California Man Charged with COVID-Relief Fraud Scheme

A federal grand jury in Los Angeles, California, returned an indictment on April 13, charging a California man with stealing hundreds of thousands of dollars from the Paycheck Protection Program (PPP).

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    The Department of Defense (DOD) has encouraged the use of fixed-price-incentive (FPI) contracts where appropriate. These contracts can provide defense contractors with a profit incentive for effective cost control and performance depending on how they are structured. Over the 10-year period from fiscal years 2010 through 2019, obligations on FPI contracts for major defense acquisition programs (MDAPs) grew to account for almost half of the $65 billion in obligations for fiscal year 2019. Percentage of Obligations by Contract Type for Major Defense Acquisition Programs from Fiscal Years 2010 through 2019 DOD guidance, including Better Buying Power initiatives, influenced DOD's use of FPI contracts over the last decade for the selected contracts GAO reviewed. In addition, when selecting a contract type, contracting officers also considered factors including the availability of cost or pricing data, previous experience with the contractor, and the previously used contract type. DOD has not assessed the extent to which use of FPI contracts has contributed to achieving desired cost and schedule performance outcomes. DOD spends billions of dollars annually using fixed-price type contracts to acquire its MDAPs, among other things. In 2010, DOD's Better Buying Power guidance encouraged the use of FPI contracts as a way to obtain greater efficiency and productivity in defense spending. Congress included a provision in statute for GAO to report on DOD's use of fixed-price type contracts, including FPI. This report examines (1) the extent to which DOD has awarded FPI contracts associated with MDAPs from fiscal years 2010 through 2019, and (2) the factors that influenced DOD's decision to use FPI contracts and the extent to which DOD assesses their use, among other objectives. GAO analyzed government contracting data by contract type for fiscal years 2010 through 2019 on contracts for 101 MDAPs. GAO further analyzed a non-generalizable sample of 12 contracts including six FPI and six firm-fixed-price (two of each type from each of the three military departments); conducted file reviews; reviewed policy documentation; and interviewed DOD officials. GAO recommends that DOD conduct an assessment of its use of FPI contracts for major defense acquisition programs, including the extent to which share lines and other contract elements contributed to achieving desired cost and schedule performance outcomes. DOD agreed with GAO's recommendation. For more information, contact W. William Russell at (202) 512-4841 or russellw@gao.gov.
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  • Disaster Recovery: HUD Should Take Additional Action to Assess Community Development Block Grant Fraud Risks
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    What GAO Found GAO identified four categories of fraud risks facing the Department of Housing and Urban Development's (HUD) Community Development Block Grant – Disaster Recovery (CDBG-DR) from 2007 to 2020, including risks from contractors, disaster recovery applicants, grantees, and others, as shown below. In total, we identified 78 cases from Department of Justice (DOJ) public announcements and 110 HUD Office of Inspector General (OIG) enforcement cases. For example, in 2012 following Hurricane Sandy, a New Jersey couple applied for disaster assistance and fraudulently received $79,000 in CDBG-DR funds, according to HUD OIG records. The couple was convicted of conspiracy, falsification, and theft and was sentenced to 5 years imprisonment. The funding was for a seaside property they fraudulently claimed was their primary residence, but was later determined to be a summer vacation home that was ineligible for assistance. GAO also found that the CDBG-DR operates in a decentralized risk environment that may make it vulnerable to fraud since CDBG-DR funds flow through a number of entities before reaching their intended beneficiaries. In addition, the risk environment in which CDBG-DR operates may contribute to negative financial impacts, such as improper payments. Fraud can have nonfinancial impacts as well, such as fraudulent contractors obtaining a competitive advantage and preventing other businesses from obtaining contracts. Fraud Risks of Department of Housing and Urban Development's (HUD) Community Development Block Grant – Disaster Recovery (CDBG-DR) HUD has taken some steps to assess fraud risks agency-wide. For example, HUD conducts an agency-wide assessment of risks through a Front-End Risk Assessment, which also considers fraud risks. In 2020, HUD redesigned its agency-level approach to evaluate fraud risks through its Fraud Risk Management Maturity Model. While HUD has taken some steps to assess fraud risks agency-wide, GAO found that HUD has not conducted a comprehensive fraud risk assessment of CDBG-DR, as called for in GAO's Fraud Risk Framework. Further, HUD's current fraud risk approach does not involve relevant stakeholders such as grantees. Leading