Feb. 4, 2019 —
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:
Military Service Law Enforcement Responses to Domestic Violence Incidents
This evaluation determines whether Military Service law enforcement policies related to responding to domestic violence incidents were consistent with DoD policy; and whether Military Service law enforcement organizations complied with DoD and their own policies when responding to nonsexual domestic violence incidents with adult victims.
System Review Report for the External Peer Review of the National Guard Bureau Internal Review Office
This review determines whether the quality control system for the audit function of the National Guard Bureau is suitably designed, and whether the audit function is complying with its quality control system to provide the National Guard Bureau with reasonable assurance of conformity with the applicable professional standards.
RECENTLY ISSUED REPORTS OF INTEREST (to view report, if available, please click on title)
Lead Inspector General Quarterly Report to the United States Congress for Operation Inherent Resolve October 1, 2018- December 31, 2018
This is the 16th Lead Inspector General (IG) quarterly report for Operation Inherent Resolve (OIR) covering the period October 1, 2018 through December 30, 2018. This report summarizes the quarter’s key events and describes completed, ongoing, and planned Lead IG and partner agency oversight work related to OIR. Towards the end of this quarter, the Administration announced that it would withdraw U.S. Forces from Syria. Because of the significance of this announcement, the DoD Office of Inspector General submitted questions to the DoD regarding the status of OIR and the efforts to defeat ISIS in Syria and Iraq. The responses the DoD OIG received from the DoD are described in this report. According to the DoD the effort to defeat ISIS continues as ISIS remains a potent force of battle-hardened and well-disciplined fighters that “could likely resurge in Syria” without counterterrorism pressure. Also during this quarter, the Lead IG and partner agencies have completed nine audit, evaluation, and inspection reports related to OIR, and conducted nine open investigations involving grant and procurement fraud, corruption, theft, computer intrusions, and human trafficking allegations.
Lead Inspector General Quarterly Report to the United States Congress for Operation Pacific Eagle-Philippines October 1, 2018- December 31, 2018
This is the 6th Lead Inspector General (IG) quarterly report for Operation Pacific Eagle-Philippines (OPE-P) covering the period October 1, 2018 through December 30, 2018.
This report summarizes the quarter’s key events and describes completed, ongoing, and planned Lead IG and partner agency oversight work related to OPE-P. During this quarter, U.S. Indo-Pacific Command reports that ISIS-P remained active with approximately 300 to 550 fighters in the southern Philippines. Philippine officials attribute a bomb blast on December 31, 2018 to ISIS-P—no group claimed responsibility. Also during this quarter, the DoD OIG completed an evaluation of DoD Oversight of Bilateral Agreements with the Republic of the Philippines. This evaluation determined that the DoD’s Joint Staff Directorate for Logistics was unaware of 76 of the 77 transactions, valued at $13 million, which were executed with the Philippine government over a 20 month period. As a result, the Directorate did not have assurance the $13 million in transactions for logistic support, supplies, and services with the Republic of the Philippines were accurate and were reimbursed.
Navy and Marine Corps Backup Aircraft and Depot Maintenance Float for Ground Combat and Tactical Vehicles
This audit determined that the Navy and Marine Corps did not have a sufficient quantity of operational F/A‑18 and T‑45 aircraft available to replace aircraft requiring depot maintenance. Specifically, 245 F/A‑18’s and 22 T-45 backup aircraft were in a non-operational status. Based on the limited number of operational F/A-18 aircraft, the Commander, Naval Air Forces moved operational aircraft from training squadrons to deploying squadrons. If shortages of operational aircraft continue for the training squadrons, the Navy and Marine Corps could experience a future shortfall of trained pilots, potentially affecting mission readiness.
Followup Audit on Army’s Business Case Analysis to Transition Human Immunodeficiency Virus Testing In-House
This audit determined that U.S. Army Medical Command (MEDCOM) personnel had corrected problems identified in a prior DoD OIG report, which found that Army officials did not adequately support or document their business case analysis (BCA) for bringing human immunodeficiency virus (HIV) testing in-house at the Walter Reed Army Institute of Research. MEDCOM personnel took corrective action by re-performing the BCA in September 2018 to address problems related to the development and support of the February 2016 BCA. As a result of the corrective actions taken, the September 2018 BCA supported MEDCOM’s decision to transfer HIV testing from the current contractor to the Army’s HIV Diagnostics and Reference Laboratory. However, MEDCOM personnel did not include the most updated information used to rank the course of action to transfer HIV testing from the current contractor to the Air Force Epidemiology Laboratory. The Army could save at least $4.4 million each year if it transitions HIV testing to the Air Force Epidemiology Laboratory it Army moves its HIV Diagnostics and Reference Laboratory into leased space and can accept the full Army HIV testing mission.
