DoD OIG Newsletter - May 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 the DoD FY2018 Compliance With Improper Payments Information Act Requirements

This audit determines whether the DoD complied with Public Law No. 107-300, “Improper Payments Information Act of 2002,” November 26, 2002, as amended by Public Law No. 111-204 and Public Law No. 112-248.  An “improper payment” is defines as any payment made in an incorrect amount, made to an ineligible recipient, or made for goods or services that were not received.  The Improper Payment Information Act requires each Federal agency to review its programs and identify those that may be susceptible to significant improper payments, report the amount and causes of improper payments that occurred, and report on corrective actions planned to reduce the improper payments.

Evaluation of U.S. European Command Nuclear Command and Control 

This evaluation determines whether U.S. European Command met DoD requirements for survivable and continuous nuclear command and control between the President and the theatre nuclear forces.  This report is classified.

The DoD’s Management of Opioid Use Disorder for Military Health System Beneficiaries 

This evaluation determines whether the DoD established policies and programs to treat opioid use disorder, and implemented opioid use disorder treatment outcome measures to inform quality of care improvements.  Opioid use disorder is a substance abuse disorder associated with the recurrent use of opioids that causes significant impairments, such as health problems, disability, and failure to meet major responsibilities at work, school, or home.

Evaluation of Operations and Management of Arlington and Soldiers’ and Airmen’s Home National Military Cemeteries 

This evaluation determines whether the Arlington National Cemetery completed actions in response to recommendations from a prior DoD OIG report, DoD OIG Report No. DODIG-2014-026, “Assessment of Arlington and Soldiers’ and Airmen’s Home National Cemeteries," December 20, 2013.  Additionally, in the current evaluation, the DoD OIG is evaluating matters such as the reliability of gravesite information; execution and oversight of contract support for the Arlington National Cemetery and Airmen’s Home National Military Cemeteries; and the causes for the wide range of wait times for pending interments and inurnments at Arlington National Cemetery.

Evaluation of the Operations and Management of Military Cemeteries 

This evaluation determines whether the Military Services completed actions in response to recommendations from a prior DoD OIG report, DoD OIG Report No. DODIG-2013-098, “Assessment of U.S. Military Cemeteries,” June 28, 2013.  Additionally, in the current evaluation, the DoD OIG is evaluating the reliability of gravesite information; contract support for the Military Cemeteries; and implementation of DoD, Army, Navy, and Air Force cemetery regulations.

Audit of the Foreign Military Sales Trust Fund

This audit determines whether the Defense Security Cooperation Agency and the Defense Finance and Accounting Service has implemented effective controls over financial reporting for the Foreign Military Sales Trust Fund.  Foreign Military Sales is a security assistance program, which involves government-to-government sales of defense articles and services from DoD stocks or through new procurements under DoD-managed contracts.  Foreign Military Sales customers are generally required to pay, in advance, amounts necessary to cover costs associated with the services or items purchased from the DoD.  

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

Report of Investigation: Mr. Patrick M. Shanahan Acting Secretary of Defense 

This investigation examined allegations asserting that Acting Secretary of Defense Patrick M. Shanahan took actions to promote his former employer, Boeing, and disparage its competitors, allegedly in violation of his ethical obligations and agreements.  The investigation determined that Mr. Shanahan fully complied with his ethics agreements and his ethical obligations regarding Boeing and its competitors.  The investigation did not substantiate any of the allegations.  In this investigation, the DoD OIG interviewed more than 30 witnesses, including the most senior officials in the DoD and Mr. Shanahan; witnesses who had frequent interaction with Mr. Shanahan; and witnesses who were involved in the review, consideration, or decisions to purchase or budget for Boeing and Lockheed Martin systems related to the allegations.  The DoD OIG also reviewed more than 5,600 pages of unclassified documents and approximately 1,700 pages of classified documents related to the allegations and the relevant major defense acquisition systems.  The DoD OIG issued a 43-page report of investigation that described the allegations, our conclusions, and the facts and evidence on which the conclusions were based.

