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Defense contractor Vector admits criminal fraud

Will pay $6.5 million for submitting false claims

(image from Vector's home page)
(image from Vector's home page)

San Diego–based Vector Planning & Services yesterday (January 14) admitted that it criminally defrauded the Department of Defense. The company agreed to pay $6.5 million to resolve civil and criminal cases.

The company admitted that its former chief executive, now deceased, submitted five years' worth of false claims to the department.

After getting reimbursed for direct costs, the company reclassified the costs to make it appear as if they were indirect costs; in essence, the company got paid twice for the same costs.

When faced with a Defense Department audit in 2011, Vector falsified its electronic accounting entires, preparing and backdating false invoices.

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(image from Vector's home page)
(image from Vector's home page)

San Diego–based Vector Planning & Services yesterday (January 14) admitted that it criminally defrauded the Department of Defense. The company agreed to pay $6.5 million to resolve civil and criminal cases.

The company admitted that its former chief executive, now deceased, submitted five years' worth of false claims to the department.

After getting reimbursed for direct costs, the company reclassified the costs to make it appear as if they were indirect costs; in essence, the company got paid twice for the same costs.

When faced with a Defense Department audit in 2011, Vector falsified its electronic accounting entires, preparing and backdating false invoices.

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Comments
12

so pay the fine, keep the profits. business as usual.

Jan. 15, 2014

Murphyjunk: But the U.S. attorney's office is cracking down on military contracting fraud. Best, Don Bauder

Jan. 15, 2014

depends on how far up the food chain they go to get real perps.

Jan. 15, 2014

Murphyjunk: In some of these cases, the U.S. attorney has gone after the owners of companies cheating DOD. Of course, these have been small companies. Similar to the bank bailout period, the big institutions are getting away with their capers. Best, Don Bauder

Jan. 16, 2014

What Don Bauder neglected to include in his story was the amount of the fraudulent overbilling, which has been reported by several sources to be $3.6 million. So, on the surface at least, it appears that the fines exceeded the "profits".

Jan. 15, 2014

danfogel: Yes, the loss to the Defense Department was more than $3.6 million from 2005 to 2009. But Vector also made false submissions in 2010, 2011, and 2012. That may account for the difference. Best, Don Bauder

Jan. 15, 2014

According to all of the reports I have read, including the official FBI press release, the false submissions were for costs incurred in 2005 through 2009, but Vector actually made the false submissions in 2010, 2011, and 2012. Because of an impending audit in 2011, they falsified "electronic accounting entries, and prepared and backdated fake invoices in order to support those falsified accounting entries" and Vector has admitted that the direction for the fraud came from its then CEO. They will pay the $6.5 million to resolve both criminal and civil cases including fines and the restitution to DoD for losses incurred in the amount of $3,672,756.

Jan. 15, 2014

danfogel: The fraudulent activity was between 2005 and 2009, and the submissions were made between 2010 and 2012. My explanation in response to a query was in error. The DOD losses were definitely $3.67 million. Best, Don Bauder

Jan. 15, 2014

This does not look like a good deal for tax payers. This is a deferred prosecution agreement whereby the criminal charges against Vector will be dismissed in three years. The resolution of this case disgusts me. Apparently, no felony charges were filed against Vector's executives and accountants who put the scheme together and falsified company records to fool government auditors. These individuals will either remain employed by the company or go on to their next jobs with clean records. The resolution of this case shows that the Department of Justice is totally corrupt. The prosecutors who put this deal together are idiots and should be fired. The prosecutors are selling out the American people and doing favors for major laws firms in exchange for lucrative jobs from these same firms after they leave government service.

http://www.dodig.mil/IGInformation/IGInformationReleases/PRvpsi.pdf

Jan. 15, 2014

Burwell: I think you are right to question why individuals got off, and the blame is shifted to a former CEO who is now dead. Some of the other DOD frauds pursued by the U.S. attorney's office have named and punished individuals. This one hasn't, but the case may still be open. Best, Don Bauder

Jan. 15, 2014

Sounds to me the fine was actually pretty close to the damage done.

I wish the same could be done to Goldman Sachs and AIG.

Jan. 16, 2014

ImJustABill: If the punishment fit the crime, Goldman Sachs and AIG would be out of business. Ditto Bank of America and numerous other financial institutions. Best, Don Bauder

Jan. 16, 2014

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