DoD OIG Newsletter December 2017


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:


Evaluation of the Evolved Expendable Launch Vehicle Program Quality Management System.  This evaluation determines whether the DoD Evolved Expendable Launch Vehicle (EELV) prime contractors and a major subcontractor performed adequate quality assurance management. Specifically, the review determines the EELV contractors’ level of compliance with the aerospace and Defense industry quality standard that is contractually required during the design, manufacture, and testing of DoD weapon systems. The EELV program is composed of three space launch vehicles that provide critical space-lift capability to support DoD and other National Security missions.

DoD’s Response to Patient Safety Elements of the Military Health System ReviewThis evaluation determines whether the DoD adequately responded to the patient safety elements in the 2014 Military Health System Review and has improved patient safety as directed by the Secretary of Defense.


Progress of the U.S. and Coalition Train, Advise, and Assist Effort to Develop the Afghan Air Force.  This evaluation determines whether U.S. and Coalition train, advise, and assist efforts are developing the Afghan Air Force across all aviation platforms, airplanes and helicopters, as well as developing necessary aviation ground support functions.


Evaluation of the Army’s Management of the DoD Recovered Chemical Warfare Materiel Program.  This evaluation determines whether the Army managed the Recovered Chemical Warfare Materiel Program in compliance with Army policies and guidelines during its execution of chemical warfare materiel response actions at three response sites. The Program seeks  to mitigate risks to the public, DoD personnel, and the environment from the discovery and disposal of chemical warfare materiel.


U.S. Military-Occupied Facilities Evaluation – Al Udeid Air Base, Qatar.  This evaluation determines whether U.S. military-occupied facilities at Al Udeid Air Base, Qatar, comply with Federal and DoD health and safety policies and standards regarding electrical, fire protection systems, and fueling systems.


Evaluation of Armed Forces Retirement Home Health Care Services.  This evaluation determines whether the Armed Forces Retirement Home provides health care services in accordance with applicable national health care standards and meets the related quality-of-life needs of the retirement home’s residents.


Audit of the U.S. Army Budget Process for Civilian Pay.  This audit determines whether the Army adequately supported and justified the civilian Full-Time Equivalents (FTEs) and pay requirements contained in the Army’s FY 2017 Budget Estimate Submission. FTEs are the total number of regular, straight-time hours worked, or to be worked, divided by the total number of hours that agencies can pay employees in a fiscal year.

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


Top DoD Management Challenges - Fiscal Year 2018. The Top Ten DoD Management Challenges for FY2018 identifies what the DoD OIG considers to be the most serious management and performance challenges facing the Department. It is forward looking and outlines current and future challenges within the DoD. Many of the challenges are the same as the previous year, but the DoD OIG has added some and reorganized others this year to focus on specific aspects of certain challenges.  For example, the DoD OIG made  “Maintaining the Nuclear Enterprise” and “Providing Effective, Comprehensive, and Cost Effective Health Care” stand- alone challenges to highlight the significance of these two issues. Additionally, the DoD OIG combined previous challenges related to developing the full spectrum force and building and maintaining readiness into a newly titled challenge, “Optimally Balancing Readiness, Modernization, and Force Structure.”


The DoD OIG FY 2018 Oversight Plan. The FY 2018 Oversight Plan details the oversight projects the DoD OIG intends to initiate in FY 2018, organized by relationship to each of the management challenges facing the DoD. The DoD OIG identified these challenges based on its oversight work, research, and judgment; oversight work done by other components within the DoD; input from DoD leaders; and oversight projects by the Government Accountability Office. 


Evaluation of Fingerprint Card and Final Disposition Report Submissions by Military Service Law Enforcement Organizations.  This evaluation determined that the Military Services did not consistently submit fingerprint cards and final disposition reports for military service members convicted of qualifying offenses to the Federal Bureau of Investigation (FBI) Criminal Justice Information Services (CJIS) for inclusion in the FBI’s Next Generation Identification (NGI) database. Our report, which was issued Dec.5, determined that the Military Services still did not consistently submit fingerprint cards and final disposition reports as required.  Overall, of the 25 hundred fingerprint cards required to be submitted, 601 (or 24 percent) were not submitted for the period from January 1, 2015, to December 31, 2016.  Of the final disposition reports required to be submitted, 780 (or 31 percent) were not submitted. Our report made a series of specific recommendations to address these serious deficiencies and ensure all fingerprint cards and disposition reports are submitted as required.

