[NYTr] Corruption: Pentagon Paid $998, 798 to Ship Two 19-Cent Washers

[All the News That Doesn't Fit]

Bloomberg - Aug 16, 2007
http://www.bloomberg.com/apps/news?pid=20601070&sid=aY5OQ5xv9HR8&refer=home

Pentagon Paid $998,798 to Ship Two 19-Cent Washers

By Tony Capaccio

Aug. 16 (Bloomberg) -- A small South Carolina parts supplier collected
about $20.5 million over six years from the Pentagon for fraudulent
shipping costs, including $998,798 for sending two 19-cent washers to
an Army base in Texas, U.S. officials said.

The company also billed and was paid $455,009 to ship three machine
screws costing $1.31 each to Marines in Habbaniyah, Iraq, and $293,451
to ship an 89-cent split washer to Patrick Air Force Base in Cape
Canaveral, Florida, Pentagon records show.

The owners of C&D Distributors in Lexington, South Carolina -- twin
sisters -- exploited a flaw in an automated Defense Department
purchasing system: bills for shipping to combat areas or U.S. bases
that were labeled ``priority'' were usually paid automatically, said
Cynthia Stroot, a Pentagon investigator.

C&D and two of its officials were barred in December from receiving
federal contracts. Today, a federal judge in Columbia, South Carolina,
accepted the guilty plea of the company and one sister, Charlene
Corley, to one count of conspiracy to commit wire fraud and one count
of conspiracy to launder money, Assistant U.S. Attorney Kevin McDonald
said.

Corley, 46, was fined $750,000. She faces a maximum prison sentence of
20 years on each count and will be sentenced soon, McDonald said in a
telephone interview from Columbia. Stroot said her sibling died last
year.

Corley didn't immediately return a phone message left on her answering
machine at her office in Lexington. Her attorney, Gregory Harris,
didn't immediately return a phone call placed to his office in Columbia.

`Got More Aggressive'

C&D's fraudulent billing started in 2000, Stroot, the Defense Criminal
Investigative Service's chief agent in Raleigh, North Carolina, said in
an interview. ``As time went on they got more aggressive in the amounts
they put in.''

The price the military paid for each item shipped rarely reached $100
and totaled just $68,000 over the six years in contrast to the $20.5
million paid for shipping, she said.

``The majority, if not all of these parts, were going to high-priority,
conflict areas -- that's why they got paid,'' Stroot said. If the item
was earmarked ``priority,'' destined for the military in Iraq,
Afghanistan or certain other locations, ``there was no oversight.''

Scheme Detected

The scheme unraveled in September after a purchasing agent noticed a
bill for shipping two more 19-cent washers: $969,000. That order was
rejected and a review turned up the $998,798 payment earlier that month
for shipping two 19-cent washers to Fort Bliss, Texas, Stroot said.

The Pentagon's Defense Logistics Agency orders millions of parts a year.
``These shipping claims were processed automatically to streamline the
re-supply of items to combat troops in Iraq and Afghanistan,'' the
Justice Department said in a press release announcing today's verdict.

Stroot said the logistics agency and the Defense Finance and Accounting
Service, which pays contractors, have made major changes, including
thorough evaluations of the priciest shipping charges.

Dawn Dearden, a spokeswoman for the logistics agency, said finance and
procurement officials immediately examined all billing records. Stroot
said the review showed that fraudulent billing is ``not a widespread
problem.''

``C&D was a rogue contractor,'' Stroot said. While other questionable
billing has been uncovered, nothing came close to C&D's, she said. The
next-highest billing for questionable costs totaled $2 million, she
said.

Stroot said the Pentagon hopes to recoup most of the $20.5 million by
auctioning homes, beach property, jewelry and ``high- end automobiles''
that the sisters spent the money on.

``They took a lot of vacations,'' she said.