Investigative Case Summaries

Quarterly Investigative Summary Reports

January - March 2018

Also, below are investigative case summaries that are reported in our Semiannual Reports to the Congress.

Contract and Grant Fraud

In February 2018, a Romanian citizen, who previously served as a Department contractor, was sentenced to 3 years in prison for his role in a Government contract kickback scheme that caused a loss of more than $3.4 million to the Department. Previously, in November 2017, this former Government contractor was convicted in the U.S. District Court for the Eastern District of Virginia for conspiring to violate the Anti-Kickback Act. OIG special agents determined the contractor conspired with others in 2011 to inflate the lease of real property in Iraq for use on a Department contract. The contractor’s role included opening a bank account that was used to pay kickbacks directly to two other contractors, who earlier in 2017 were sentenced to prison—one for 4 years, the other for 3 years—for their roles in the conspiracy.

In March 2018, a German citizen living in the United States was indicted and arrested on a charge related to a scheme to defraud the Department of $1.2 million. The individual’s company had been awarded a grant to support and promote U.S. global internet freedom efforts under the guise that it was a 501(c)(3) nonprofit organization. OIG special agents determined the company was not a nonprofit organization and, thus, not eligible to apply for the grant. OIG also determined that much of the grant funds were spent on personal expenses.

In October 2017, a Department contract company agreed to pay a $975,576 administrative settlement to resolve allegations that it knowingly provided false information to the Department. OIG special agents determined the company did not comply with contractual obligations to ensure that U.S. embassy local guard force personnel were adequately trained to contract specifications.

In September 2017, a Department contract company agreed to pay a $200,000 settlement in order to resolve their mandatory disclosure report under provisions of the Federal Acquisition Regulation. OIG special agents and auditors discovered that the company had overcharged Embassy Santa Domingo for fuel. In that disclosure, the company’s internal investigation concluded that it charged the Department for fuel not received.

In August 2017, a Department contract company agreed to pay a $5 million settlement to resolve allegations that it knowingly failed to follow vetting requirements for personnel working in Afghanistan. OIG special agents determined the company did not comply with contractual obligations to conduct developed reference checks on applicants filling high-risk and armed positions. In addition, the settlement also resolved a lawsuit brought against the company by a former contract company manager under the qui tam, or whistleblower provisions, of the False Claims Act.

In June 2017, a former Government contractor was sentenced to 4 years in prison and ordered to pay $3.4 million in restitution for his role in a Government contract kickback scheme. OIG special agents determined that the contractor orchestrated a conspiracy between multiple contract companies to inflate the lease of real property for use on a Department contract. Both the contractor and another associate received at least $390,000 in kickback payments for their roles in the leasing scam. Earlier, in March 2017, two other individuals were charged for their roles in the conspiracy. One co-conspirator pled guilty in July 2017 and is scheduled for sentencing in October 2017. The other was extradited from Romania and is scheduled for a jury trial in November 2017.

In January 2017, a Government contractor pled guilty in the U.S. District Court for the District of Columbia to a charge of conspiracy to commit theft of Government property and wire fraud. As the manager of an auto restoration and collision center, the individual conspired with both the shop owner and a Department employee to misappropriate and illicitly resell Department vehicles. From approximately 2011 to 2015, under an apparently legitimate Government contract to provide fleet services to the Department’s Defensive Equipment and Armored Vehicle Division, these individuals misappropriated Department vehicles, totaling at least $512,420 in value, and resold them while splitting the profits. The plea agreement requires the auto center manager to pay $416,020 in restitution and an equal amount in forfeiture money judgment.

Embezzlement and Theft

In February 2018, six individuals were charged for their roles in an elaborate international advance fee and money-laundering scheme. It is alleged that the defendants impersonated bank executives and deceived victims into believing they would receive millions of dollars in investment funding as part of joint ventures with U.S. banks. To convince victims that the opportunities were legitimate, the perpetrators allegedly recruited U.S. citizens to pose as bank representatives at in-person meetings around the world, including having the impostors make sham visits to the local U.S. embassy and fabricating U.S. Government documents to give the appearance that the U.S. Government was sponsoring the investment agreements. The scheme allegedly resulted in losses of more than $7 million from victims in more than 20 countries. To date, approximately $446,000 in assets, all directly traceable to victims’ payments have been seized. This total includes a house in Richmond, Texas, a 2014 Land Rover Range Rover, and almost $50,000 in cash.