Audit of the Joint Air to Ground Missile Program. This audit determined that the Joint Attack Munition Systems project office adequately assessed the affordability of the Joint Air-to-Ground Missile (JAGM) Increment one.  The JAGM is the next generation of aviation-launched, air-to-ground, self-guided missiles that is intended to replace the Hellfire family of missiles.  The DoD intends for the JAGM to be used on Joint service manned and unmanned aircraft to destroy enemy targets from greater distances than existing missiles.  An increment is a capability with its own set of threshold and objective values set by the user.  The audit also determined that, despite its affordability, JAGM increment one will not provide critical capabilities needed by the warfighter. As a result, JAGM increment one will not provide the warfighter with the capability to launch missiles from fixed-wing aircraft, strike targets from longer distances, and increase accuracy, lethality, and interoperability over existing air-to-ground missiles.

Defense Health Agency Controls Over High-Risk Pharmaceutical Payments. This audit determined that the Defense Health Agency (DHA) identified drugs with rising costs and implemented new and effective controls in response to the rising costs for six drugs reviewed. However, the DHA often took more than six months to implement new quantity limits or prior authorization requirements for other drugs. The DHA could further reduce the risk of fraudulent or abusive claims by implementing quantity limits in a timelier manner.


External Peer Review on the Defense Contract Audit Agency System Review Report. This review determined that the system of quality control for the Defense Contract Audit Agency (DCAA), for the year ended June 30, 2016, was suitably designed and complied with in order to provide DCAA with reasonable assurance that its audit function was in compliance with auditing standards. Audit organizations can receive a rating of pass, pass with deficiencies, or fail. The DCAA received a rating of pass with deficiencies due to certain deficiencies related to evidence, reporting, documentation, supervision, and professional judgment.


(U) Follow Up Audit: Basic Expeditionary Airfield Resources Support and Repair Spare Kits. This follow up audit determined that Air Force Material Command and U.S. Pacific Air Forces (PACAF) officials did not fully implement the recommendations identified in DoD OIG report DoDIG-2014-062, “Improvements Needed in the Stocking of Air Force Basic Expeditionary Airfield Resources Support and Repair Spare Kits in Guam.”  Specifically, Air Force Material Command officials did not complete actions to implement the recommendation to perform and document a reconciliation of the U.S. Pacific Command’s operation plan and strategic plan requirements with authorizations, at least every two years or as updated, in coordination with PACAF. In addition, PACAF did not have documentation to support that it validated basic expeditionary airfield resources requirements with on-hand kit inventories, including the 146 excess support and repair kits.  As a result, PACAF continued to stock basic expeditionary airfield resources support and repair kits that did not meet U. S. Pacific Command operation plan requirements.


Defense Hotline Allegations on the Surface Electronic Warfare Improvement Program Block 3 Costs. This audit determined that the Surface Electronic Warfare Improvement Program (SEWIP) Block 3 experienced significant cost increases for the Engineering and Manufacturing Development (EMD) Phase. In addition, Program Executive Office Integrated Warfare Systems (PEO IWS) officials did not approve an EMD phase cost baseline estimate. As a result, PEO IWS officials may pay more than the original estimated cost to complete fewer deliverables than agreed to in the original contract, Additionally, PEO IWS officials may complete the EMD phase behind schedule and may complete initial production later than planned. SEWIP is an upgrade to the electronic warfare system that provides early detection, signal analysis, threat warning, and protection from anti-ship missiles.   


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


Owner of Florida Pharmacy Pleaded Guilty in $100 Million Compounding Pharmacy Fraud Scheme. On November 6, 2017, Nicholas A. Borgesano Jr. pleaded guilty to conspiracy to commit health care fraud and conspiracy to engage in monetary transactions involving criminally derived property.  Borgesano agreed to forfeit real property, high-end cars, and a boat with a combined value of over $7.6 million that were purchased with fraudulent proceeds. Borgesano owned numerous pharmacies that he and his co-conspirators used to execute a fraud scheme that generated over $100 million in proceeds. Borgesano caused the submission of false and fraudulent reimbursement claims for prescription compounded medications, mainly pain creams and scar creams, to TRICARE, Medicare, and private insurance companies. Borgesano and his co-conspirators manipulated billing codes for reimbursement claims, and paid kickbacks and bribes in exchange for prescriptions and patient identifying information, including to a physician in exchange for the physician signing prescriptions for patients he did not treat. Seven co-conspirators previously pleaded guilty in connection with the scheme. This was a joint investigation with the Federal Bureau of Investigation (FBI) and the Health and Human Services Office of Inspector General.