Audit of Training Ranges Supporting Aviation Units in the U.S. Indo-Pacific Command

This audit determined that training ranges and airspace did not have the capability or capacity to support aviation readiness for aviation units assigned to U.S. Indo-Pacific Command.  Specifically, the training land, airspace, impact areas, and electronic warfare systems were more limited than what was required for training with ordnance used by the aircrafts and the aircrafts’ capabilities.  As a result, the aviation units in the U.S. Indo-Pacific Command area of responsibility could not train as they would fight, which, according to the National Defense Strategy, is essential for lethality and success in accomplishing theater campaign operation plan objectives.

Audit of the Identification and Training of DoD’s Operational Contract Support Workforce

This audit determined that DoD Components did not consistently integrate operational contract support (OCS) training into workforce development.  Specifically, the Army developed an OCS training course for non-acquisition personnel but the training does not adequately prepare personnel to perform OCS in theater.  The Navy developed training requirements for its OCS personnel but has not identified which personnel comprise the Navy’s OCS workforce.  The Air Force and Marine Corps did not incorporate OCS training into the workforce development policy for their military or civilian OCS personnel.  As a result, DoD personnel executing OCS activities in theater, such as contract support integration, contracting support, and contractor management, are often unable to adequately perform their OCS duties.  

Audit of Payments to the DoD for Medical Services Provided to Department of Veterans Affairs Beneficiaries at Selected Army Medical Centers

This audit determined that two Army medical centers, the Tripler Army Medical Center (Tripler) in in Honolulu, Hawaii and the William Beaumont Army Medical Center (Beaumont)  in El Paso, Texas,  did not always bill the Veteran Affairs (VA) for authorized care and did not receive payment from the VA for all medical care provided to VA beneficiaries under established resource sharing agreements between the DoD and the VA.  Furthermore, the control weaknesses identified may exist at other medical centers where the DoD provides medical services to VA beneficiaries, increasing the risk that the DoD will provide unauthorized and unreimbursed care to VA beneficiaries in the future.

Audit of the Army’s Oversight of National Afghan Trucking Services 3.0 Contracts

This audit determined that the Army did not fully monitor contractor costs or provide continuous oversight of contractor performance for the National Afghan Trucking Services 3.0 (NAT 3.0) contracts, which provide services such as personnel, trucks, equipment, tools, materials, supervision and other items necessary for safe, timely, and reliable transportation of U.S. Government supplies and assets.  The contracting officer’s representatives did not review or verify all transportation movement request data submitted by the contractors before the contracting office approved invoices.  In addition, the contracting officer’s representatives did not complete monthly surveillance checklist or monthly status reports as required by the quality assurance surveillance plan.  As a result, the Army does not have assurance that the NAT 3.0 contractors’ services, valued at $41.3 million (as of December 2018), complied with contract requirements for the delivery of supplies and assets.

Evaluation of Military Services’ Law Enforcement Responses to Domestic Violence Incidents 

This evaluation determined that the Military Service law enforcement policies related to responding to incidents of domestic violence were consistent with DoD Policy.  However, the DoD OIG determined that Military Service law enforcement organizations did not consistently comply with DoD policies when responding to nonsexual domestic violence incidents with adult victims.  Specifically, in 219 domestic violence incidents  Military Service law enforcement organizations did not consistently process crime scenes (62 of 219), conduct thorough interviews (148 of 219), notify the Family Advocacy Program of domestic violence incidents (49 of 219), or submit criminal history data to the Defense Central Index of Investigations, the Federal Bureau of Investigation, Criminal Justice Information Services Division and the Defense Forensics Science Center (180 out of 219).  These deficiencies could hinder criminal investigations, impact law enforcement and national security interests, and expose victims to additional harm.