In January 2018, a former Department contractor was sentenced to 3 years of probation for the sale of Government property. Previously, in September 2017, the former contractor pled guilty to the theft and sale of Government property. OIG special agents determined that, from March 2016 through March 2017, the contractor unlawfully acquired ballistic vests and combat helmets valued at more than $16,000 and sold and traded them online for other items.

In December 2017, the former owner of a transportation company that contracted with the Department pled guilty in the U.S. District Court for the Eastern District of Virginia to a charge of stealing approximately $17,335 in Federal grant funds intended for a Department-maintained foreign exchange program. OIG and Federal Bureau of Investigation special agents determined the owner conspired with a Department official to steal portions of the $247,200 grant by submitting false invoices for nonexistent vendors and inflated invoices for legitimate vendor services. Sentencing is scheduled for April 2018.

In September 2017, a former Department contractor pled guilty to the theft and sale of Government property. OIG special agents determined that, from March 2016 through March 2017, the contractor sold and traded online U.S. Government tactical equipment, including ballistic helmets and vests that were valued at more than $16,000. Sentencing is scheduled for January 2018.

Employee Misconduct

In February 2018, a former Department employee was sentenced to 1 year of home confinement, 300 hours of community service, and 3 years of probation and was ordered to pay $416,020 in restitution and an additional $53,000 in a forfeiture judgment. The defendant pled guilty in November 2017 to a charge of conspiracy to commit theft of Government property and wire fraud. In January 2017, the manager of an auto restoration and collision center pled guilty to the same charges. OIG and Federal Bureau of Investigation special agents determined the individuals conspired to misappropriate and illicitly resell Department vehicles. From approximately 2011 to 2015, under a legitimate contract to provide fleet services to the Department’s Defensive Equipment and Armored Vehicle Division, the individuals misappropriated Department vehicles, totaling at least $512,420 in value, and resold them while splitting the profits. As an additional result of the investigation, the two individuals—along with two companies and a third individual—were debarred from doing business with the U.S. Government for a period of 3 years.

In December 2017, a former Department employee was sentenced to 1 year of probation and ordered to pay a $125,000 fine for knowingly and willfully making false statements in his SF-86 Questionnaire for National Security Positions. Previously, in September 2017, the former employee pled guilty to false statements. The plea came after special agents from OIG and the Bureau of Diplomatic Security’s Office of Special Investigations determined that the employee deliberately minimized the frequency of his gambling and extent of his losses, which from 2012 through 2015 amounted to hundreds of thousands of dollars. He also concealed a number of contacts with non-U.S. citizens living overseas. In addition to being sentenced and fined, he was court-ordered to attend mandatory gambling addiction classes and submit to random drug testing.

A Department employee, who was previously suspended for 8 days without pay and issued a warning letter, was ordered in October 2017 to repay $2,726 in shipping costs for abusing Unaccompanied Air Baggage policies while transferring to a new duty post. OIG special agents determined that the employee attempted to ship as household effects 496 handbags and 78 handbag straps that were actually intended for a personally owned business. The employee did so to avoid paying shipping charges and customs duty on these commercial items.

In August 2017, a former Department contractor was sentenced to 24 months of probation and ordered to pay restitution of $29,650. In March 2017, the former contractor pled guilty to theft of Government funds. The plea came after OIG special agents determined that, between July 1, 2015, and April 1, 2016, the contractor submitted false travel expense claims for hotel stays in excess of $29,650 and converted the money for personal use. Prior to this plea, in 2016, a U.S. consulate locally employed staff member was terminated from her employment with the Department because of her role in the fraud scheme. In addition, both the former contractor and locally employed staff member, as well as the lodging provider owned by her, were debarred for a period of 3 years.

In July 2017, a Department Compliance Officer was suspended for 5 days, and the officer’s security clearance was placed on probation for a period of 1 year because of misuse of a Government-issued travel card. OIG special agents determined the employee completed 526 cash advances without official travel authorizations, which were valued at $256,800.

