ML20035A247
| ML20035A247 | |
| Person / Time | |
|---|---|
| Issue date: | 09/30/1992 |
| From: | David Williams NRC OFFICE OF THE INSPECTOR GENERAL (OIG) |
| To: | |
| References | |
| NUREG-BR-0147, NUREG-BR-147, NUDOCS 9303250049 | |
| Download: ML20035A247 (16) | |
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U.S. Nuclear Regulatory Commission Office of The Irispector General
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David C. Williams Inspector General
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September 1992 f
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i FraudAn arcrucss k
. CONTENTS i
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INTRODUCTION...
1 OFFICE OF 71IE INSPECTOR GENERAL...........
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RECOGNIZING FRAUD...
3 Specific Indicators.......
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Common Fraud Schemes 4
PROSECUTING FRAUD..........
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Criminal Penalties.....
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t Civil. Contractual, and Administrative Penalties...........
10 REPORTING FR AUD...............................
13 Employee Reporting Obligations....
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Fraud Awareness l
INTRODUCHON t
j Fraud wastes valuable funding and other resources; it also threatens successful achievement of U.S. Nuclear Regulatory Commission's (NRC's) mission of protecting the public health and safety.
t NRC contractors perform critical technical and administrative services and provide essential supplies. These contractors are paid mi!! ions of dollars annually. Derefore, each of us, as an NRC employee and taxpayer, has a i
direct interest in the value NRC receives from its contracts. To a certain l
degrec, NRC must rely on cach contractor to provide the high-quality product i
or service for which NRC contracted. NRC employees must, however, maintain constant vigilance and demand the highest standards of integrity s
from contractors dealing with this agency. Mischarging of costs, kickbacks, y
substitution of infenor products. and other schemes that have plagued other agencies must alert cach of us to be aware of and to prevent instances of contract fraud at NRC.
Our interest is in avoidmg fraud belore it occurs. To succeed, we need the cooperation of all NR C employees and managers, as wcll as NRC contractors.
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l'raud it wareness Franditwarcncss OFFICE OF TIIE INSPECTOlt GENEllAL ItECOGNIZING FitAUD
'Ihc Inspector General Act of 1978, as amended in 1988, states that one of the Some factors may indicate the pr esence of, or enhanced potential for, fraud at reasons for establishing the Office of the inspector General (OIG)is various stages in t he procurement process. These indicators are not intended, cach taken by itself, to establish the existence of fraud. Rather, any of the to provide leadership and coordination.
for activitics indicators, when taken in the context of a particular procurement action, designed...-(a) to promote economy, cfficiency, and effectiveness should alert NRC cmployces to the possibility of impropriety and to the need
.. and (b)... to prevent and detect fraud and abuse.
to take appropriate actions to ensure the integrity of the process.
1hc purpose of the NRC OIG Fraud Awareness Pregram is to educate you The motives for committing fraud in the contract award process are varied.
about contract fraud laws and regulations, inform you of common schemes There are many instances of fraud being perpetrated to obtain a contract in used to perpetrate fraud, and advise you of reporting obligations so that you order to create the opportunity to later engage in such activitics as theft or can fulfill your obligations a; a Government employce.
embezzicment, substitution of pn) ducts, mischarging of costs, er progress payment fraud. Some contractors commit fraud to obtain a contract at a
'ihe O!G staff has prepared this brochure as part of its ongoing efforts to higher price or one with better terms than those in an award untainted by educate, inform, and support you, the NRC empkiyce, in preventing and fraud. Still others commit fraud to obtain Government contracts because they detecting fraud and abuse.
need the business to keep their companics in operation when activity in the private sector is low.
Another factor to be considered is that fraud is sometimes committed by, or with the assistance of, Government employees. The possibility should not be ovcihicked that a Government employee has solicited or accepted bribes or -
gratuities or has a financial interest in a contractor. In some instances, agency employees have created or become partncts in outside businesses for the sole.
purpose of committing fraud through their ability to affect or manipulate the award process.