Evaluation of the Oversight of Intelligence Interrogation Approaches and Techniques

This evaluation determined that the Office of the Secretary Defense for Intelligence (OUSD(I)) developed and coordinated DoD policy, and reviewed, approved, and ensured coordination of DoD Component intelligence interrogation policies, directives, and doctrine.  However, the OUSD(I)’s methodology for the oversight of the combatant commands’ implementation of DoD policy regarding intelligence interrogation approaches and techniques was inconsistent.  As a result, OUSD(I) cannot ensure that the combatant commands' intelligence interrogation programs are employing interrogation approaches and techniques consistent with applicable policies and regulations. 

Report on Evaluation of Defense Contract Management Agency Contracting Officer Actions on DoD Contractor Executive Compensation Questioned by the Defense Contract Audit Agency 

This evaluation determined that in 18 of 35 audit reports that the DoD OIG selected for evaluation, Defense Contract Management Agency contracting officers failed to comply with the Federal Acquisition Regulation and DoD Instruction requirements to document an adequate rationale when they do not sustain the DCAA’s recommendations.  As a result of not sustaining the DCAA recommendations, contracting officers reimbursed DoD contractors $22.5 million in executive compensation that DCAA reported as unreasonable in the 18 audit reports.  In addition, contracting officers did not maintain evidence that the negotiation memorandum and indirect cost rate agreements were distributed to the contracting officials affected by the negotiation for 17 of 35 audit reports, as required by Federal Acquisition Regulation.  

Evaluation of DoD Component Responsibilities for Counterintelligence Support for the Protection of Defense Critical Infrastructure 

This evaluation determined that the Undersecretary of Defense for Intelligence (USD (I) did not assign responsibilities for Counterintelligence (CI) coverage of critical assets and facilities previously managed by defense infrastructure sector lead agents.  CI organizations are required to provide comprehensive and timely reporting of foreign intelligence entity threats, incidents, events, and trends to DoD Components that manage critical assets and facilities.  Without current and clear guidance, it is difficult for DoD Components to provide consistent and comprehensive CI support to essential DoD services and infrastructure.  As a result, the evaluation determined that DoD support provided through efforts such as threat awareness briefings, CI inquiries, and support to the DoD foreign visitors program may not consistently identify CI threats to essential DoD services and infrastructure.  In addition, the DoD may not be adequately integrating and coordinating CI support for essential DoD services and infrastructure, which could result in duplicative CI efforts or insufficient CI coverage for these assets.

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

Individual Sentenced To 56 Months in Prison for Defrauding the U.S. Army Reserve Recruiting Assistance Program

On April 4, 2019, Luis De Jesus-Negron, a former Army Reserve recruiter, was sentenced by the District of Puerto Rico to serve 56 months confinement and pay $19,000 in restitution to the Army for wire fraud, aggravated identity theft, and other criminal charges.  De Jesus-Negron was found guilty of 26 criminal charges on December 6, 2018, after an 8-day jury trial.  Luis De Jesus-Negron defrauded the Army Reserve Recruiting Assistance Program, which was created in 2007 through a task order under a contract then existing between the National Guard Bureau and the company Document and Packaging Broker, Inc. (Docupak).  The Army Reserve Recruiting Assistance Program was a recruiting program designed to offer referral bonus payments to Reserve soldiers to recruit civilians to serve in the Army Reserve.  The Program had two primary participants, which were recruiters and recruiter assistants.  Under the contract specifications of the Army Reserve Recruiting Assistance Program, only recruiter assistants were eligible to receive recruiting referral bonuses.  De Jesus-Negron and a co-conspirator set up an online account on the Docupak administered website for the program without authorization, utilizing the personal identifying information of potential recruits to falsely collect recruiting bonuses that he was not entitled to receive.  In a separate scheme, De Jesus-Negron was found guilty of falsely representing himself as an Army Reserve soldier who was eligible to be a recruiter assistant under the recruiting program, so that he could receive referral bonus payments to which he was not entitled.  This case was investigated by the Defense Criminal Investigative Service (DCIS).

