Sept. 6, 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:
Audit of DoD Management of Medical Claims Through the Third Party Collection Program
This audit determines whether the DoD collected the costs of providing health care services from medical claims within the Third Party Collection Program. The Third Party Collection Program is a congressionally mandated program that authorizes military treatment facilities to recover the costs of providing health care services to covered DoD beneficiaries from third party payers. Third party payers are health insurers that covered beneficiaries may have through their employer or private insurance that provides for medical, dental, or pharmacy expenses.
Followup Audit on Defense Logistics Agency Management of Excess Items in Long-Term Storage
This audit determines whether the Defense Logistics Agency implemented recommendations the DoD OIG made in Report No. DoDIG-2016-036, "Management of Items in Defense Logistics Agency Long-Term Storage Needs Improvement," December 22, 2015, and whether the implemented actions corrected the deficiencies identified in the report. The prior report determined that items the Defense Logistics Agency stored in long-term storage exceeded historical demand and, therefore, were not justified for retention.
Audit of Controls at Military Installations for Schools Participating in the DoD Tuition Assistance Program
This audit determines whether military installations had implemented controls for the DoD Tuition Assistance Program that were designed to ensure that educational institutions with authorized access to DoD installations complied with DoD policies and partnership memorandums of understanding to prevent improper recruitment of service members.
United States Air Force Academy’s Response to Incidents of Sexual Assault and Victim Care
This evaluation determines whether the United States Air Force Academy sexual assault response coordinator and sexual assault prevention and response victim advocates provided sexual assault prevention and response services to cadet-victims of sexual assault, as required by DoD and Air Force policy.
Recently issued Reports of Interest (to view report, if available, please click on title)
Audit of Contingency Planning for DoD Information Systems
This audit determined that DoD Components did not consistently develop and test information system contingency plans to recover national security systems and data after emergencies, system failures, or disasters, as required by DoD and Federal guidance. A national security system is an information system that involves intelligence activities, cryptologic activities related to national security, command and control of military forces, weapons or weapon systems equipment, or the direct fulfillment of military or intelligence missions. Without a valid information system contingency plan, DoD Components may not effectively recover national security systems or data in a timely manner. DoD Components may also risk losing the ability to minimize the negative impact to critical missions in the event of emergencies, system failures, or disasters.
Report of Investigation: Admiral William Moran, U.S. Navy
This investigation determined that Admiral Moran used his personal e-mail account to discuss official DoD communications with other Navy military, civilian, and contract personnel, in violation of DoD policy.
Lead Inspector General for Operation Inherent Resolve Quarterly Report to the Unites States Congress April 1, 2019 - June 30, 2019
This Lead Inspector General (Lead IG) report discussed the status of Operation Inherent Resolve (OIR), the overseas contingency operation to combat the Islamic State in Iraq and Syria (ISIS). The report summarized the quarter’s key events and described completed, ongoing, and planned Lead IG and partner agency oversight work related to OIR. During this quarter, the DoD reported that ISIS continued its transition from a territory-holding force to an insurgency in Syria and intensified its insurgency in Iraq. According to the DoD ISIS carried out assassinations, suicide attacks, abductions, and arson of crops in both Iraq and Syria. The DoD also reported that a partial withdrawal of U.S. forces from Syria decreased the support available to partner forces at a time when they needed training and equipping to respond to resurgent ISIS cells. During this quarter, Lead IG agencies and oversight partners issued 10 reports, and had 24 ongoing projects, 11 planned oversight projects, and 124 open investigations related to OIR.
Audit of TRICARE Payments for Health Care Services and Equipment That Were Paid Without Maximum Allowable Reimbursement Rates
This audit determined that the Defense Health Agency (DHA) regularly paid more than other pricing benchmarks for services and equipment provided to TRICARE beneficiaries where it did not establish or use existing TRICARE maximum allowable reimbursement rates. As a result, of the $18.1 million reimbursements reviewed in this audit, DHA paid $3.9 million more than other pricing benchmarks for vaccines and contraceptive systems provided to TRICARE beneficiaries in 2017. The audit concluded that if DHA continues its current paid‑as‑billed practice, and prices and volume remain the same, DHA will waste an additional $19.5 million for health care services and equipment over the next 5 years.
Audit of the Army Integrated Air and Missile Defense Program
This audit determined that the Army Integrated Air and Missile Defense (IAMD) capability requirements, developed to address current and future warfighter needs, remain valid. However, IAMD project officials will not have a full analysis of the limited user test data until after a September 2020 scheduled milestone review. The IAMD system includes a common mission command center, integrated fire control network, and common interface kits that connect Army air and missile defense sensors and weapons. As a result, the milestone decision authority may approve the procurement of six initial IAMD systems, at a total cost of about $29.6 million, based on an incomplete analysis of the limited user test.