practices include tailoring the fraud risk assessment to the program and also involving relevant stakeholders responsible for the design and implementation of the program's fraud controls in the assessment process. Ensuring that a fraud risk assessment is completed specifically for CDBG-DR may provide greater assurance that HUD addresses CDBG-DR fraud risks, including ones identified in this report. Why GAO Did This Study In response to a historic string of natural disasters, Congress appropriated approximately $39.5 billion in CDBG-DR grant funds in 2017 through 2019, with most of the funding designated for Texas, Florida, Puerto Rico, and the U.S. Virgin Islands. However, accompanying this unprecedented amount of funding is an increased vulnerability to fraud given that CDBG-DR involves multiple factors. GAO was asked to review a range of disaster recovery issues following the 2017 disaster season. This report addresses: (1) the fraud risks and risk environment of CDBG-DR and their impacts; and (2) the steps HUD has taken to assess fraud risk agency-wide, and specifically for CDBG-DR, in alignment with leading practices. GAO reviewed DOJ public announcements and HUD OIG enforcement cases to identify CDBG-DR fraud risks. GAO assessed HUD's procedures against leading practices in the Fraud Risk Framework. GAO interviewed HUD officials responsible for CDBG-DR and fraud risk assessment; and conducted site visits to Florida and Texas, selected partly for the amount of CDBG-DR funds they received, among other factors.
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    What GAO Found The Department of Defense (DOD) and the Department of State (State) have similar processes for formal challenges to the classification of information. For example, if there is reason to believe that information is improperly classified, authorized holders—including executive branch agency or contractor personnel with relevant clearances—can submit a formal classification challenge in writing (see figure). Officials will then review the classification challenge and make a determination. If a formal challenge is denied, the authorized holder can then appeal to senior officials within the agency, and if the agency denies the appeal, the authorized holder can appeal directly to the Interagency Security Classification Appeals Panel (ISCAP). ISCAP, established by Executive Order, then issues a decision that is final unless the head of the agency appeals ISCAP's decision to the President. Processes for Formal Challenges to the Classification of Information aIndividual refers to an authorized holder with access to classified information. Both DOD and State encourage authorized holders to resolve classification challenges informally before pursuing a formal classification challenge. According to DOD and State officials, informal challenges can be done in person, by phone, or by email. For example, officials told GAO that authorized holders can contact the relevant information security office about whether classified documents are marked properly. According to DOD and State officials, Members of Congress (Members) may use their existing processes to formally and informally challenge the classification of information. However, according to officials from the Information Security Oversight Office (ISOO), which provides support to ISCAP, Members cannot appeal a decision to ISCAP. Instead, Members can appeal to the Public Interest Declassification Board (PIDB), a statutory body that makes recommendations to the President in response to certain congressional requests to evaluate the proper classification of records. DOD officials stated that they do not have any knowledge of ever receiving a formal classification challenge from Members. State officials stated that they did not receive any formal classification challenges from Members in 2017 through 2020. ISOO officials also stated that the panel received its first formal classification challenge from a Member in 2020. ISCAP subsequently denied the challenge and directed the Member to the PIDB. Why GAO Did This Study Classified national security information is vital to U.S. national interests. The appropriate protection and handling of this information is a top priority for the executive branch and Congress. Based on guidance, such as Executive Order 13526, Classified National Security Information, authorized holders with access to classified information may submit a classification challenge if there are reasons to believe information is improperly classified. According to DOD and State officials, Members may also submit a classification challenge. GAO was asked to review the processes for challenging the classification of national security information. This report describes (1) the processes to challenge the classification of information at DOD and State; and (2) the processes that Members of Congress can use to challenge the classification of information at DOD and State. GAO reviewed applicable laws and regulations, and DOD, State, and other guidance related to the classification of information and classification challenge processes. GAO also interviewed DOD, State and ISOO officials. For more information, contact Joe Kirschbaum at (202) 512-9971 or Kirschbaumj@gao.gov.