Former CEO Of Tennessee Pain Management Company Convicted for Role in Approximate $4 Million Medicare Kickback Scheme

On April 4, 2019, John Davis, the former CEO of a Tennessee pain management company, was found guilty by jury trial of one count of conspiracy to defraud the U.S. and violate the Anti-Kickback Statute and seven counts of violating the Anti-Kickback Statute for his role in a kickback scheme involving fraudulent durable medical equipment (DME) claims.  Davis arranged for referrals of Medicare DME orders to go to his co-conspirator.  Davis and his co-conspirator obtained over $2.4 million dollars in improper reimbursement from Medicare.  Davis paid bonuses to CPS providers who ordered DME for Medicare beneficiaries and referred those orders to CCC Medical.  Davis would receive 60 percent of the Medicare profit from those referrals, while the company he ran paid the bill.  Evidence at trial also showed that in April and May of 2015, concerned about the size of the kickback payments CCC Medical was making to Davis, he and Montgomery created the fake sale of ProMed.  ProMed did not have any assets, employees, equipment, office space or customers other than CPS.  This case was investigated by the Health and Human Services OIG (HHS-OIG), DCIS, Internal Revenue Service-Criminal Investigation (IRS-CI) and the Tennessee Bureau of Investigation Medicaid Fraud Control Unit. 

Two Tulsa Doctors Settle with the U.S. Government for Allegedly Engaging in Illegal Kickback Schemes

On April 5, 2019, two Tulsa doctors, Lam Nguyen and Hugo Salguero, entered into settlement agreements with the U.S. Attorney’s Office for the Northern District of Oklahoma for allegedly accepting kickback payments from OK Compounding, LLC for writing prescriptions for compounded medications.  Lam Nguyen agreed to pay the Government $124,139 for allegedly accepting kickback payments from OK Compounding.  In a separate settlement, Hugo Salguero, a licensed medical doctor specializing in pain medicine, agreed to pay the Government $228,301 for allegedly accepting illegal kickback payments from OK Compounding.  These civil settlements resulted from an investigation into numerous health care providers writing prescriptions for pain creams compounded and sold by OK Compounding in return for payments.  In 2013, Dr. Nguyen and Dr. Salguero prescribed pain creams for their patients, facilitating the sale and distribution of the creams.  As compensation for their services, OK Compounding paid the doctors based upon an hourly rate.  However, the payments the two physicians received from the company were actually kickbacks.  Because some of the patients were insured by Medicare, Tricare, and the Veterans Health Administration, the kickbacks were in violation of the False Claims

Act.  These settlements resolved allegations that Dr. Nguyen and Dr. Salguero had illegal financial relationships with OK Compounding concerning pain creams in 2013.  Since January 2019, seven medical professionals have settled for allegedly receiving kickback payments from the company.  This was a joint investigation by DCIS, the Department of Labor OIG, IRS–CI, the U.S. Postal Service OIG, Federal Bureau of Investigation (FBI, the Department of Veterans Affairs OIG, and HHS-OIG. 

Insulation Contractor Branch Manager Pleads Guilty to Bid Rigging and Fraud

On April 8, 2019, Gary DeVoe, the branch manager of an insulation contractor, pleaded guilty for his role in a scheme to rig bids and engage in fraud on insulation installation contracts, marking the first conviction in this investigation.  From about October 2011 to March 2018, DeVoe allegedly conspired with other insulation installation contractors to rig bids and engage in fraud for insulation installation contracts in Connecticut, New York, and Massachusetts.  Insulation installation contractors install insulation around pipes and ducts on renovation and new construction projects at universities, hospitals, and other public and private entities.  In addition to his guilty plea, DeVoe has agreed to pay restitution.  The antitrust charge carries a maximum penalty of 10 years in prison and a fine of $1 million for individuals.  The fraud conspiracy charge carries a maximum penalty of 20 years in prison and a fine of $250,000.  DeVoe also agreed to resolve civil forfeiture cases connected to the criminal charges.  DeVoe agreed to settle the pending forfeiture action on his home for $131,000 and to forfeit all of his seized bank accounts.  This was a joint investigation by the Antitrust Division’s New York Office, the United States Attorney’s Office for the District of Connecticut, FBI, and DCIS. 