In addition, IAMD project officials may discover system deficiencies after the milestone decision that require additional time and funds to correct, which may further delay the fielding of the IAMD system.
Audit of the Air Force Nonappropriated Fund Government Purchase Card Program
This audit determined that Air Force Nonappropriated Funds (NAF) Government Purchase Card (GPC) cardholders made improper purchases that were not documented in compliance with applicable laws and regulations. In addition, cardholders made recurring GPC purchases to the same merchant without establishing a contract. This audit statistically projected that, as a result of these deficiencies, cardholders made up to $23.3 million in potential improper payments on 45,737 purchases between July 2017 and June 2018. The DoD OIG also projected that Air Force NAF GPC program personnel were responsible for administrative discrepancies, such as not providing documentation related to how the purchase requirement was generated on up to 303,125 purchases totaling $167.3 million.
Audit of the Planning for and Implementation of the Afghan Personnel and Pay System
This audit determined that, as of December 2018, Combined Security Transition Command–Afghanistan (CSTC-A) had not validated the accuracy of personnel records for Ministry of Defense and the Ministry of Interior personnel added to the Afghan Personnel and Pay System (APPS), and had not verified that the contractor developed the system according to the software development contract requirements. As a result, CSTC-A paid the APPS software development contractor $26.2 million for a system that cannot communicate directly with Afghan systems, relies on the same manually intensive human resource and payroll processes that it was designed to streamline, and does not reduce the risk of inaccurate personnel records or fraudulent payments through the use of automated controls.
Lead Inspector General for Operation Freedom’s Sentinel Quarterly Report to the Unites States Congress April 1, 2019 - June 30, 2019
This Lead IG report discussed the status of Operation Freedom’s Sentinel (OFS), the overseas contingency operations in Afghanistan. The report summarized significant events involving OFS and described completed, ongoing, and planned Lead IG and partner agency oversight work related to OFS. During the quarter, while the U.S. Special Representative for Afghanistan Reconciliation continued to hold direct talks with the Taliban on the framework of a peace agreement, the Taliban continued attacks on civilians, government installations, and Afghan security forces. This quarter, the Afghan National Defense and Security Forces took steps to reduce the number of static checkpoints in Afghanistan. This has been a long-standing area of concern for USFOR-A because the majority of ANDSF casualties occur at checkpoints. This report also included new and updated information on several aspects of the DoD’s train, advise, and assist mission. During this quarter, Lead IG agencies and oversight partners issued 9 reports and closed 16 investigations related to OFS.
Lead Inspector General for Operation Pacific Eagle- Philippines Quarterly Report to the Unites States Congress April 1, 2019 - June 30, 2019
This Lead IG report discussed the status of Operation Pacific Eagle–Philippines (OPE-P), the overseas contingency operation to support the Armed Forces of the Philippines’ fight against ISIS affiliates and other terrorist organizations. The report summarized significant events related to OPE-P and described ongoing and planned Lead IG and partner agency oversight work. In June, ISIS–East Asia (ISIS-EA) carried out its first suicide bombing committed by a Philippine national, causing U.S. and Philippine officials to reassess previous assumptions that the Filipino people are culturally avers to suicide attacks. Philippine security forces also struggled to combat kidnap-for-ransom activity, which represents a key funding source for ISIS-EA. In addition, the Muslim-majority provinces of the southern Philippines worked to establish a new, semi-autonomous regional government, facing challenges such as lack of funding and inexperience among its leaders, many of whom are former militants. During the quarter, Lead IG agencies issued two reports, and had four ongoing and one planned oversight project, related to OPE-P.
Audit of Defense Logistics Agency Troop Support Negotiation of Prices for the Pharmaceutical Prime Vendor–Global Program
This audit determined that Defense Logistics Agency (DLA) Troop Support could improve its negotiations of pharmaceutical prices. Additional, pricing data was available from the Defense Health Agency that DLA Troop Support could have used to assist with negotiating lower prices for some pharmaceuticals. Instead, DLA Troop Support established prices for the Pharmaceutical Prime Vendor–Global program based on Government prices, such as the Veterans Affairs Federal Supply Schedule, or the prime vendor’s pricing agreements. As a result, based on the DoD OIG’s calculations, the Defense Health Agency’s median amounts paid for the same quantity of pharmaceuticals were $137.1 million less than the DLA Troop Support’s prices for the 6,615 pharmaceuticals.
