OBO's Security Contractor Settles Civil and Criminal Fraud Claims

Add inside info and cash, mix well, enjoy

That scheme to sell soy protein shakes to embassy construction site security guards which got a couple of my good friends in OBO prosecuted (here) makes more sense now.

Diplopundit has posted news of a settlement between the U.S. government and Coastal International Security, an OBO contractor for site security personnel, in which we learn that the contractor was obtaining inside information on its competitor's bids and pricing at the same time it was helping its OBO program manager - one of the people who oversaw Coastal International Security's contract - to defraud the government in his own, separate, tasty and nutritious conspiracy.

Details are in DOJ's press release, State Department Contractor to Pay $1.65 Million to Resolve Criminal and Civil Fraud Allegations:

Coastal International Security, Inc., based in Upper Marlboro, Maryland, agreed to pay a total of $1.65 million to resolve criminal and civil allegations that the company defrauded the State Department during performance of a security contract and later concealed the fraud from contracting officials, and civil allegations that the company improperly obtained and used competitors’ pricing information to underbid competitors on government task orders.

The government’s investigation focused on the relationship between Marvin Hulsey, a former program manager for Coastal International Security, and Tony Chandler, a former contracting official of the State Department. According to court documents, Hulsey and Chandler conspired together to submit false invoices to the State Department for unallowable costs of nutritional supplements. Chandler, as an authorized distributor of the nutritional supplements, received commissions from the approximate $170,000 in fraudulent nutritional supplement billings. Independent of this scheme, Hulsey admitted to causing approximately $140,000 in additional fraudulent billings through a company owned by his wife.

-- snip --

Coastal International Security simultaneously agreed to pay $1.5 million to resolve civil claims under the False Claims Act for the above conduct, as well as claims under the Procurement Integrity Act arising out of Coastal International Security’s knowledge and use of a competitor’s publicly unavailable bid proposal information. The competitor’s information allegedly enabled Coastal International Security to underbid the competition on bids that Coastal International Security made between Nov. 4, 2008, and Oct. 7, 2011, in connection with various Department of State task orders.

So, Chandler made a comparatively small score by allowing Coastal International Security to bill the government for nutritional supplements that he sold to their employees. Meanwhile, Coastal, which now had a lock on Chandler, used it to obtain inside information with which it could make a much larger score by underbidding its competitors.

The whole story is way more depressing than when I thought it was merely a pyramid scheme run amok.