Sunnyvale-Based Network Security Company Agrees to Pay $545,000 to Resolve False Claims Act Allegations

On April 12, 2019, Sunnyvale, California-based Fortinet, Inc. agreed to pay $545,000 to resolve alleged violations of the False Claims Act by falsely representing its products were in compliance with the Trade Agreements Act.  According to the settlement agreement, Fortinet acknowledged that from approximately 2009 to 2016, A Fortinet employee responsible for supply chain management arranged to have labels on certain products altered to fraudulently claim that the products complied with the Trade Agreements Act.  The employee has since been terminated from Fortinet.  To settle the allegations, Fortinet has agreed to pay $400,000 and to provide the United States Marine Corps with additional equipment valued at $145,000.  The lawsuit was filed by Yuxin “Jay” Fang under the qui tam provisions of the False Claims Act.  Under the act, private citizens can bring suit on or behalf of the government for false claims and share in any recovery.  The act also permits the United States to intervene in and take over a whistleblower suit, as was done here.  This was a joint investigation with DCIS, the General Services Administration OIG, the Air Force Office of Special Investigations, the U.S. Army Criminal Investigative Division/Command, DHS-OIG, the Department of the Navy, and the Coast Guard Investigative Service.  

Company Agrees to $46 Million Penalty for Falsifying Test Results

On April 23, 2019, an Oregon aluminum extrusion manufacturer agreed to pay $46 million to NASA, the DoD, and others to resolve criminal charges and civil claims relating to a 19-year fraud scheme that included falsifying thousands of certifications for aluminum extrusions provided to hundreds of customers.  According to court documents, Hydro Extrusion Portland, Inc., formerly known as Sapa Profiles Inc. (SPI), and its corporate parent, Hydro Extrusion USA, LLC, formerly known as Sapa Extrusions, Inc. (SEI), admitted to providing customers, including U.S. Government contractors, with falsified certifications after altering the results of tensile tests designed to ensure the consistency and reliability of aluminum extruded at the companies’ Oregon-based facilities.  Tensile testing involves slowly stretching and then ripping apart a sample of the metal using a machine, which then measures the force applied to the sample at each stage of the test.  SPI has agreed to plead guilty to one count of mail fraud, and SEI has entered into a deferred prosecution agreement (DPA) in connection with a criminal information filed on April 23, 2019, charging the company with mail fraud.  As part of the plea agreement, SPI has agreed to pay $34.1 million in combined restitution to NASA, the DoD’s Missile Defense Agency (MDA), and commercial customers.  SPI has also agreed to forfeit $1.8 million in ill-gotten gains. 

The plea agreement remains subject to acceptance by the court at a plea hearing currently scheduled for May 13, 2019.  To protect the government supply chain, NASA both suspended SPI from Government contracting and proposed SPI for debarment government-wide.  The exclusion from Government contracting has been effective since September 30, 2015.  This was a joint case with the U.S. Attorney’s Office for the Eastern District of Virginia, DOJ’s Criminal and Civil Division, NASA OIG, FBI, and DCIS.

Pain Management Clinics Settle Medicare Civil Fraud Claims

On April 25, 2019, the DOJ announced that National Spine and Pain Centers (NSPC), and Physical Medicine Associates (PMA), with pain management clinics in northern Virginia, Glen Allen and Fredericksburg, agreed to pay approximately $3.3 million to settle civil fraud allegations.  The settlement resolves civil fraud allegations that defendants billed Medicare and other federal healthcare providers for medical services performed by physician assistants and nurse practitioners as if physicians had provided the services, submitted claims for urine drug tests in violation of the Stark Law and the Anti-Kickback Statute, and ordered medically unnecessary urine drug tests.  The settlement resolves a lawsuit filed in the U.S. District Court for the Eastern District of Virginia by a former Physical Medicine Associates physician assistant under the qui tam, or whistleblower, provisions of the False Claims Act.  This was a joint investigation with HHS OIG, Office of Personnel Management OIG and DCIS. 