Specific Indicators When a contractor routinely ships NRC more items than the contract called for t
substitutes another item for an item specified in the contract When an NRC employec declares serviceable items as surplus and then repurchases similar items maintains high inventories to justify purchasing items from certain vendors purchases items in response to marketing efforts by ccmtractors instead of valid requirements 2
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Fraud Awarcness Fraud Awarcncss unnecessarily awards " sole source" contracts or fails to distortion of the overhead accounts or overhead bases by develop "second sources" for items or both transferring charges or accounts that have a material impact on Government contracts specifics needs improperly in ways that can be met only by failure to correct known system deficiencies that lead to defective certain contractors a
pticing establishes prequalification standards in specifications that unnecessartly exclude othenvisc qualified contractors protracted delay in releasing data to the Govertiment to preclude possible price reductions agrees to amend contracts to increase the price immediately after the contract is signed repeated denial by responsible contractor employces of the existence of historical records that are subsequently found provides contractors with advance "inside" information Substitution of Products uses srnall-purchase procedures to avoid contract-review procedures In this scheme, a contractor ccrtifics that goods or services are being provided in accordance with contract specifications when, in t cality, the contractor has Common Frauti Schemes provided a substitute or inferior product. NRC contracting procedures allow for changes in performance only with the knowledge and prior approval of the Defectisc psicing contracting officer. A unilateral decision by a contractor to change performance and falsify contract certifications can lead to criminal liability.
In this scheme, when negotiating the price of a contract or contract modification, the contractor falsely certifics to NRC that the amount the Indicators - Some of the indicators of, and conditions conducive to, product contractor will pay for materials or serviccs to be used in the performance of substitution arc a contractor's unauthorited quality assurance practices, a the wntract is based on accurate, complete, and current cost or pricing data.
history of poor performance by the contractor, negative preaward survey, awards to unusually low bidders, misuse of fast pay contracts, reliance of la.umjVei,ontractor certifies to NRC that its contract price is based on a cost Government quality assurance representatives on documentation falsified by of materials of $100,000, when it knows that it will pay only $70,000, a contractor, and inadequate Government quality assurance practices.
NRC protects itself from defective pricing through the use of solicitation and Mischarging of Costs contract clauses. In addition to the statutory requirements of the Truth in Negotiations Act (Section 2306 of Title 10 of the U.S. Code [U.S.C.]). Fedcral In this scheme, costs are charged improperly to NRC cost-type contracts; for Acqmsition Regulation (FAR) 15 gives cost and pricing data requirements. If cxample, charges are switched from commercial contracts to NRC contracts, the contractor's certification is false, fictitious, or fraudulent, it may be a or cost overruns from one Government contract are charged to other violation of criminal law as well as a violation of the contract.
Government contracts.
I Indicators-Some of the most significant indicators are the following:
l FAR 31-205 provides specific guidance on allowabic and unallowabic costs.
Mischarges on cost reimbursement contracts can be accounting, material indications that supperting data were falsified or altered costs, or labor mischarges or all three.
e failure to update the cost or pricing data even though it is known Kickbacks e
from current activity that costs or prices have decreased Payments made for the purpose of improperly obtaining or rewarding failure by responsible contractor employees to disclose known data favorable treatment in relation to a Government contract ecmstitute a a
completely kickback. Although they are similar in many ways to the bribing of a 4
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- Fraud Awareness Fraud Awareness i
i Government official, kickbacks, until recently, had not been the focus of equal to three times the amount of the bribe, whichever is greater. I or violation of conflict of interest statutes,18 U.S.C. 9 208 provides for a public attention and little had been donc to address the problem.
Congress enhanced the original 1946 kickback statute in 1986 (see 41 U.S.C.