Mercer Transportation Company Agreed to Pay $4.4 Million to Resolve Alleged Violations of the False Claims Act. On November 8, 2017, Mercer Transportation Company agreed to pay $4.4 million to resolve allegations that it violated the False Claims Act (FCA) by billing for shipments on contracts that were obtained by bribing Government officials. From 2006 through 2012, Mercer allegedly used its agents, employees, and representatives to bribe two Government employees who worked at the Marine Corps Logistics Base in Georgia. The bribery allegedly resulted in Mercer being awarded contracts for shipments that it would not have otherwise received. This investigation was initiated as a result of a civil lawsuit filed under the qui tam provisions of the FCA. The act permits private individuals, called relators, to sue on behalf of the Government those who falsely claim Federal funds, and to receive a share of any funds recovered through the lawsuit. The relator will receive $814,000 of the settlement amount. This was a joint investigation with the Naval Criminal Investigative Service and the Army Criminal Investigation Command (Army CID).


Owner of Defense Contracting Firm Sentenced to Five Years in Prison for Paying Bribes to Civilian Employee at Aberdeen Proving Ground. On November 7, 2017, Rainier Ramos, a civilian information technology professional, was sentenced to two years in prison and one year of home confinement followed by three years of supervised release for bribery in connection with his duties at the Aberdeen Proving Ground in Maryland. Ramos was also ordered to pay a money judgment of $33,000 and restitution in the full amount of the victim’s losses, $2,215,779. Ramos conspired with Bhupesh Wadhawan, the owner of Link Solutions, Inc. (LSI), an information technology company, to put LSI in a position to be awarded Government contracts that it might not have otherwise received. Specifically, Ramos recommended that certain contracts be reserved for companies that were part of the Small Business Administration 8(a) program, which was a significant benefit to LSI as a certified 8(a) business. Ramos also provided Wadhawan with the winning proposal of a previous contractor on a contract that Wadhawan intended to bid.  In exchange, Wadhawan offered and Ramos accepted bribes worth $33,000, such as meals and drinks, rounds of golf, tickets to sporting events, and gift cards. Wadhawan previously pleaded guilty and was sentenced to five years in prison and was ordered to pay $2,215,779 in restitution. This was a joint investigation with the FBI and Army CID.


Former Army Official and Contractor Sentenced to 18 Months in Federal Prison for Bribery Scheme Involving Contracts at Aberdeen Proving Ground. On November 8, 2017, Danielle N. Kays was sentenced to 18 months in prison for conspiracy to defraud the United States and commit bribery related to contracting for the Army at Aberdeen Proving Ground. She was also ordered to forfeit $250,700. Danielle Kays and her husband, John Kays, conspired with Matthew Barrow to benefit Barrow’s company, MJ-6, LLC. In exchange for $800,000, the Kays used their official positions to add MJ–6 as a subcontractor acceptable to the Army, to approve MJ-6 employees to work on various task orders, and to approve the pay rates, status reports, and travel reimbursements for MJ-6 employees. The Kays steered $21 million in subcontracts to MJ-6. In order to conceal their corrupt relationship, Barrow caused a glass company that he worked for as a procurement manager to enter into contracts and make payments to Transportation Logistics Services, LLC, a company incorporated by John Kays. Barrow later agreed to pay the Kays from MJ-6 disguised as employment salary. John Kays and Matthew Barrow previously pleaded guilty and are awaiting sentencing. This was a joint investigation with the FBI and Army CID.

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


Investigation and Review  regarding the DoD’s Submission of Information for Inclusion in the Federal Bureau of Investigation’s Databases. The objective of this investigation is to determine why appropriate information regarding Devin Patrick Kelley, the former Air Force member who shot and killed more than two dozen people in the November 5, 2017, Texas church shooting, was not transmitted to the FBI for entry into its databases. Separately, the DoD OIG will review the policies, practices, and procedures for submitting qualifying information by DoD law enforcement agencies to the FBI for entry into its databases.


Operations and Management of Military Cemeteries. The objective of this evaluation is to examine the operations and management processes and procedures at the Army National Military Cemeteries (Arlington National Cemetery (ANC) and the United States Soldiers’ and Airmen’s Home National Cemetery (SAHNC)), and other military cemeteries under control of the military departments.



Audit of the Commercial and Government Entity Code Process. The objective of this audit is to determine whether controls governing the Commercial and Government Entity (CAGE) code process are adequate and effective in managing vendor access. The CAGE code is a five-character identification number, assigned by the Defense Logistics Agency and used extensively within the federal government. The CAGE code is used to support a variety of systems throughout the government and provides a standardized method of identifying a contractor at a specific location.