Evaluation of U.S. and Coalition Efforts to Train, Advise, Assist, and Equip Afghan Tactical Air Coordinators
This evaluation determined that U.S and Coalition trainers did not train Afghan tactical air coordinators on coordinating airdrop operations, did not develop the required detailed training curriculum for air liaison officers, and did not track the operational effectiveness of the deployed Afghan tactical air coordinators and Afghan targeting officers. As a result, the lack of training for Afghan tactical air coordinators and Afghan air liaison officers could increase the risk for unsuccessful air-to-ground operations, civilian casualties, and failure to meet operational objectives.
DEFENSE CRIMINAL INVESTIGATIVE SERVICE HIGHLIGHTS (to view DOJ press release, if available, please click on title)
Telemarketer and His Companies Agree to Pay $2.5 Million to Settle Allegations That They Operated Telemedicine Schemes Involving Illegal Kickbacks and Unnecessary Prescriptions
On August 1, 2019, Scott Roix and several marketing companies through which he ran his telemarketing business agreed to pay $2.5 million to resolve allegations that Roix and these marketing companies violated the False Claims Act by causing the submission of false claims to Federal health care programs in connection with telemedicine health care fraud schemes. The Government alleged that Roix and his marketing companies fraudulently obtained insurance coverage information from consumers across the country to arrange for them to receive prescription pain creams and other similar products that were not medically necessary and did not arise from a valid doctor-patient relationship. Additionally, the Government alleged that Roix and his marketing companies sold these prescriptions to pharmacies under the guise of marketing services, and the payments solicited were based on the volume and value of the prescriptions in violation of the Anti-Kickback Statute and False Claims Act. This case was investigated by the Defense Criminal Investigative Service (DCIS), the Federal Bureau of Investigation (FBI), and the Offices of Inspector General for the Department of Health and Human Services, the Office of Personnel Management, and the U.S. Postal Service.
Georgia Man Sentenced for $6.5 Million Health Care Fraud, Money Laundering Involving Tricare, Other Victims
On August 2, 2019, Michael Burton of Decatur, Georgia, was sentenced to 96 months confinement after he pleaded guilty to charges of conspiracy to commit health care fraud and wire fraud, conspiracy to commit money laundering, and money laundering. Between January 2014 and December 2015, Burton conspired with others to defraud TRICARE and other insurance companies out of more than $6.5 million in fraudulent claims for prescriptions for compounded pain cream, scar cream, and wellness capsules. Burton admitted that he conspired with others to obtain forged prescriptions for compounded drugs for individuals who did not have a doctor-patient relationship to the prescribing physician. Additionally, Burton recruited sales representatives to obtain and provide Burton with the personally identifying information and insurance cards of individuals for whom the prescriptions could be issued in exchange for commission payments. Burton forwarded that information to an unlicensed co-conspirator who would issue the prescriptions and send them to Physician Specialty Pharmacy in Pensacola, Florida, without the individuals ever seeing or speaking with a doctor. Physician Specialty Pharmacy then caused TRICARE and other insurance companies to be billed and paid Burton a 50-percent commission for each compounded drug prescription that was paid by insurance. Burton earned over $1.4 million in commissions from fraudulent prescriptions. This case was investigated by the Naval Criminal Investigative Service, the Army Criminal Investigative Command (Army CID), the Florida Department of Law Enforcement, the Florida Department of Financial Services–Bureau of Insurance Fraud, the Florida Department of Health, DCIS, and the FBI.
Brooklyn Man Charged with Illegally Exporting Rifle Parts to Russia
On August 6, 2019, a criminal complaint was unsealed charging Vladimir Kuznetsov, a Russian national, with illegally exporting, attempting to export, and conspiring to export firearm parts and accessories from the United States to individuals in Russia. According to the criminal complaint, from approximately February 2017 to the present, Kuznetsov and others conspired to export, and exported from the United States to Russia, firearm parts and other items on the U.S. Commerce Control List. These items are restricted and cannot be exported from the United States without licenses from the Department of State and Department of Commerce. Kuznetsov purchased U.S. firearm parts online, including parts used to assemble sniper rifles. He subsequently shipped the firearm parts through the U.S. Postal Service to buyers in Russia. To avoid detection, Kuznetsov provided false descriptions of the items contained in each package and hid rifle parts inside the packages.
This case is being investigated by the Homeland Security Investigations (HSI) and DCIS.
