Northrop Grumman Subsidiary Agrees to Pay $31.65 Million for Overbilling U.S. Air Force in Civil and Criminal Settlements

SAN DIEGO – Northrop Grumman Systems Corporation (“NGSC”), a subsidiary of the Northrop Grumman Corporation, with offices in San Diego, California, agreed today to pay a total of $31.65 million to settle civil and criminal investigations into fraud arising out of its Battlefield Airborne Communications Node (“BACN”) and Dynamic Re-tasking Capability (“DRC”) contracts with the United States Air Force.  NGSC agreed to pay $27.45 million to settle civil allegations that it violated the False Claims Act by overstating the number of hours its employees worked on the BACN and DRC contracts with the United States Air Force.  Additionally, NGSC agreed to forfeit $4.2 million in a separate agreement to resolve a criminal investigation into fraudulent billing on the BACN contract.  In exchange for admitting its employees’ misconduct, making full restitution, and agreeing to cooperate in the ongoing criminal investigation, no criminal charges will be filed against NGSC.

In the agreement resolving the criminal investigation of NGSC, the company admitted that its employees deployed to an air base in the Middle East defrauded the Air Force by overbilling time charged to the BACN contract.  Specifically, from January 2011 to October 2013, NGSC employees charged exactly 12 or 13.5 hours per day, seven days a week, despite the fact that the employees were not working those hours.  NGSC admitted that its employees billed time to the BACN contract when its employees were not working and engaged in leisure activities, such as golfing, skiing, visiting local amusement parks, going out to eat or drink, shopping, and enjoying various amenities at the five-star hotels where the employees were housed.

By inflating their time, the employees working on the BACN contract personally profited and were paid thousands of dollars that they did not earn.  In an email, one NGSC employee summed up the billing practices by saying that they “work[ed] about 6-8 hours and charge[d] 13.”  NGSC admitted that its employees working on the BACN contract overbilled the United States by more than $5 million at one site alone.

“Federal contracts are not a license to steal from the U.S. Treasury,” said U.S. Attorney Adam Braverman.  “DOJ is firmly committed to vigilantly weeding out abuse and will swiftly pursue all available remedies when egregious fraud occurs.”

“Air Force OSI’s Office of Procurement Fraud is dedicated to protecting the taxpayer’s interests worldwide while safeguarding the needs of the warfighter.   This investigation is a testament to AFOSI’s global reach, and to our partnerships with DCIS and the FBI which allowed us to meticulously unravel this international conspiracy to defraud the U.S. Air Force,” stated Jason T. Hein, Special Agent in Charge of the Air Force OSI Office of Procurement Fraud, Detachment 6.

“We are committed to ensuring the funds of the American people are used for their intended purpose,” stated John Brown, Special Agent in Charge of the San Diego Field Office - Federal Bureau of Investigation.   “This is another example of the incredible partnerships between the FBI and our Department of Defense counterparts.  Together, uncovering this immense fraud against the government and returning the funds to the American taxpayer is vitally important to ensuring our military receives the honest services they are due.”

Chris Hendrickson, Special Agent in Charge of the Western Field Office, Defense Criminal Investigative Service, said:  “This settlement demonstrates how defense contractors will be held accountable for making false claims to the United States.  DCIS is committed to working with its law enforcement partners and the Department of Justice to aggressively investigate such matters, and the recovered funds can now be properly used to support the men and women of our Armed Forces.”

Except for the conduct admitted in connection with the criminal agreement, the claims resolved by the civil agreement are allegations only, and there has been no determination of civil liability.

The civil investigation was handled by Assistant U.S. Attorneys Joseph Price and Douglas Keehn and Benjamin C. Wei, Senior Trial Counsel, Fraud Section, Civil Division, Department of Justice.

The criminal investigation was handled by Assistant U.S. Attorneys Michelle L. Wasserman, Billy Joe McLain, Mark W. Pletcher, and Phillip L.B. Halpern.

AGENCIES

Air Force Office of Special Investigations

Defense Criminal Investigative Service

Federal Bureau of Investigation

Defense Contract Audit Agency

Air Force Materiel Command Law Office Fraud Division

Dunford Shares Thoughts on Maintaining U.S. Military’s Competitive Advantage

By Jim Garamone, Defense.gov

ARLINGTON, Va. -- t is a dangerous and unpredictable time, and the United States must reverse any erosion in its military capabilities and capacities, the chairman of the Joint Chiefs of Staff said at the Military Reporters and Editors conference here Oct. 26.

