July 9, 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:
Compendium of Open Office of Inspector General Recommendations to the Department of Defense
This report contains detailed information regarding open DoD OIG recommendations issued to the DoD. An open recommendation is a recommendation that was made in a previously issued DoD OIG report for which corrective actions have not been completed. We have issued an annual compendium of open recommendations each year since 2017. The Compendium contains all recommendations made by the DoD OIG that remain open as of March 31, 2019. The compendium also lists what the DoD OIG considers to be the top 30 open recommendations, as well as a summary of all the open recommendations with potential monetary benefits that the DoD could achieve if the recommendations were fully implemented.
Audit of Protection of DoD Controlled Unclassified Information on Contractor‐Owned Networks and Systems
This audit determines whether DoD contractors have implemented adequate security controls to protect DoD‐controlled unclassified information maintained on their information technology networks and systems from internal and external cyber threats. Controlled unclassified information is a designation for unclassified information that requires proper safeguarding because compromise of the information has the potential to affect national security.
Evaluation of Combatant Commands' Insider Threat Programs
This evaluation determines whether combatant commands have developed and implemented adequate processes and procedures to ensure the effectiveness of their Insider Threat Programs, according to applicable DoD policies and guidelines. The DoD Insider Threat Program is designed to gather, integrate, review, assess, and respond to information derived from counterintelligence, security, cybersecurity, and other sources as necessary and appropriate to identify, mitigate, and counter insider threats. This report is classified.
Recently issued Reports of Interest (to view report, if available, please click on title)
Audit of F‑35 Ready‑For‑Issue Spare Parts and Sustainment Performance Incentive Fees
This audit determined that the DoD did not receive Ready‑For‑Issue (RFI) F‑35 Joint Strike Fighter (F-35) spare parts according to contract requirements, that the DoD paid performance incentive fees on sustainment contracts based on inflated and unverified F‑35A aircraft availability hours. RFI means that the spare parts are ready for aircraft maintenance personnel to install on the aircraft, and have an Electronic Equipment Logbook assigned, which includes information such as part history and remaining life (hours). Spare parts without a logbook are considered non-RFI. As a result of the deficiencies, the DoD received non‑RFI spare parts and has spent up to $303 million since 2015 in labor costs on manual processes to make the non-RFI parts usable. In addition, the audit concluded that the DoD will continue to pay up to $55 million annually for labor cost to correct non‑RFI spare parts until resolved. Furthermore, by using manual processes to mitigate the delivery of non-RFI spare parts, rather than addressing the problem, the DoD could create life and safety concerns for aircrew members, if the flight hours on a critical safety part are manually tracked incorrectly and that spare part is flown beyond its useful life.
Evaluation of DoD Efforts to Combat Trafficking in Persons in Kuwait
This evaluation determined that DoD officials at U.S. Central Command did not consistently enforce DoD and command regulations regarding the identification of trafficking in persons and the oversight of Combatting Trafficking in Persons (CTIP) in Kuwait. The Federal Acquisition Regulation (FAR) prohibits U.S. contractors from engaging in various forms of trafficking in persons, and defines these practices with reference to the host-nation labor and wage laws. However, this evaluation determined that DoD contracting organizations lacked a process for determining Kuwaiti labor law requirements regarding wage, housing, and safety standards and therefore could not fully conduct oversight of contractors’ implementation of the FAR CTIP clause. Furthermore, Army and Air Force contracting officers did not always confirm that contracts included the required FAR CTIP clauses and had oversight plans that required monitoring for combatting for trafficking in persons. Additionally, Army and Air Force Exchange Service personnel did not consistently monitor contractor CTIP compliance, document their monitoring, and report the results to contracting officers. As a result, U.S. Central Command is at an increased risk of not detecting or correcting and underreporting labor trafficking in persons on U.S. military facilities.
Audit of the DoD’s Implementation of the Joint Regional Security Stacks
This audit determined that the DoD’s implementation of the Joint Regional Security Stacks (JRSS) is not fully achieving the expected outcomes of the objective of the DoD’s Joint Information Environment to implement regional cyber security. The JRSS is a suite of equipment that includes assets such as network routers, firewalls, and switches that work together to provide network security capabilities and to improve the DoD’s ability to defend its network against cyber-attacks. Although the JRSS is reducing the number of paths an adversary can use to gain access to the DoD Information Network, it is not achieving other intended joint information environment outcomes for implementing regional cyber security. If the JRSS is not operationally effective, secure, and sustainable, the DoD may not achieve greater security in the DoD Information Network.