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    According to estimates from Department of Defense (DOD) survey data, roughly one-quarter of military spouses who were in the workforce and in career fields that required credentials (state licenses or certifications) were unemployed in 2017. In that same year, about one-quarter of spouses who were employed in credentialed career fields were working outside their area of expertise, and about one in seven were working part-time due to a lack of full-time opportunities—two potential indicators of underemployment. Employment outcomes for military spouses may also vary due to other factors, including their partner's rank and frequent moves, according to DOD survey data and GAO's literature review. In February 2020, the Defense State Liaison Office, which works on key issues affecting military families, assessed states' use of best practices that help military spouses transfer occupational licenses. For example, the Liaison Office found that 34 states could increase their use of interstate compacts, which allow spouses in certain career fields, such as nursing, to work in multiple states without relicensing (see figure). However, the Liaison Office does not plan to continue these assessments, or assess whether states' efforts are improving spouses' experiences with transferring licenses. As a result, DOD may not have up-to-date information on states' actions that help spouses transfer their licenses and maintain employment. Assessment by the Defense State Liaison Office of Number of States Using Interstate Compacts to Improve Military Spouse Employment DOD and the military services use a range of virtual and in-person outreach to promote awareness of employment resources among military spouses. For example, officials GAO interviewed at installations said they promoted resources through social media and at orientation briefings. Nonetheless, GAO found that inconsistent information sharing across DOD and with external stakeholders who help spouses with employment hindered the effectiveness of outreach. For instance, officials from two services said they do not have methods to regularly exchange outreach best practices or challenges, while officials from another service said they have quarterly staff calls to share lessons learned. Without strategies for sharing information among internal and external stakeholders, DOD may miss opportunities to increase spouses' awareness of available resources, and improve their employment opportunities. There were over 605,000 spouses of active duty servicemembers in the U.S. military as of 2018. These spouses may face conditions associated with the military lifestyle that make it challenging to start or maintain a career, including frequent moves and difficulties transferring occupational licenses. House Armed Services Committee Report 116-120 accompanying the National Defense Authorization Act for Fiscal Year 2020 included a provision for GAO to review several matters related to military spouse employment. This report examines (1) selected employment outcomes for military spouses, (2) DOD's efforts to evaluate states' licensing policies for spouses, and (3) DOD's outreach efforts to promote awareness of employment resources. GAO reviewed DOD documentation and 2017 survey data (most recent available), relevant literature, and federal laws; interviewed DOD and military services officials and relevant stakeholders; and spoke with staff at six military installations selected based on the numbers of servicemembers, among other factors. GAO is making two recommendations to DOD to continue assessing and reporting on states' efforts to help military spouses transfer occupational licenses, and to establish information sharing strategies on outreach to military spouses about employment resources. DOD concurred with both recommendations. For more information, contact Elizabeth Curda at (202) 512-7215 or curdae@gao.gov.