Marine Corps Gen. Joe Dunford is confident the U.S. military can protect the homeland and fulfill its alliance commitments today, but he must also look at the long-term competitive advantage and that causes concern.

He said the competitive advantage the U.S. military had a decade ago has eroded. “This is why our focus is very much on making sure we get the right balance between today’s capabilities and tomorrow’s capabilities so we can maintain that competitive advantage,” Dunford said.

Strategic Alliances Provide Strength

The greatest advantage the United States has – the center of gravity, he said – is the system of alliances and partners America maintains around the world.

“That is what I would describe as our strategic source of strength,” he said.

This network is at the heart of the U.S. defense and security strategy, Dunford said. “We really revalidated, I think, what our threat assessors have known for many years, is that that network of allies and partners is truly unique to the United States of America and it is truly something that makes us different,” the general said.

A related aspect is the U.S. ability to project and maintain power “when and where necessary to advance our national interests,” Dunford said.

“We have had a competitive advantage on being able to go virtually any place in the world,” he said, “and deliver the men and women and materiel and equipment, and put it together in that capability and be able to accomplish the mission.”

This is what is at the heart of great power competition, the general said. “When Russia and China look at us, I think they also recognize that it is our network of allies and partners that makes us strong,” he said.

Challenges Posed by Russia, China

Broadly, Russia is doing what it can to undermine the North Atlantic Alliance and China is doing what it can to separate the United States from its Pacific allies. Strategically, Russia and China are working to sow doubt about the United States’ commitment to allies. Operationally, these two countries are developing capabilities to counter the U.S. advantages. These are the seeds to the anti-access/area denial capabilities the countries are developing. “I prefer to look at this problem less as them defending against us and more as what we need to do to assure our ability to project power where necessary to advance our interests,” Dunford said.

These are real threats and include maritime capabilities, offensive cyber capabilities, electromagnetic spectrum, anti-space capabilities and modernization of the nuclear enterprise and strike capabilities. These capabilities are aimed at hitting areas of vulnerability in the American military or in striking at the seams between the warfighting domains.

“In order for us to be successful as the U.S. military, we’ve got to be able to project power to an area … and then once we’re there we’ve got to be able to freely maneuver across all domains … sea, air, land, space, and cyberspace,” the chairman said.

This requires a more flexible strategy, he said. During the Cold War, the existential threat to the United States emanated from the Soviet Union and strategy concentrated on that. Twenty years ago, this was different. The National Security Strategy of 1998 didn’t address nations threatening the U.S. homeland.

“To the extent that we talked about terrorism in 1998, we talked about the possible linkage between terrorism and weapons of mass destruction,” Dunford said. “For the most part, what we talked about were regional challenges that could be addressed regionally with coherent action within a region, not transregional challenges.”

Different Threats

Transregional threats are a fact of life today and must be addressed, the general said. “What I’m suggesting to you, is in addition to the competitive advantage having eroded, the character of war has fundamentally changed in my regard in two ways,” he said. “Number one, I believe any conflict …  is going to be transregional – meaning, it’s going to cut across multiple geographic areas, and in our case, multiple combatant commanders.”

Another characteristic of the character of war today is speed and speed of change, he said. “If you’re uncomfortable with change, you’re going to be very uncomfortable being involved in information technology today,” the general said. “And if you’re uncomfortable with change, you’re going to be uncomfortable with the profession of arms today because of the pace of change. It’s virtually every aspect of our profession is changing at a rate that far exceeds any other time in my career.”

He noted that when he entered the military in 1977, the tactics he used with his first platoon would have been familiar to veterans of World War II or the Korean War. The equipment and tactics really hadn’t changed much in 40 years.

But take a lieutenant from 2000 and put that person in a platoon “and there’s virtually nothing in that organization that hasn’t changed in the past 16 or 17 years,” Dunford said. “This has profound impacts on our equipment, our training, the education of our people.”

This leads, he said, to the necessity of global integration. “When we think about the employment of the U.S. military, number one we’ve got to be informed by the fact that we have great power competition and we’re going to have to address that globally,” he said.