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ll 51-58) to make it illegal for any person to provide, attempt to provide, or j
Under 18 U.S.C. 9 218, the Government can rescind any contract involving a r
offer any kickback to a Government contractoror contractor employee for the I
conviction for giving or rccciving a bribe or a gratuity or for engaging in an purpose of improperly obtaining any favorable treatment under a activity that results in a conflict of interest. NltC includes a clause in most of -
its contracts and agreements that prohibits the provision of gratuitics in -
Government contract. The prohibition covers any tuoney, commission, gratuity, or any ot!.cr thing of value, whether provided directly or indircctly, connection with an NitC centract. If it is proven that a contractor offered or and applies equally to persons who solicit, accept, or attempt to accept gave a gratuity, NitC can terminate the contract for default.
kickbacks. The legislation further prohibits the inclusion cf any kickback t
amounts in the contract price charged by a contractor, i
y In addition to criminal penaltics, which include imprisonment for up to 10 years, the legislation also provides for civil action and administrative offsets when kickbacks are involved. In~a civil action, the Government may recover a penalty of twice the amount of the kickback plus $10,000 for cach kickback i
payment. 'the Government contracting officer may also administratively offset the amount of any kickback against any moneys owed by the Government under the contract.
Ihibes, Gratuitics, or Conflicts of Interest Statutes prohibit a broad range of activitics that can be described generally as corruption.'lhese activitics include giving or receiving a bribe or gratuity, as well as engaging in an activity that results in a conflict of interest.
A bribe is something of value given to a Government employee for the purpose of improperly influencing the performance of an
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official duty.
j A gratuity is something of value improperly given to a Government e
7 cmployee because of his or her official position. 'Ihcre is no
,J requirement for the Government to prove that the gratuity was
. given for the purpose of influencing any official act, A conflict of interest arises when a Government employee engages
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e in activities that create a conflict between his or her personal h
interests and his or her duty to protect and serve theinterests of the y?
Government or that create the appearance of favoritism or the use of public office for private gain.
Penaltics for bribes and gratuitics, as provided for in 18 U.S.C. ) 201, include a
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maximum penalty of 15 years' imprisonment and a fine of up to $20,000 or one l
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Fraud Awareness Fraud Awarcness l'ItOSECUTING FilAUD Thus, two or more persons agreeing to submit a fraudulent contract invoice could be prosecuted for making a false statement, filing a Con t ract fraud as a spec fic offense is not defined in t he U.S. Code. In addition false claim, and conspiring to defraud the Government.
to the types of fraud covered by the statutes enumcrated below,it is important to recognize fraud in its broad context. Fraud is characterited by acts of guile, Conspiracy With Regard to Claims (13 U.S.C.
286)~Under this deccit, trickery, concealment, or breach of confidence that are committed to statute, it is illegal to agree with another person to take joint action gain some unfair er dishonest advantage. 'lhe objective may be to obtain to submit a false claim.
money, property. or scrvices; to avoid the payment or loss of money, property, or services: or to secure business or personal advantage. Fraud may occur at Thus, a contractor who agreed with a subordinate to falsify the any stage of the Government centracting process. As discussed in the contractor's costs in a cost-plus contract would have entered into a following sections, it may incur criminal, civil, contract ual, and administrative conspiracy with regard to a claim.
penaltics.
Mail and Wire Fraud (18 U.S C. %} 1311 and 1313)~Under thesc statutes, it is illegal to use the mail or telephonc lines, including' C,r.iminal i,enall.ies telephonc lines to transmit facsimile or computer data, to commit Criminal penalties are avaiIabic to punish contractors and Government fraud.
emplo)ces who commit fraud. Statutes that generally address acts of criminal
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di k dh mem invoice to an fraud in the contract process include the following:
agency of ficial for reimbursement could be pr osecuted for making a Fahe Starcments (18 U S C. % 1001).Ilu.s statute renders the willful false statement, filing a false claim, and committing mail fraud.
making of an untrue official statement a comc*
Wire fraud would be implicated if the telephone were used or if the informtion were transmitted through a computer modem.