Evaluation of the DoD’s Management of Opioid Use Disorder for Military Health System Beneficiaries
This evaluation determined that the DoD has established policies and programs to manage the treatment of opioid use disorder for Military Health System beneficiaries. However, Marine Corps Substance Abuse Counseling Center (SACC) counselors made substance use disorder diagnoses in violation of DoD and Navy Bureau of Medicine and Surgery policies. Although, the SACC counselors were licensed, they were not granted clinical privileges and did not have access to the DoD Health Record system. As a result, Marine Corps SACC counselors could not document substance use disorders in the DoD Health Record, which could impact the quality of care provided to Military Health System beneficiaries and the quality of medical data in the DoD Health Record. In addition, the DoD did not collect and track DoD-wide standard outcome and process measures specific to opioid use disorder, such as the percentage of opioid use disorder patients who initiated treatment within 14 days of diagnosis. As a result, the Military Health System had no mechanism to compare the performance of opioid use disorder treatment programs to civilian benchmarks or across Military Treatment Facilities, making the full extent of the population in the DoD with opioid use disorder population unclear.
Report of Investigation: Brigadier General Norman Cooling, U.S. Marine Corps
The DoD OIG investigated allegations that Brigadier General Cooling, while serving as Legislative Assistant to the Commandant, Marine Corps Office of Legislative Affairs, violated applicable standards for exemplary conduct, leadership, and treatment of subordinate personnel. The DoD OIG substantiated the allegation that Brigadier General Cooling’s overall course of conduct disparaged, bullied, and humiliated subordinates, devalued women, and created a negative Office of Legislative Affairs work environment.
Audit of the Training of the Army’s Regionally Aligned Forces in the U.S. Africa Command
This audit determined that the Regionally Aligned Forces (RAF) personnel allocated to U.S. Africa Command did not receive adequate regionally aligned training to meet the RAF’s mission requirements. Regionally aligned training, which includes required and supplemental training, is specific to the RAF mission and is mandatory for all RAF's. As a result, U.S. African Command’s RAF have not been consistently prepared for deployments to Africa, which has degraded the effectiveness of the RAF’s missions. In addition, ineffective RAF training could disrupt or delay execution of the U.S. Africa Command strategy for the continent.
Follow-up Evaluation of Corrective Actions Taken in Response to a Prior Evaluation of Foreign Officer Involvement at the United States Special Operations Command
This evaluation determined that the U.S. Special Operations Command and the Defense Intelligence Agency have taken corrective actions to develop policies and procedures for foreign officers assigned to the DoD, which addressed 24 of 25 recommendations from a June 2016 DoD OIG evaluation. However, the Under Secretary of Defense for Policy did not update DoD Directive 5230.20, “Visits and Assignments of Foreign Nationals,” to include the establishment of criteria for granting exceptions to policy for foreign nationals and the use of extended visit requests for foreign personnel. According to the Defense Technology Security Administration Acting Director, the Under Secretary of Defense for Policy did not complete the agreed-upon actions because the Defense Technology Security Administration is in the process of updating policy and developing a comprehensive DoD instruction that will address the recommendations made in the June 2016 OIG report.
System Review Report of the United States Special Operations Command, Office of the Inspector General, Audit Division
The DoD OIG reviewed the system of quality control for the Audit Division of the United States Special Operations Command, Office of the Inspector General (USSOCOM OIG), that were in effect for the period January 1, 2016, through December 31, 2018. A system of quality control encompasses the USSOCOM OIG Audit Division’s organizational structure, and established policies and procedures to provide it with reasonable assurance of conforming to the Government Auditing Standards. In our opinion, the system of quality control for the USSOCOM OIG Audit Division, in effect for the 3-year period that ended December 31, 2018, has been suitably designed and complied with to provide the USSOCOM OIG Audit Division with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material aspects. Audit organizations can receive a rating of pass, pass with deficiencies, or fail. The USSOCOM OIG Audit Division received a rating of pass.
