay the Government more than $2.8 million to settle claims they improperly billed the Navy for rental equipment.  IMIA and MES were involved in maintenance work on the USS Ronald Reagan, a Nimitz-class, nuclear powered aircraft carrier.  According to the settlement agreement, between February 2012 and October 2012, IMIA billed the Government for equipment rented from MES, through a subcontractor.  Under the Federal Acquisition Regulation (FAR), companies like IMIA and MES that are under “common control” are not allowed to bill the Government for rental costs, except under limited circumstances that the Government contends were not present in this situation.  Rather, the FAR treats such equipment as if it were owned directly by IMIA and thus limits compensation to the costs of ownership.  IMIA did not disclose its relationship with MES to the Navy when it submitted invoices for the USS Ronald Reagan project, which the Government contended resulted in overbillings to the Navy in excess of $1.4 million.  The Government further contended that IMIA, with MES, knowingly presented such claims for unallowable costs to the Navy in violation of the False Claims Act.  This was a joint investigation with the DCIS, NCIS, and the DCAA.

Former CEO of Defense Contractor, Wellco Enterprises, Inc., Sentenced to 41 Months in Federal Prison for "Made In The USA" Marketing and Contract Fraud
On August 6, 2018, the former President and Chief Executive Officer of Wellco Enterprises, Inc. (Wellco), and Tactical Holdings Operations, Inc. (Tactical Holdings), Vincent Lee Ferguson, was sentenced to serve 41 months in Federal prison for his role in a wire fraud conspiracy.  Wellco was a manufacturer and supplier of military footwear to the DoD and to civilian customers for over 70 years.  From December 2008 through August 2012, Ferguson conspired with his executive team to import military-style boots that were made in China into the U.S.  These boots were then deceptively marketed and sold to the DoD, contractors, and the general public as "Made in the USA.”  The boots were also marketed as compliant with the Berry Amendment and the Trade Agreements Act.  The company sold over $8.1 million in fraudulent boots.  To conceal the fraud, the conspirators required the Chinese manufacturing facility to include "USA" on labels of the boot uppers.  After the U.S. Department of Homeland Security's Customs and Border Protection seized two shipments of the boots, the conspirators ordered the Chinese facility to stitch tear-away "Made in China" labels in the boot uppers.  The conspirators then instructed Wellco factory workers in Morristown, Tennessee, to tear out the "Made in China" tags prior to shipping the boots to government and commercial purchasers.  This was a joint investigation with the DCIS, Homeland Security Investigations, the Air Force Office of Special Investigations, the General Service Administration OIG, and the DCAA.

Pharmacy Owner Pleads Guilty As Part of Largest Health Care Fraud Case Ever in Mississippi
On August 9, 2018, Thomas Edward Spell, Jr. pled guilty to a criminal information outlining his role in a more than $240 million scheme to defraud TRICARE.  From approximately August 2014 through January 2016, Spell owned and operated pharmacies in Mississippi and across the United States.  During this time, Spell and other co-conspirators marketed compounded medications at his pharmacies.  Rather than formulating compounded medications based on the individualized needs of patients, formulas were selected to maximize profit based upon reimbursements from TRICARE and other health care benefit programs.  At the direction of Spell and his co-conspirators, Spell's pharmacies submitted fraudulent claims to TRICARE and other health care benefit programs.  The result was that TRICARE reimbursed Spell's pharmacies on these fraudulent claims totaling over $243 million.  Spell personally obtained over $29 million in proceeds from the illegal scheme.  This was a joint investigation with the DCIS, the Federal Bureau of Investigation, and Internal Revenue Service Criminal Investigation Division.

Scientist Sentenced To Three Years For Defrauding NASA, U.S. Navy, And Missile Defense Agency
On August 24, 2018, Akbar Fard was sentenced to three years in federal prison for wire fraud.  The court also ordered Fard to forfeit $1.4 million in proceeds from the offense.  According to testimony and evidence presented at trial, Fard defrauded the Small Business Innovation Research and Small Business Technology Transfer programs of the National Aeronautics and Space Administration (NASA), the Missile Defense Agency, and the U.S. Navy.  He diverted for his personal benefit $1.4 million that should have been used to research critical national research priorities related to spacecraft, satellites, and the protection of naval assets from fires.  With the money, Fard went on an international vacation, paid for a car, funded his retirement, and purchased retail items and groceries.  This was a joint investigation with the DCIS, NASA OIG, and NCIS.