In June 2017, a former DS employee pled guilty to defrauding the U.S. Government of $198,000 in funds paid under the Federal Employees’ Compensation Act (FECA), commonly referred to as workers’ compensation. OIG special agents determined the employee received FECA benefits while also serving as president of a company that received $260,000 in Government contracts, including Department contracts. During this time, the company’s gross profits exceeded $2,078,219, and as company president, the former employee received $370,000 in salary and other earnings. As part of his guilty plea, the individual agreed to pay full restitution and forfeiture of his FECA benefits. He also agreed to pay $3,650 in restitution to the U.S. Department of Education for fraudulently obtained Federal Pell Grants. Sentencing is scheduled for October 2017.

In October 2016, a U.S. consulate suspended three locally employed staff members and terminated four for administrative violations in connection with their use of the Diplomatic Post Office and diplomatic pouch mail system. A joint OIG and DS Regional Security Office investigation determined the employees conspired to and illicitly utilized the system from 2008 through 2016 to import items from online commerce vendors with the goal of evading customs duties.

Visa Fraud/Other

In December 2017, a U.S. citizen agreed to pay a $25,000 civil settlement to resolve allegations that he knowingly submitted false information to the Department. OIG special agents determined that a U.S. embassy issued 13 immigrant work visas based on information submitted by the individual. However, none of the visa recipients actually worked for the sponsoring organization during their time in the United States.

In August 2017, an individual was sentenced to 27 months of imprisonment and 3 years of probation and was ordered to pay restitution of $502,716. Additionally, the Federal Bureau of Investigation is leading forfeiture proceedings with respect to $15,404 in assets. Previously, in April 2017, the individual pled guilty to wire fraud, theft of Government funds, and passport fraud. The charges stemmed from a 15-year scheme to fraudulently obtain $366,716 in Federal financial aid through U.S. Department of Education programs and $136,000 in Federal grant funds from the National Science Foundation. In addition, the individual made a false statement to receive a U.S. passport. The plea was obtained as the result of a joint OIG investigation with the OIGs from the Department of Education, the Social Security Administration, and the National Science Foundation.

In June 2017, the owner of a staffing agency and co-conspirators were sentenced for their roles in a nationwide fraud scheme designed to unlawfully profit from Department exchange visitor programs. Following a joint OIG and Department of Homeland Security investigation, special agents determined that more than 200 foreign nationals came to the United States believing that they would be part of the Department’s Intern & Training Program. Rather than receiving the high-level managerial training they expected, the victims were sent to work in restaurants, hotels, and theme parks, receiving only a small portion of the wages they earned. The owner was sentenced to 26 months in Federal prison and ordered to pay restitution of $815,570. His wife was ordered to pay restitution of $815,570, his daughter was ordered to pay restitution of $271,856, and both were sentenced to 5 years of probation.

In February 2017, following a grand jury indictment in 2016, a Federal jury convicted two co-conspirators on multiple counts, including conspiracy to defraud the Government and international smuggling of ancient artifacts into the United States from Pakistan. Following a joint investigation by OIG and Homeland Security Investigations, special agents determined that the two individuals— both of Santa Fe, New Mexico—used their legitimate business to import and sell illegal antiquities. The smuggling operation spanned from approximately 2007 through 2014. The individuals were also found guilty of obstructing justice and multiple counts of naturalizing and procuring U.S. citizenship by fraud.

In December 2016, following the earlier guilty pleas of two accomplices, a third individual was found guilty on three counts related to a conspiracy to defraud several Federal agencies by issuing numerous fraudulent bonds to insure Government construction contracts. A Federal jury convicted the defendant of major fraud, mail fraud, and false statements to a Federal agency. These convictions stemmed from his role in the fraud scheme that spanned from May 2008 to October 2010. The defendant was sentenced to 150 months in prison and ordered to pay joint restitution of $4,165,221. In February 2017, the Government took administrative action to suspend
the individual, along with one co-conspirator and eight entities, from Federal contracting. In addition, a third individual was debarred.