DEFENSE CRIMINAL INVESTIGATIVE SERVICE HIGHLIGHTS (to view DOJ press release, if available, please click on title)
Government Contractor Pleads Guilty To Making False Statements
On June 3, 2019, Enco Industries, Inc. (Enco), a company located in Plaistow, New Hampshire, pleaded guilty to making false statements to the Defense Logistics Agency (DLA). In December 2011, the DLA posted a solicitation to acquire approximately 96,000 units of hazardous material mats over a five-year period. The solicitation required, among other things, that the mats pass standards established in National Fire Protection Association for Static Decay and Surface Resistivity. The solicitation also required the selected government contractor to purchase mats manufactured by a company in Tipton, Pennsylvania or another company in Pennsylvania. On January 13, 2012, Enco's government contracting manager submitted Enco's bid for the contract. The bid stated that Enco would purchase the mats from the company in Tipton for $29.15 for each unit containing 100 mats during the first year of the five-year annually renewable contract. This statement was false because at the time the bid was submitted, Enco did not intend to purchase the mats from the company in Tipton. On June 18, 2012, DLA awarded the contract to Enco and sent the company a purchase order that incorporated all the required specifications for the mats. From June 2012 to October 2013, Enco provided approximately 21,700 units to DLA. To obtain payments, Enco's office manager submitted claims to the DoD. Most of the claims were false because only seven units contained mats that were manufactured by the company in Tipton. Enco received payments totaling $683,513.55 for these claims. In addition to other false statements, Enco’s president gave false statements to special agents from the Naval Criminal Investigative Service and DCIS during the course of the investigation. A sentencing hearing has been scheduled for September 2019. This was a joint investigation with the Naval Criminal Investigative Service, the Air Force Office of Special Investigations (AFOSI), and the Defense Criminal Investigative Service (DCIS).
Opioid Manufacturer Insys Therapeutics Agrees to Enter $225 Million Global Resolution of Criminal and Civil Investigations
On June 5, 2019, Opioid manufacturer lnsys Therapeutics (Insys) agreed to a global resolution to settle the Government's separate criminal and civil investigations. As part of the civil resolution, lnsys agreed to pay $195 million to settle allegations that it violated the False Claims Act. As part of the criminal resolution, lnsys will enter into a deferred prosecution agreement with the Government, lnsys's operating subsidiary will plead guilty to five counts of mail fraud, and the company will pay a $2 million fine and $28 million in forfeiture. Both the criminal and civil investigations stemmed from lnsys's payment of kickbacks and other unlawful marketing practices in connection with the marketing of Subsys lnsys's drug Subsys is a sublingual fentanyl spray, a powerful, but highly addictive, opioid painkiller. In 2012, Subsys was approved by the Food and Drug Administration for the treatment of persistent breakthrough pain in adult cancer patients who are already receiving, and tolerant to, around-the-clock opioid therapy. Allegedly, lnsys paid kickbacks to induce physicians and nurse practitioners to prescribe Subsys for their patients. Many of these kickbacks took the form of speaker program payments for speeches to physicians that were fake; jobs for the prescribers' relatives and friends; and lavish meals and entertainment. Allegedly, lnsys improperly encouraged physicians to prescribe Subsys for patients who did not have cancer, and lied to insurers about patients' diagnoses in order to obtain reimbursement for Subsys prescriptions that had been written for Medicare and TRICARE beneficiaries. This was a joint investigation with the Federal Bureau of Investigation (FBI); the Food and Drug Administration (FDA) Office of Regulatory Affairs; the Drug Enforcement Administration; DCIS; the U.S. Department of Labor (DOL), Employee Benefits Security Administration; the U.S. Postal Inspection Service; the United States Postal Service OIG; the Department of Veterans Affairs OIG; the Office of Personnel Management OIG; and the Defense Health Agency.
Fort Washington Man Sentenced to 66 Months in Federal Prison for Two Separate Drug Cases
On June 6, 2019, Daniel Wilkerson of Fort Washington, Maryland was sentenced to 66 months confinement, followed by 5 years of supervised release, for possession with intent to distribute more than 100 kilograms of marijuana, and in a separate case for conspiring to steal prescription drugs from Federal military hospitals. Wilkerson was ordered to pay restitution in the amount of $4,450,679.60, and forfeit $16,320.44. Wilkerson admitted that from January 2008 to June 2013, he conspired with others to steal Norditropon, Humatrope, Somatotropin, Botox, and other branded varieties of human growth hormones from pharmacies located at Fort Belvoir Community Hospital in Fort Belvoir, Virginia; Walter Reed National Military Medical Center in Bethesda, Maryland; and the former Walter Reed Medical Center in Washington, D.C. The conspirators re-sold the stolen pharmaceuticals. The total loss to the United States caused by Wilkerson and others was at least $4,467,000. In a separate case, Wilkerson was found guilty for possessing, with intent to distribute, 384 pounds (174 kilograms) of marijuana, worth more than $1 million. This was a joint investigation with DCIS and the FDA Office of Criminal Investigations (OCI).