Thus, a contractor could be prosecuted for this type of fraud for Theft and Embm/cment (Is U.S C. Q 611)-Under this statute,it is making an untrue statement on a financial disclosure form or on an illegal to stcal, to embcule, or to retain something stolen from the application for a Government entitlement program or for any form Government.
of payment.
Thus, a contractor who retained money improperly could bc False Claims (18 U.SC.
287)-Under this statute, it is illegal to prosecuted for embculement.
knowingly submit a claim to the Government for money that is undeserved.
Computer 1+aud (18 U.S C.
j 10301-Under this statute, unauthorized access to a Government computer is illegal as is Thus, a contractor making an untrue statement on an invoice could access without authorization to obtain financial information, affect be prosecuted for making a false statement and filing a falsc claim.
Government operations, defraud the Government, or bencfit a foreign nation or injure the United States.
Convitacy To I)cfraud (18 U.S.C. g 371)-Under this statute, it is illecal to' agree with another person, or to take joint action, to
.lhus, a contractor filing a false claim by accessing a Government deffaud the Government database could be prosecuted for making a false statement, fihng a false claim, and committing wire fraud and computer fraud. If two A conspiracy is defined as two or more persons agr ceing to cornmit or m rc pers ns were involved, prosecution for conspiracy could a crime. Society views conspiracy with contempt because it also be possibic, generally believes that two or more persons working together are more harmful than one and because a conspirator, by definition, Obstruction of Audit (18 U.XC. & 1516)-Under this statute, it is must have planned or " premeditated' the crime.
llegal to influence. obstruct, or impede a Federal auditor to deceive or defraud the Government.
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Fraud Awarcncss FraudAwareness
'lhus, a contractor who destroyed evidence er prevented auditors Other sanctions arc imposed by agency officials under administrative from doing their work might be unlawfully obstructing an audit if iegulations. For exampic, under contract law and principles, the Government the intent was to deceive or defraud the Govcinment.
has the right to insist on certain standards of tesponsibih:y and business integrity from its contractorsflhe violation of any of those laws or principles N'S ""' ""* """'"I l h' 'I hl '" '"k V"TIClY "I "i""S-U Civil, Cimtractual, and Adininistrative l'eaalties Statutes and regulations that address civil, contractual, and administrative Cisii, contractual, and administrative penaltics are avad. ble to recover money a
penaltics include the following:
lost on contract fraud schemes and to protect the Government from nonrcsponsible contractors. Disciplinary actions (removal, suspension-Civil Adse Claims Act (31 US C. % 3729) 'the submission of a false demotion, or reassignment) ngainst Government employees who commit claim to the Government can make a contractor liab!c to the fraud or who cellude with contractors in fraudulent conduct may also bc taken. Imposition of these penaltics does not require the level of proef Government.both eriminally and civdly.'t he Civil Falsc Claims Act establishes liability for false claims. It stipulates that the needed to support a criminal conviction. Actions may be taken even if there is never a criminal prosecution for fraud.
Government can take action to recover penaltics and damages for false claims in addition to, or instead of, resorting to criminal s,metions. 'through such actions, the Government can recover It is important to be aware that the decision not to prosecute cnminally is not assets lost throug'h fraud.
always based on failure to cotablish that wrongdoing has occuned.
'lhe act, as amended, provides for penaltics of up to $10,000 plus In some instances, investigators have suff cient evidence that a crime three times the amount of damages sustained by the Government occurred, but the circumstances do not warrant taking judicial action. If the for each false claim. I!ach mvoice submitted by a contractor could, Depar t ment of Justice (DOJ) declines to prosecute, managers and under appropriate circumstances, be considered a false claim for contracting officials should consider the facts the investigator has gathered to purposes of the act.
determine if alternative action is warranted.