CEO and CFO of Utah Biodiesel Company and California Businessman Charged in $500 Million Fuel Tax Credit Scheme
On August 24, 2018, the DOJ unsealed a federal grand jury indictment charging Washakie Renewable Energy’s (WRE), Chief Financial Officer Jacob Kingston, and Chief Executive Office Isaiah Kingston with laundering proceeds of a mail fraud scheme, which obtained over $511 million in renewable fuel tax credits from the Internal Revenue Service (IRS).  According to the indictment, WRE has described itself as the "largest producer of biodiesel and chemicals in the intermountain west."  Jacob Kingston and Isaiah Kingston each held a 50 percent ownership interest in the company.  Jacob Kingston, Isaiah Kingston, and Lev Asian Dermen, owner of California-based fuel company NOil Energy Group, allegedly schemed to file false claims for renewable fuel tax credits, which caused the IRS to issue over $511 million to WRE.  Jacob Kingston is separately charged with filing nine false claims for refund on behalf of WRE in 2013.  This was a joint investigation with the Defense Criminal Investigative Service, IRS-Criminal Investigations Division, and the Environmental Protection Agency Criminal Investigation Division.

ANNOUNCED PROJECTS (to view the announcement letters, if available, please click on the title)

Audit of Victim’s Rights for Preference for Prosecution in Sexual Assault Cases
The objective of this audit is to determine whether victims of sexual-related offenses in  Military Services have been consulted regarding their preference on whether covered offenses should be prosecuted by courts-martial or in a civilian court with jurisdiction over the offenses.

Audit of Army Oversight of the National Afghan Trucking Services 3.0 Contract 
The objective of this audit is to determine whether the Army provided effective oversight of the National Afghan Trucking Services 3.0 contract.  The National Afghan Trucking contract is intended to provide a secure and reliable means of distributing reconstruction material, security equipment, fuel, miscellaneous dry cargo, and life support assets throughout the Combined/Joint Operations Area-Afghanistan.  In addition, the contract provides services such as personnel, trucks, equipment, tools, materials, supervision, and other items necessary for safe, timely, and reliable ground transportation of U.S. Government supplies and assets. 

Audit of U.S. Army Regionally Aligned Forces in U.S. Africa Command
The objective of this audit is to determine whether U.S. Africa Command Regionally Aligned Forces were trained to meet mission requirements.  The regionally aligned forces concept, identified in the 2008 National Defense Strategy, is the Army's approach to for providing Combatant Commanders with tailored, responsive, and consistently available Army forces for the U.S. Africa Command region.

Audit of the DoD’s Preparation for Natural Disasters
The objective of this audit is to determine to what extent the DoD is prepared to respond to upcoming natural disasters.  This audit will also determine whether DoD applied any of the lessons learned from the DoD response to recent natural disasters when developing relief policies and procedures for natural disasters such as hurricanes, tornados, earthquakes, and flooding.

Interagency Coordination Group of Inspectors General for Guam Realignment Fiscal Year 2018
The objective of this audit is to compile a detailed statement of all obligations, expenditures, and revenues associated with military construction in Guam Section 2835 of the 2010 National Defense Authorization Act established the Interagency Coordination Group of Inspectors General for Guam Realignment and requires the group to submit an annual report summarizing the activities under programs and operations funded with amounts appropriated, or otherwise made available, for military construction on Guam.

Audit of the Air Force Non-appropriated Fund Purchasing Office Government Purchase Card Program
The objective of this audit is to determine whether Government Purchase Card cardholders under the Air Force Non-appropriated Fund Purchasing Office properly made and documented purchases in accordance with applicable laws and regulations.

U.S. Marine Corps Special Purpose Marine Air-Ground Task Force's Ability to Respond to crisis within the US Africa Command area of responsibility
The objective of this evaluation is to determine whether U.S. Marine Corps’ Special Purpose Marine Air-Ground Task Force Crisis Response-Africa (SPMAGTF) meets U.S. Africa Command’s (USAFRICOM) operational requirements for crisis response.  Specifically, the DoD OIG will evaluate the SPMAGTF’s manning, training, and equipping in support of USAFRICOM’s theater campaign plans and other operational planning documents.

DoD Compliance at Active Sites Conducting Open Burning or Open Detonation of Excess Conventional Ammunition and Explosives in the U.S. and Its Territories
The objective of this evaluation is to determine whether the DoD is in compliance with relevant environmental laws, inter-agency and municipal agreements, and DoD policy at sites where the DoD conducts or conducted open burning of excess conventional ammunition and explosives at locations in the United States and its Territories.

Followup Audit of the Army's Business Case Analysis Used to Support the Army's Transition to In-House Human Immunodeficiency Virus (HIV) Testing
The objective of this audit is to determine whether the U.S. Army medical Command corrected problems identified in a prior OIG report, Report No. DoDIG-2017-066, “Army Did Not Support Business Case Analysis Recommending Transition of Human Immunodeficiency Virus Testing.”  The prior report found that Army officials did not adequately support or document their business case analysis for testing the human immunodeficiency virus testing at the Walter Reed Army Institute of Research.