Medical Device Maker ACell, Inc. Pleads Guilty and Will Pay $15 Million to Resolve Criminal Charges and Civil False Claims Allegations
On June 11, 2019, a Maryland-based medical device manufacturer, ACell, Inc. (ACell), pleaded guilty to charges relating to its MicroMatrix powder wound-dressing product (MicroMatrix). ACell entered a guilty plea for failure and refusal to report a medical device removal in violation of the Federal Food, Drug, and Cosmetic Act. In addition, ACell agreed to settle allegations that it caused false claims to be submitted to federal health care programs for MicroMatrix, and to pay $15 million to resolve its criminal and civil liability arising from these matters. According to court documents, ACell removed MicroMatrix from sales representative inventories, hospitals, and other healthcare centers to reduce a risk to health posed by the device, but it failed to report the removal to the FDA. Pursuant to a plea agreement, ACell admitted that it learned in January 2012 that more than 30,000 MicroMatrix devices were contaminated with endotoxin levels that posed a risk to patient health. Due to that health risk, ACell initiated a removal of certain sizes of MicroMatrix devices from the market. ACell admitted that it did not report the removal of these devices from the market to FDA. ACell also admitted that it concealed the reason for the product removal from doctors, hospitals, and the company's own sales force, and it did not notify doctors who had already used MicroMatrix devices from the lots subject to removal of the elevated endotoxin levels. Under the terms of the plea agreement, ACell agreed to pay a criminal fine of $3 million. ACell must also enact extensive compliance reforms. Pursuant to the civil settlement under the False Claims Act, ACell agreed to pay $12 million over five years to resolve its civil liability for causing false claims for MicroMatrix to be submitted to government health care programs. This was a joint investigation with the Health and Human Services (HHS) OIG, FDA OCI, FBI and DCIS.
Wholesaler Admits to Conspiracy to Manufacture and Sell Counterfeit Goods to the U.S. Military and Government
On June 13, 2019, a clothing and goods wholesaler, Ramin Kohanbash, pleaded guilty to conspiring and selling more than $20 million dollars of Chinese-made counterfeit goods to the U.S. military, Government purchasers, and companies that supply the U.S. Government. Among other items, Kohanbash and others arranged to counterfeit 200 military parkas of a type used by Air Force personnel stationed in Afghanistan. These parkas were falsely represented as genuine Multicam®, a fabric that incorporates specialized near infrared management technology designed to make the wearer more difficult to detect with equipment such as night-vision goggles. Other items carried labels that made explicit, and false, representations about the product's safety. In one case, labels on counterfeit hoods intended for military and law enforcement personnel stated that the items were "permanently flame resistant" and that they met a specific industry standard for flame-resistant attire. Kohan admitted that he provided, reviewed, and approved photographs, descriptions, and samples of tags and labels to be attached to the counterfeit goods, including the trademarks and brand names of actual products made in the U.S. Kohanbash received these counterfeit goods via shipments from China and sold these goods to other wholesalers who sold them to the U.S. military and Government as genuine, American made products. This was a joint investigation with the General Services Administration (GSA) OIG, the U.S. Army Criminal Investigative Command Division, the Homeland Security Investigations, AFOSI, and DCIS.
Three Physicians and Five Marketers Charged for Violations to Federal Anti-Kickback Statutes
On June 13, 2019, three physicians and five marketers were charged with violating the federal anti-kickback statute and other criminal offenses. The defendants allegedly caused federal health care insurance programs to pay reimbursement costs for fraudulent and expensive compounding drug prescriptions written by recruited doctors in return for kickback payments. The defendants would then use the reimbursed funds for their own financial gain. Dr. Krishna Balarma Parchuri was charged in a superseding indictment along with Christopher R. Parks, Dr. Gary Robert Lee, and Dr. Jerry May Keepers with conspiracy to commit health care fraud. Keepers and Parchuri are also charged with soliciting and receiving illegal bribes and kickback payments. Parchuri was further charged with obstructing the criminal investigation into the health care offenses. The criminal indictment alleged that since November 2012, Parks and Lee engaged in a conspiracy to unlawfully pay kickbacks and bribes to physicians in order to induce the physicians to write expensive compounding prescriptions to pharmacies they controlled, including OK Compounding LLC, One Stop RX LLC, NBJ Pharmacy LLC, and Airport McKay Pharmacy. The defendants then allegedly submitted large claims for payment to Federal health care programs and divided the profits. The defendants are accused of causing Tricare to pay reimbursement for false claims in the total amount of $3,207,514; Medicare in total of $285,776; FECA Program in total of $552,544; and CHAMPVA in total of $310,273. Other defendants who participated in this scheme as marketers were also included in the indictment. This was a joint investigation with the DOL OIG, the Internal Revenue Service Criminal Investigation, the U.S. Postal Service OIG, the Department of Veterans Affairs OIG, the FBI, HHS OIG, and DCIS.