DoD Efforts to Train, Advise, Assist, and Equip the Armed Forces of the Republic of the Philippines
This evaluation determined whether DoD efforts to train, advise, assist, and equip the Armed Forces of the Philippines increased the Armed Forces of the Republic of the Philippines’ capability to counter existing violent extremist organization threats, and built sustainable capabilities to disrupt, defeat, and deny safe haven to current and future violent extremist organizations in the Philippines. The DoD OIG determined that the advice, and assistance of U.S. Forces helped the Armed Forces of the Philippines to counter violent extremists in the southern Philippines. In addition, the U.S. Indo- Pacific Command and the Joint U.S. Military Advisor Group at the U.S. Embassy complied with the gross violation of human rights vetting requirements. However, the DoD OIG also determined that U.S. Forces did not provide counterterrorism training to the Armed Forces of the Philippines conventional forces, as directed in the U.S. Indo-Pacific Command Operation Pacific Eagle-Philippines Execute Order. (This report is classified).
Interagency Coordination Group of Inspectors General for Guam Realignment Annual Report
This report provided a detailed statement of the obligations, expenditures, and revenues associated with U.S. military construction on Guam. The annual report of the Interagency Coordination Group of Inspectors General for Guam Realignment is required by Public Law 111-84, “The National Defense Authorization Act for Fiscal Year 2010,” October 28, 2009.
DEFENSE CRIMINAL INVESTIGATIVE SERVICE HIGHLIGHTS (to view DOJ press release, if available, please click on title)
Kansas Man Charged in Government Contract Fraud Scheme
On January 18, 2019, the Department of Justice (DOJ) announced that Troy Bechtel was charged with two counts of major program fraud against the United States and two counts of lying to Federal investigators. Bechtel allegedly conspired with others to portray Joseph David Dial, Jr., a disabled Army veteran, as the operator of United Medical Design Builders (UMDB). Bechtel allegedly ran the daily operations of UMDB and made project decisions without reporting to or consulting with Dial. Dial was rarely in the office, and he signed a blank sheet of paper that was scanned and used on official letters and correspondence. The U.S. Army Corps of Engineers awarded the company a contract through the Service-Disabled Veteran-Owned Small Business program to design and construct healthcare facilities on Langley Air Force Base (AFB), Andrews AFB, Hanscom AFB, and McGuire AFB. This is a joint investigation with the Defense Criminal Investigative Service (DCIS), the Small Business Administration Office of Inspector General (OIG), the General Services Administration OIG, and Army Criminal Investigation Command (Army CID).
Manhattan U.S. Attorney Announces $269.2 Million Recovery From Walgreens In Two Civil Healthcare Fraud Settlements
On January 22, 2019, the DOJ announced that Walgreens agreed to pay the U.S. Government and state governments a total of $269.2 million to settle alleged violations of the False Claims Act. Walgreens allegedly billed the Government for hundreds of thousands of insulin pens that the company unnecessarily dispensed to beneficiaries of Federal healthcare programs. Walgreens also allegedly overbilled Medicaid for prescription drugs. This was a joint investigation with DCIS, Health and Human Services OIG, the Federal Bureau of Investigation, Department of Labor OIG and Office of Personnel Management OIG.
Orange County Electronics Distributor Pleads Guilty to Selling Counterfeit Integrated Circuits with Military and Commercial Uses
On January 25, 2019, the DOJ announced that Rogelio Vasquez, the owner of PRB Logics Corporation, pleaded guilty to Federal charges of selling counterfeit integrated circuits. Vasquez admitted that he imported old, used, and discarded integrated circuits from Chinese suppliers. The circuits had been repainted and labeled with counterfeit logos. Vasquez admitted that, in August 2012 (approximately), he purchased counterfeit integrated circuits from China and sold them to a DoD subcontractor, and the subcontractor supplied the counterfeit circuits to a prime DoD contractor. The counterfeit circuits ended up in a classified Air Force weapons system. Vasquez also admitted that, in April 2016, he sold eight counterfeit integrated circuits that he believed would be used by the U.S. military in the B-1 Lancer Bomber. Vasquez also admitted that, in April and May 2016, he sold approximately 8,000 counterfeit integrated circuits to a company, and the company resold most of the circuits to a DoD contractor. The DoD contractor bought the circuits to use in products for numerous customers, including the Army, the Navy, and the Marine Corps. Vasquez agreed to forfeit $97,362 as well as over 160,000 counterfeit and suspected counterfeit integrated circuits that were seized during the investigation. This was a joint investigation with DCIS, Homeland Security Investigations, and the National Reconnaissance Office OIG.