Program Fraud Civil Remedics Act (31 U.S.C. b JS01) *lhis act in evaluating administrative penaltics, officials should be mindful that one of allows Federal agencies to impose administrative penaltics and the functions of the criminaljustice system is not the recoupment of assetslost damages for false claims and false statements if the damages sought as a result of fraud or the protection of the procurement system from future are less than $150,000 NRC has established administrative dealings with contractors who practice deception. Although a contractor procedures to im 31cment the provisions of this act (see Part 13 of might be convicted of, or plead guilty to, a crime, this does not, without action Title 10 of the Code ofFcdcralRcgidatiems [CFR])Jihe act provides by contracting officials, prevent the contractor from obtaining future for a penalty of up to $5,000 for cach false claim or false statement, contracts or allow the agency to recoup moneys paid to the contractor as a Damages for false claims may be assessed at doubic the amount of result of fraud or to obtain the desired er intended performance under the the provabic loss.
cont ract.
Contract Disputes Art (11 U.S.C. k 6011-Under this act, a Fmally, it is necessary for managers and contracting officials to be aware of contractor is liabic to the Government for the amount of any and to use the civil, administrative, and contmetual powers and penaltics unsupported part of a claim plus the costs of reviewing the claim if available to prevent further loss to the Government and to recover the claim is based even in part on fraud or misrepresentation of fact.
Govetnment assets and funds lost through fraud.
'Ihc Government does not have to pay the claim in order to recover damages.
'the Government has the right to take action against contractors who engage in fraudulent activitics. Ihis right is based on several statutory grounds. Some Forfeiture of Fraudulent Claims (2S U.S.C. Q 2514)-Under this e
of the civil actions based on those statutes are filed by the DOJ and may be statute, the U.S. Court of Claims can order the forfeiture of the ided in conjunction with, after, or instead of a criminal prosecution, entire amount of a clann m, which it Judges the proof, statement, 10 II
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FrauJ Awareness I rauJ <1wareness establishment, or allowance thereof is based on fraud or aticmpted 11EI'OllTING FRAUD fraud by a contractor.
Pnwurement integnty Act (41 U.S.C.1423) 'Ihis act provides for penaltics against Governrnent employees and contractors for
'Ihc provisions of 10 CFit 0.735-3 require that directors of offices improper negotiation of cmployment, offering or accepting of and divisions report to the OIG "all wmplaints concerning fraud, gratuitics, or du. closure of proprietary information during a graft. corruption, diversion of NitC assets by NIIC emphiyces or pr ocurement. Violation may result in criminal conviction, contractors, and misconduct of NitC employces.."
administrative actions, and civil penalties including fines up to
$100.000 for individuals and $ 1,000,000 for contractor companics, Iteports of alleged violations are preferably submitted in writing to e
the OlG. NitC cmployces may make such reports either through Terminationfor Default "Ihc making of a false claim or statement their office director or directly to the OIG.
e in a contract is evidence of a contractor's nonresponsibihty. As lie wary of contractors who attempt to " buy" NitC business.
provided fer in FAlt 52.249, the contracting officer may terminate a e
contract for default under these circumstances.
Acceptance of even small favors by employces could result in an Fmdings of NonrespoInsibility-VAlt 9.1 requires contractors to e
demonstrate affirmatively their responsibility, including a
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e if you believe a contractor or any other person is offering you a satisfactory record ofintegrity and business ethics. Any evidence of bnbe, notify the OIG immediately. Immediate reportmg is fraud by a contractor is clearly a matter that contractin{; officers j
important for the following reasons:
should consider in making responsibility determinations.
i An attempt to bribe a Government official is itself a crime.
Suspension und Dcbarment-Contractors may be precluded from doing business with the Government for the commission of fraud or Contractors whose babc is rejected will sometimes falsely fo* various other actions indicating a lack of business integrity.The report that the empicycc " solicited" a bribe.
procedures for suspending and debarring contractors are given in Fall 9.4 and 48 CFil Chapter 20.
Itefusal to accept a bribe,in itself, has no deterrent effect.
f NRC OlG llotlinc l
'Ihc O1G Ilottine number is 1-800-233-3497.
Anyone having knowledge of fraud, waste, or abuse may call anonymously anytime.
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