Granite Bay Man Sentenced For Multi-Million Dollar Product Substitution Fraud on Federal Government Agencies
On June 17, 2019, Jim A. Meron of Granite Bay, CA was sentenced to 33-months confinement and three years of supervised release on 2 counts of wire fraud arising out of a government-procurement fraud scheme. Meron was also ordered to pay restitution of $1,622,729 to dozens of victims. The court also entered a final order forfeiting more than $1.7 million in assets seized during the investigation of Meron's crimes. Between May 2011 and July 2017, Meron used two office supply businesses he operated to defraud Federal Government agencies out of as much as $3.5 million, in thousands of transactions, by substituting and delivering cheaper, generic versions of expensive, name-brand office products his customers ordered, and pocketing the price difference. Meron's companies, WOW Imaging Products LLC and Time Enterprises LLC, contracted to sell office supplies to Federal agencies through two web-based government sales portals, GSA Advantage, operated by the GSA, and DOD E-Mall, operated by the DoD. After Meron received payments for the premium products his customers ordered, he obtained compatible products from his suppliers that cost him a fraction of what his customers paid for the brand-name products they ordered. Meron then substituted and delivered these cheaper products for the more expensive products his customers ordered, and retained the difference in cost. Over time, Meron extended his substitution scheme to nearly all orders for those name-brand products. This was a joint investigation with the GSA OIG and DCIS.
ANNOUNCED PROJECTS (to view the announcement letters, if available, please click on the title)
Audit of the Supply Chain Management for a U.S. Nuclear Delivery System
The objective of this audit is to determine whether the DoD has implemented supply chain risk management for a U.S. nuclear weapons delivery system according to DoD requirements. The DoD supply chain is the sequence of activities necessary to provide an end user with a finished product or system (from raw material to finished product). The activities include design, manufacturing, production, packaging, handling, storage, transportation, mission operation, maintenance and disposal.
Audit of U.S. Military Equipment Retrograded from Syria
The objective of this audit is to determine whether the DoD has secured and accounted for U.S. military equipment retrograded from Syria. The withdrawal of equipment is referred to as retrograde.
Audit of the Army's Oversight of the Base Operations Support Services Contract for Camp Taji, Iraq
The objective of this audit is to determine whether the Army is adequately overseeing the Camp Taji, Iraq, Base Operations Support Services contract to ensure that the contractor is providing support services according to contract requirements. Base Operations Support Services contracts provide the resources to operate military bases and installations to sustain mission capability, ensure quality of life, and enhance work force productivity, including food services and base security.
Evaluation of the U.S. Air Force Space and Missile Systems Center's Management of the Quality Assurance Program for the Geosynchronous Space Situational Awareness Program
The objective of this evaluation is to determine whether the Air Force Space and Missile Systems Center is complying with DoD and Air Force quality assurance standards for the Geosynchronous Space Situational Awareness Program and whether the program office is providing adequate oversight of the contractor. Geosynchronous Space Situational Awareness Program satellites are a space-based capability supporting U.S. Strategic Command space surveillance operations as a dedicated Space Surveillance Network sensor.
Evaluation of DoD Policies and Processes to Provide Interoperable and Sustainable Counter Small Unmanned Aircraft Systems
The objective of this evaluation is to determine whether DoD's Senior Integration Group for countering small-unmanned aircraft systems is developing policy and implementing processes to provide interoperable and sustainable unmanned aircraft systems to the combatant commands and the Military Services.
Quality Control Review of the Deloitte & Touche LLP and the Defense Contract Audit Agency Single Audit of The Aerospace Corporation for Fiscal Year Ending September 30, 2016
The objective of this evaluation is to determine whether the audit work performed by Deloitte and Touche and the Defense Contract Audit Agency regarding the Aerospace FY 2016 single audit was performed according to applicable laws and auditing standards.