Chinese Telecommunications Conglomerate Huawei and Huawei CFO Wanzhou Meng Charged with Financial Fraud
On January 28, 2019, Huawei and two of its subsidiaries, Huawei Device USA and Skycom, as well as Huawei’s Chief Financial Officer, Wanzhou Meng, were charged with bank fraud and conspiracy to commit bank fraud, wire fraud and conspiracy to commit wire fraud, conspiracy to defraud the U.S., conspiracy to violate and substantive violations of the International Emergency Economic Powers Act, and conspiracy to commit money laundering. Huawei and Huawei USA were also charged with conspiracy to obstruct justice. Meng was charged with bank fraud, wire fraud, and conspiracy to commit bank and wire fraud. Huawei, Meng, and other employees allegedly engaged in a scheme to conceal Huawei’s business activities in Iran from numerous global financial institutions and the Government. Beginning in 2007, Huawei allegedly misrepresented the company’s connection to an unofficial subsidiary in Iran called Skycom. Huawei allegedly used a network of global financial institutions for banking services to avoid U.S. laws and regulations that generally prohibit transactions between parties in Iran and the United States. In 2017, when Huawei became aware of the Government’s investigation, Huawei and Huawei USA allegedly destroyed evidence and made efforts to move witnesses with knowledge of Huawei’s Iran-based business to China. This is a joint investigation with DCIS, the Federal Bureau of Investigation, Homeland Security Investigations, and the Department of Commerce Office of Export Enforcement.
Newark-Based Company and CEO Agree to Pay 2.75 million to Resolve Allegations of Government Contracting Fraud
On January 29, 2019, the DOJ announced that E.M. Photonics (EMP) and its Chief Executive Officer, Eric Kelmelis, have agreed to pay $2.75 million to resolve alleged violations of the False Claims Act. EMP received funds under seven contracts and grants awarded through the Federal Small Business Innovation (SBIR) and Small Business Technology Transfer (SBTTR) programs. The Government alleged that from January 2009 to April 2014, Kelmelis directed EMP employees, or caused others to direct EMP employees, to falsify timesheets that overcharged the Government for labor service. The Government also alleged that EMP and Kelmelis sought and received SBIR and STTR funding for equivalent work already performed and funded by another Government agency and falsely certified that the work was non-duplicative. This was a joint case with DCIS, the National Aeronautics and Space Administration OIG, Army CID, and the Department of Energy OIG.
ANNOUNCED PROJECTS (to view the announcement letters, if available, please click on the title)
Audit of Defense Logistics Agency-Energy Reimbursement Process for Refueling Missions within the U.S. Central Command and U.S Africa Command Areas of Responsibility
The objective of this audit is to determine whether the Defense Logistics Agency-Energy and supporting commands are billing and obtaining full reimbursement from partner nations for refueling missions within the U.S. Central Command and U.S. Africa Command areas of responsibility.
Audit of Jordan Border Program
The objective of this audit is to determine whether the Defense Threat Reduction Agency is ensuring the contractor provided equipment, training, and sustainment meet the Jordan Border Security Program requirements. The Jordan Border Security Program seeks to enhance border security between Jordan, Syria, and Iraq by providing U.S. military assistance support to the Jordan Armed Forces. In April 2011, the Defense Threat Reduction Agency awarded the Cooperative Threat Reduction Integrating Contract II, an indefinite delivery,indefinite quantity contract to Raytheon Technical Services Company. The contract provides equipment and training to the Jordan Armed Forces and other partner nations to strengthen their border security, and build their capacity to prevent the proliferation of foreign extremists and weapons of mass destruction throughout the region.
Audit of the Sustainment, Restoration, and Modernization of DoD Treatment Facilities
The objective of this audit is to determine whether the Defense Health Agency and the Military Services are properly maintaining medical treatment facilities to include conducting building assessments, planning and budgeting for maintenance, and completing scheduled maintenance tasks. Additionally, the DoD OIG will determine whether any critical maintenance repairs were not performed and determine whether the Defense Health Agency and the Military Services have a plan to address deferred maintenance.
Audit of DoD Management of Undefinitized Contract Actions
The objective of this audit is to determine whether the Military Services properly managed undefinitized contract actions by obligating funds within required limits, ensuring profit was adjusted for cost incurred, and definitizing actions within required time limits. Undefinitized contracts allow a contractor to begin work and incur costs before the Government and the contractor have reached a final agreement on contractual terms, specifications, or price.
External Peer Review of the Army Internal Review Program
The objective of this review is to determine whether the quality control program of the Army Internal Review Program is designed to provide reasonable assurance that the policies and procedures related to the system of audit quality are suitably designed, operating effectively, and complied with in practice.
Quality Control Review of the KPMG LLP Single Audit of Johns Hopkins University
The objective of this review is to determine whether the KPMG LLP Single Audit of Johns Hopkins University for the fiscal year ended June 30, 2017, was performed in accordance with Uniform Guidance requirements and applicable auditing standards.