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

Summary Report of DoD OIG Reviews of Acquisition: A Framework for Improvement

The objective of this audit is to review and summarize previous DoD OIG acquisition reports and recommendations to determine whether systemic weaknesses exist within the defense acquisition process community.

Audit of the Governance, Protection, and Ownership Rights of the DoD's Artificial Intelligence Technology and Data

The objective of this audit is to determine whether the DoD has gaps and weaknesses related to the governance, protection, and ownership rights of artificial intelligence (AI) data and technologies.  AI is any artificial system that performs tasks under varying and unpredictable circumstances without significant human oversight, or that can learn from experience and improve performance when exposed to data sets.  In June 2018, the DoD established the Joint Artificial Intelligence Center, under the Chief Information Officer's leadership, to accelerate the delivery of AI-enabled capabilities throughout the DoD and to synchronize DoD AI activities to expand Joint Force advantages.

Audit of the Cybersecurity of DoD Additive Manufacturing Systems

The objective of this audit is to determine whether DoD Components are securing additive manufacturing systems and data to prevent unauthorized changes and ensure integrity of design data.  Additive manufacturing (commonly known as 3D printing) is a manufacturing process where 3D design data is used to build a product in successive layers without the use of molds, casts, or patterns.  Additive manufacturing offers the ability to create prototypes or operational equipment that can help validate the fit, form, and functionality of proposed products, which can provide both time and cost savings when compared with traditional manufacturing.

Audit of the DoD's Response to and Recovery from Cyber Incidents

The objective of this audit is to determine whether the DoD is adequately responding to and recovering from cyber incidents, which include mitigating adverse operational and technical impacts, in accordance with Federal and DoD guidance.

Audit of the DoD Beyond Economical Repair Process for Parts

The objective of this audit is to determine whether DoD “beyond economical repair        processes,” which are used to decide whether to repair a part or purchase a replacement part for a weapon system platform, comply with the agreed-upon thresholds and procedures.  The beyond economical repair process is a complex decision-making process designed to ensure the best outcome for the DoD when deciding whether to repair a part or scrap the part and buy new.

Audit of Physical Security at DoD Military Treatment Facilities

The objective of this audit is to determine whether DoD Military Treatment Facilities implemented adequate physical security controls to prevent unauthorized access to facilities, equipment, and sensitive areas.

Audit of Training of Mobile Medical Teams in the U.S. Indo-Pacific Command and U.S. Africa Command Areas of Responsibility

The objective of this audit is to determine whether the Defense Health Agency and the Military Services are providing effective training to mobile medical teams prior to deploying to the U.S. Indo-Pacific Command and U.S. Africa Command areas of responsibility to improve trauma care.

Audit of Host Nation Logistical Support in the U.S. European Command

The objective of this audit is to determine whether the U.S. European Command host nation support agreements adequately address logistical requirements needed to execute the operation plan.  The DoD negotiates and concludes host nation support agreements with partner nations to provide logistical support. 

External Peer Review of the Defense Contract Audit Agency

The objective of this review is to determine whether the Defense Contract Audit Agency’s system of quality control was suitably designed and  followed to provide reasonable assurance that the Defense Contract Audit Agency conformed with applicable audit standards for the period ending June 30, 2019.  Government Auditing Standards require that an audit organization performing audits in accordance with Government Auditing Standards undergo an external peer review every three years by an organization that is independent of the organization being reviewed.

Evaluation of Combined Joint Task Force-Operation Inherent Resolve's Military Information Support Operations 

The objective of this evaluation is to determine whether Combined Joint Task Force-Operation Inherent Resolve effectively plans and executes Military Information Support Operations to counter the Islamic State in Iraq and Syria.  Military Information Support Operations is an information-related capability to influence target audiences.