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    In U.S GAO News
    The efforts of selected agencies to plan for disaster contracting activities and assess contracting workforce needs varied. The U.S. Forest Service initiated efforts to address its disaster response contracting workforce needs while three agencies—the U.S. Army Corps of Engineers (USACE), the U.S. Coast Guard, and Department of the Interior (DOI)—partially addressed these needs. The Environmental Protection Agency indicated it did not have concerns fulfilling its disaster contracting responsibilities. Specifically, GAO found the following: USACE assigned clear roles and responsibilities for disaster response contracting activities, but has not formally assessed its contracting workforce to determine if it can fulfill these roles. The Coast Guard has a process to assess its workforce needs, but it does not account for contracting for disaster response activities. DOI is developing a strategic acquisition plan and additional guidance for its bureaus on how to structure their contracting functions, but currently does not account for disaster contracting responsibilities. Contracting officials at all three of these agencies identified challenges executing their regular responsibilities along with their disaster-related responsibilities during the 2017 and 2018 hurricane and wildfire seasons. For example, Coast Guard contracting officials stated they have fallen increasingly behind since 2017 and that future disaster response missions would not be sustainable with their current workforce. GAO's strategic workforce planning principles call for agencies to determine the critical skills and competencies needed to achieve future programmatic results. Without accounting for disaster response contracting activities in workforce planning, these agencies are missing opportunities to ensure their contracting workforces are equipped to respond to future disasters. The five agencies GAO reviewed from above, as well as the Federal Emergency Management Agency (FEMA), collectively spent more than $20 million for 2017 and 2018 disaster response activities using purchase cards. GAO found that two of these six agencies—Forest Service and EPA—have not completed fraud risk profiles for their purchase card programs that align with leading practices in GAO's Fraud Risk Framework. Additionally, five of the six agencies have not assessed or documented how their fraud risk for purchase card use might differ in a disaster response environment. DOI completed such an assessment during the course of our review. An Office of Management and Budget memorandum requires agencies to complete risk profiles for their purchase card programs that include fraud risk. GAO's Fraud Risk Framework states managers should assess fraud risk regularly and document those assessments in risk profiles. The framework also states that risk profiles may differ in the context of disaster response when managers may have a higher fraud risk tolerance since individuals in these environments have an urgent need for products and services. Without assessing fraud risk for purchase card programs or how risk may change in a disaster response environment, agencies may not design or implement effective internal controls, such as search criteria to identify fraudulent transactions. The 2017 and 2018 hurricanes and California wildfires affected millions of people and caused billions of dollars in damages. Extreme weather events are expected to become more frequent and intense due to climate change. Federal contracts for goods and services play a key role in disaster response and recovery, and government purchase cards can be used by agency staff to buy needed items. GAO was asked to review federal response and recovery efforts related to recent disasters. This report examines the extent to which selected agencies planned for their disaster response contracting activities, assessed their contracting workforce needs, and assessed the fraud risk related to their use of purchase cards for disaster response. GAO selected six agencies based on contract obligations for 2017 and 2018 disasters; analyzed federal procurement and agency data; reviewed agencies' policies on workforce planning, purchase card use, and fraud risk; and analyzed purchase card data. FEMA was not included in the examination of workforce planning due to prior GAO work. GAO is making 12 recommendations, including to three agencies to assess disaster response contracting needs in workforce planning, and to five agencies to assess fraud risk for purchase card use in support of disaster response. For more information, contact Marie A. Mak at (202) 512-4841 or makm@gao.gov.
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    Office of the [Read More…]
  • On the Passing of Former Marshallese President Litokwa Tomeing
    In Crime Control and Security News
    Michael R. Pompeo, [Read More…]
  • Secretary Blinken’s Call with PRC Director Yang
    In Crime Control and Security News
    Office of the [Read More…]
  • The United States and Japan Expand Indo-Pacific Economic Cooperation
    In Crime Control and Security News
    Office of the [Read More…]
  • Covid-19: Data Quality and Considerations for Modeling and Analysis
    In U.S GAO News