The Russian challenge is not isolated to the plains of Europe. It is a global one, he said.

“China is a global challenge” as well, Dunford added.

Global Context

American plans have historically zeroed-in on a specific geographic area as a contingency, the general said. “Our development of plans is more about the process of planning and developing a common understanding and having the flexibility to deal with the problem as it arises than it is with a predictable tool that assumes things will unfold a certain way in a contingency,” he said. “So we’ve had to change our planning from a focus on a narrow geographic area to the development of global campaign plans that actually look at these problem sets in a global context. When we think about contingency planning, we have to think about contingencies that might unfold in a global context.”

This has profound implications for resource allocation, Dunford said. Forces are a limited resource and must be parceled out with the global environment in mind. “The way we prioritize and allocate forces has kind of changed from a bottom-up to a top-down process as a result of focusing on the strategy with an inventory that is not what it was relative to the challenges we faced back in the 1990s,” he said.

In the past, the defense secretary’s means of establishing priorities came through total obligation authority. The secretary would assign a portion of the budget to each one of the service departments and the services would develop capabilities informed by general standards of interoperability. At the time, this meant the American military had sufficient forces that would allow it to maintain a competitive advantage.

“Because the competitive advantage has eroded, in my judgment, the secretary is going to have to be much more focused on the guidance he gives,” Dunford said. “He not only has to prioritize the allocation of resources as we execute the budget, but he’s got to five, seven or 10 years before that, make sure that the collective efforts of the services to develop the capabilities that we need tomorrow are going to result in us having a competitive advantage on the backside.”

This fundamentally changes the force development/force design process, he said. “This is not changing because of a change in personalities. It’s not changing because different leaders are in place,” the general said. “It’s changing because the character of war has changed, the strategic environment … within which we are operating today and expect to be operating in five to seven years from now, will change. Frankly, were we to not change the fundamental processes that we have in place inside the department, we would not be able to maintain a competitive advantage five or seven years from now.”

Former U.S. Navy Commander Sentenced to Prison for Bribery Conspiracy with Foreign Defense Contractor in Massive U.S. Navy Corruption and Fraud Case

A former U.S. Navy Commander was sentenced today to 30 months in prison, followed by three years of supervised release, a $10,000 fine and $21,625.60 in restitution by the Honorable Janis L. Sammartino of the U.S. District Court for the Southern District of California.  The case relates to a wide-ranging corruption and fraud investigation involving foreign defense contractor Leonard Glenn Francis and his Singapore-based company, Glenn Defense Marine Asia (GDMA).

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division and U.S. Attorney Adam L. Braverman for the Southern District of California, made the announcement.

Earlier this year, Amundson, 51, of Ramsey, Minnesota pleaded guilty to one count of conspiracy to commit bribery, admitting that he conspired with Francis and others to receive things of value in exchange for taking official acts for the benefit of GDMA and violating his official duties to the U.S. Navy.  Francis pleaded guilty in 2015 to bribery and fraud charges.

According to admissions made as part of his guilty plea, from May 2005 to May 2013, Amundson served as the officer responsible for coordinating the U.S. Navy’s joint military exercises with its foreign navy counterparts.  As part of his duties, Amundson was responsible for building and maintaining cooperative relationships with the U.S. Navy’s foreign navy exercise partners.  Amundson admitted that from September 2012 through October 2013, Francis paid for dinner, drinks, transportation, other entertainment expenses, and the services of prostitutes for Amundson and other U.S. Navy officers, in return for sensitive information, such as U.S. Navy ship schedules, and for taking other actions in favor of GDMA and in violation of his official duties.   Amundson further admitted that after being interviewed by federal criminal investigators in October 2013, he deleted e-mail correspondence with Francis.

So far, 33 defendants have been charged and 21 have pleaded guilty, many admitting to accepting things of value from Francis in exchange for helping the contractor win and maintain contracts and overbill the Navy by millions of dollars.

The investigation is being conducted by the Defense Criminal Investigative Service, Naval Criminal Investigative Service and Defense Contract Audit Agency.  The case is being prosecuted by Assistant Chief Brian R. Young of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Mark W. Pletcher and Patrick Hovakimian of the Southern District of California.