Man Arrested for Theft of Military Property
On August 8, 2019, Bryan Allen was indicted for theft of military property and conspiracy to steal military property. Allen was also charged with aggravated identity theft. Allen allegedly used his position as the property book officer for the 4th Battalion, 3rd Special Forces Group at Fort Bragg, North Carolina, to decrease the number of items shown in the possession of specific companies, thereby reducing the number of those respective items expected to be present during a physical inventory. It is alleged that, from December 2016 to June 2018, Allen stole more than $2 million of military property, including 43 enhanced night vision goggles, which were made to military specifications and carried specific demilitarization requirements. This case is being investigated by Army CID, HSI, DCIS, and the FBI.
Defense Contractor to Pay $3.3M to Resolve False Claims Act Allegations
On August 8, 2019, Ambu, Inc., agreed to pay $3.3 million to resolve False Claims Act allegations that it manufactured products in China and Malaysia for sale to U.S. Government agencies in violation of the Trade Agreements Act (TAA). The settlement resolves allegations that, between December 2011 and March 2015, Ambu, a provider of medical supplies, submitted false claims to the Defense Logistics Agency and the Department of Veterans Affairs for payment relating to Ambu’s sales of medical supplies. The TAA requires that products sold to Government agencies must come only from countries with which the United States has a trade agreement. While many countries qualify as TAA compliant countries, China and Malaysia do not. Ambu began manufacturing its products in these countries and selling them to Government agencies in violation of the TAA. During the years covered by the settlement, more than 80 percent of Ambu’s sales to the Defense Logistics Agency and Department of Veteran Affairs under these contracts were from these non-compliant countries. Ambu executives certified that Ambu products came from compliant countries despite allegedly knowing that most of the products were manufactured in non-compliant countries. This case was investigated by DCIS, Army CID, and the Veterans Affairs Office of Inspector General (VA OIG).
Government Settles Alleged False Claims Act Violations with Sesolinc Group
On August 19, 2019, the Sesolinc Group, a veteran-owned small business that manufactures and supplies pre-fabricated small buildings, shelters, and equipment systems, agreed to pay up to $2.4 million to settle allegations that it supplied defective products and submitted false claims to the Army, Department of Veterans Affairs, and the General Services Administration. Based on the allegations of the unsealed complaint, Sesolinc is alleged to have violated the False Claims Act when it sold products to the United States that did not comply with required electrical and structural standards. After concerns were raised internally, Sesolinc, which manufactures its products in Statesboro, Georgia, is alleged to have continued to deliver defective products to Government customers. As part of the settlement, Sesolinc has agreed to repair goods previously supplied to the United States and pay an additional penalty. This case was investigated by DCIS, Army CID, VA OIG, and the General Services Administration OIG.
Arms Trafficker Convicted in Anti-Aircraft Missiles Scheme and of Other Arms Offenses Sentenced to 30 Years in Federal Prison
On August 19, 2019, Rami Najm Asad-Ghanem, a black-market arms dealer with a history of brokering machine guns, rocket-propelled grenades, and anti-tank armaments and who was found guilty last year in a scheme to sell and use surface-to-air missiles, was sentenced to 30 years in Federal prison. Ghanem, a naturalized U.S. citizen who was living in Egypt at the time of the offenses, was found guilty last year of conspiring to use and to transfer missile systems designed to destroy aircraft. The day before his trial started, Ghanem pleaded guilty to six other Federal crimes stemming from his arms-trafficking activities, including the unlicensed export of weapons and ammunition, smuggling, money laundering, and unlicensed arms brokering. Ghanem conspired to transfer a wide array of surface-to-air missile systems to customers around the world, including clients in Libya, the United Arab Emirates, Iraq, and the leadership of Hezbollah, a designated foreign terrorist organization. During the trial, prosecutors showed that he conspired to use Russian-made Igla and Strela surface-to-air missile systems by brokering the services of mercenary missile operators to a militant faction in Libya in 2015. Among other actions, Ghanem negotiated the salaries and terms of service of the mercenary missile operators, coordinated their payment, facilitated their travel to Libya, confirmed their arrival and performance of duties, and offered them a $50,000 bonus if they successfully shot down airplanes flown by the internationally recognized government of Libya. This case was investigated by the HSI, DCIS, the Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement, the Hellenic National Police, the Hellenic Financial and Economic Crimes Unit, and U.S. Customs and Border Protection.