    The rapid spread and magnitude of the COVID-19 pandemic have underscored the importance of having quality data, analyses, and models describing the potential trajectory of COVID-19 to help understand the effects of the disease in the U.S. The Centers for Disease Control and Prevention (CDC) is using multiple surveillance systems to collect data on COVID-19 in the U.S. in collaboration with state, local, and academic and other partners. The data from these surveillance systems can be useful for understanding the disease, but decision makers and analysts must understand their limitations in order to interpret them properly. For example, surveillance data on the number of reported COVID-19 cases are incomplete for a number of reasons, and they are an undercount the true number of cases, according to CDC and others. There are multiple approaches to analyzing COVID-19 data that yield different insights. For example, some approaches can help compare the effects of the disease across population groups. Additional analytical approaches can help to address incomplete and inconsistent reporting of COVID-19 deaths as well. For example, analysts can examine the number of deaths beyond what would normally be expected in the absence of the pandemic. Examining higher-than-expected deaths from all causes helps to address limitations in the reporting of COVID-19 deaths because the number of total deaths is likely more accurate than the numbers of deaths from specific causes. The figure below shows actual deaths from the weeks ending January 1 through June 27, 2020, based on data from CDC’s National Center for Health Statistics, compared with the expected deaths based on prior years’ data. Deaths that exceeded this threshold starting in late March are considered excess deaths that may be related to the COVID-19 pandemic. Higher-Than-Expected Weekly Mortality for 2020, as of July 14, 2020 Analysts have used several forecasting models to predict the spread of COVID-19, and understanding these models requires understanding their purpose and limitations. For example, some models attempt to predict the effects of various interventions, whereas other models attempt to forecast the number of cases based on current data. At the beginning of an outbreak, such predictions are less likely to be accurate, but accuracy can improve as the disease becomes better understood. The COVID-19 pandemic has resulted in significant loss of life and profoundly disrupted the U.S. economy and society, and the Congress has taken action to support a multifaceted federal response on an unprecedented scale. It is important for decision makers to understand the limitations of COVID-19 data, and the uses and limitations of various methods of analyzing and interpreting those data. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) includes a provision for GAO to, in general, conduct monitoring and oversight of the authorities and funding provided to address the COVID-19 pandemic and the effect of the pandemic on the health, economy, and public and private institutions of the U.S. This technology assessment examines (1) collection methods and limitations of COVID-19 surveillance data reported by CDC, (2) approaches for analyzing COVID-19 data, and (3) uses and limitations of forecast modeling for understanding of COVID-19. In conducting this assessment, GAO obtained publicly available information from CDC and state health departments, among other sources, and reviewed relevant peer reviewed and preprint (non-peer-reviewed) literature, as well as published technical data on specific models. For more information, contact Timothy M. Persons, PhD at (202) 512-6888 or PersonsT@gao.gov, SaraAnn Moessbauer at (202) 512-4943, or MoessbauerS@gao.gov, or Mary Denigan-Macauley, PhD at (202) 512-7114 or DeniganMacauleyM@gao.gov.
    [Read More…]
  • Assistant Attorney General Makan Delrahim Announces Re-Organization of the Antitrust Division’s Civil Enforcement Program
    In Crime News
    The Department of Justice’s Antitrust Division announced today that it is creating the Office of Decree Enforcement and Compliance and a Civil Conduct Task Force.  Additionally, it will redistribute matters among its six civil sections in order to build expertise based on current trends in the economy.
    [Read More…]
  • Submission to Congress of the Executive Summary of the Report on Adherence to and Compliance with Arms Control, Nonproliferation, and Disarmament Agreements and Commitments (Compliance Report)
    In Crime Control and Security News
    Office of the [Read More…]
  • Justice Department Reaches Major Olmstead Settlement Agreement with North Dakota
    In Crime News
    The Justice Department today announced a settlement agreement with the State of North Dakota under the Americans with Disabilities Act (ADA). The agreement resolves complaints alleging that North Dakota unnecessarily institutionalizes individuals with disabilities in nursing facilities, instead of providing them the services they need to live in the community.
    [Read More…]
  • Qatar Travel Advisory
    In Travel
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  • Utah Man Posing As Medical Doctor To Sell Baseless Coronavirus Cure Indicted On Fraud Charges
    In Crime News
    Utah resident Gordon H. Pedersen has been indicted for posing as a medical doctor to sell a baseless treatment for coronavirus (COVID-19). According to the indictment returned by a federal grand jury in Salt Lake City late last week, Pedersen fraudulently promoted and sold ingestible silver-based products as a cure for COVID-19 despite having no evidence that his products could treat or cure the disease. Pedersen is also alleged to have claimed to be a physician and worn a stethoscope and white lab coat in videos and photos posted on the Internet to further his alleged fraud scheme.
    [Read More…]
  • Texas Woman Charged with Fraudulently Obtaining Nearly $2 Million in COVID Relief Funds
    In Crime News
    A Texas woman has been taken into custody on allegations she fraudulently obtained more than $1.9 million in Paycheck Protection Program (PPP) loans, announced Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division and U.S. Attorney Ryan K. Patrick of the Southern District of Texas.
    [Read More…]