Five Fraudsters Indicted for Million Dollar Scheme Targeting Thousands of U.S. Service Members and Veterans
On August 21, a 14-count indictment was unsealed in San Antonio, Texas, charging five individuals with coordinating an identity theft and fraud scheme targeting military service members and veterans. The charged defendants, who were based both in the Philippines and the United States, are alleged to have used the stolen personally identifiable information (PII) of thousands of military members to access Department of Defense and Veterans Affairs benefits sites and steal millions of dollars. The defendants, Robert Wayne Boling, Jr., Fredrick Brown, Trorice Crawford, Allan Albert Kerr, and Jongmin Seok, were charged with multiple counts of conspiracy, wire fraud, and aggravated identify theft based on their alleged leading roles in the theft and exploitation of victim PII to conduct their fraud scheme. Boling (a U.S. citizen), Kerr (an Australian citizen), and Seok (a South Korean citizen) were arrested in the Philippines. Brown and Crawford, both U.S. citizens, were arrested in Las Vegas and San Diego respectively. According to the indictment, the defendants’ identity theft and fraud scheme began in 2014 when Brown, then a civilian employee at a U.S. Army installation, stole thousands of military members’ PII, including names, dates of birth, social security numbers, and Department of Defense identification numbers. Brown allegedly then provided the stolen information to Boling, who exploited the information in various ways together with his Philippines-based co-defendants, Kerr and Seok. Allegedly, Boling, Kerr, and Seok used the stolen information to compromise a Department of Defense portal designed to enable military members to access benefits information online. Once through the portal, the defendants allegedly accessed benefits information, enabling them to steal or attempt to steal millions of dollars from military members’ bank accounts. The defendants also stole veterans’ benefits payments. After the defendants had compromised military members’ bank accounts and veterans’ benefits payments, Boling allegedly worked with Crawford to recruit individuals who would accept the deposit of stolen funds into their bank accounts and then send the funds through international wire remittance services to the defendants and others. This case is being investigated by DCIS with support from the U.S. Postal Inspection Service, Army CID, and the Veterans Benefits Administration’s Benefits Protection and Remediation Division.
ANNOUNCED PROJECTS (to view the announcement letters, if available, please click on the title)
Audit of the Solicitation, Award, and Administration of Washington Headquarters Services Contract and Task Orders for the Office of Small Business Programs
The objective of this audit is to determine whether the DoD’s Washington Headquarters Services Acquisition Directorate solicited, awarded, and administered task orders issued under a program development and support contract for the Office of Small Business Programs in accordance with the Federal Acquisition Regulation, the Defense Federal Acquisition Regulation Supplement, and Washington Headquarters Services policies.
Followup Audit of the Implemented Recommendations of Naval Station Great Lakes Fire Station
The objective of this audit is to determine whether Navy officials corrected deficiencies identified in a prior DoD OIG report, Report No. DODIG-2012-132, “Project Planning Resulted in Outstanding Building Deficiencies and Decreased Functionality of the Main Fire Station at Naval Station Great Lakes,” September 14, 2012. In addition, the DoD OIG will determine whether other building deficiencies exist and whether Navy Region Mid-Atlantic established oversight procedures to ensure that firefighters have access to safe and compliant facilities.
Audit of the DoD's Compliance With the Berry Amendment
The objective of this audit is to determine whether the Military Services and the Defense Logistics Agency complied with the Berry Amendment for DoD procurements and acquisitions when purchasing materials and supplies. The Berry amendment requires DoD to give preference in procurement to domestic products.
Audit of the DoD FY 2019 Compliance With Improper Payments Elimination and Recovery Act Requirements
The objective of this audit is to determine whether in FY 2019 the DoD complied with the “Improper Payments Information Act of 2002.” An “improper payment” is any payment that was made in an incorrect amount, made to an ineligible recipient, or made for goods and services that were not received. The law requires each agency to annually review programs and identify those susceptible to significant improper payments, estimate and submit the annual amount of improper payments to Congress, and report on actions taken to reduce improper payments.
Audit of Munitions Storage Facilities in the U.S. European Command
The objective of the audit is to determine whether the DoD stored and secured its munitions in the U.S. European Command in accordance with applicable policy.
Evaluation of the DoD's Controls Related to Patient Eligibility and Pharmaceutical Management Within the DoD National Capital Region Medical Directorate Executive Medicine Services
The objective of this evaluation is to determine whether the DoD implemented appropriate controls for executive medicine services in the DoD National Capital Region Medical Directorate Executive Medicine Services related to identifying eligible patients, and ordering, storing, dispensing, and accounting for pharmaceuticals.
Evaluation of the DoD Processes to Counter Radio Controlled Improvised Explosive Devices
The objective of this evaluation is to determine whether the process to counter improvised explosive devices by using tactical jammers is effective.
Followup Evaluation of the DoD's BSAT Biosafety and Biosecurity Program Implementation
The objective of this followup evaluation is to determine whether recommendations from report DODIG-2016-078, “Evaluation of DoD Biological Safety and Security Implementation,” April 27, 2016, were implemented.