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Shocking Report Reveals the Pentagon's Addiction to Fraudulent Contractors | The Nation

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George Zornick

George Zornick

Action and dysfunction in the Beltway swamp. E-mail tips to george@thenation.com

Shocking Report Reveals the Pentagon's Addiction to Fraudulent Contractors

How often does the Pentagon award contracts to defense companies that have already been proven to be defrauding taxpayers? A report the Department of Defense did at the request of Senator Bernie Sanders (I-VT) reveals an answer that should make Washington very uncomfortable.

The report, released today, showed that hundreds of defense contractors found guilty of civil fraud received more than $1.1 trillion in defense contracts since 2001. The study took into account only companies that were found to have defrauded taxpayers of more than $1 million dollars.

More than $573 billion went directly to companies that were guilty of defrauding taxpayers, and when you factor in the awards that went to the parent companies of those contractors, the total is $1.1 trillion. Of that $573 billion, more than two-thirds—$398 billion—went to companies after they had been found guilty of fraud.

Companies convicted of “hard-core criminal fraud” received $255 million in contracts, $33 million of it after conviction.

Some of the country’s biggest defense contractors were implicated. “The ugly truth is that virtually all of the major defense contractors in this country for years have been engaged in systemic fraudulent behavior, while receiving hundreds of billions of dollars of taxpayer money,” said Sanders. According to the report:

Lockheed Martin in 2008 paid $10.5 million to settle charges that it defrauded the government by submitting false invoices on a multi-billion dollar contract connected to the Titan IV space launch vehicle program. That didn’t seem to sour the relationship between Lockheed and the Defense Department, which gave Lockheed $30.2 billion in contracts in fiscal year 2009, more than ever before.

In another case, Northrop Grumman paid $62 million in 2005 to settle charges that it “engaged in a fraud scheme by routinely submitting false contract proposals,” and “concealed basic problems in its handling of inventory, scrap and attrition.” Despite the serious charges of pervasive and repeated fraud, Northrop Grumman received $12.9 billion in contracts the next year, 16 percent more than the year before.

The report comes at a crucial time, as the Congressional supercommittee debating $1.2 trillion in deficit reduction is at least theoretically going to be looking at cuts to the Defense Department—and if they cannot agree, which seems increasingly likely, triggers will take half of that amount from defense spending.

Many Republicans are strongly opposed to any cuts—Senator Jon Kyl (R-AZ), a member of the panel, even threatened to quit if significant defense cuts were made. Senator John McCain (R-AZ) has already said he would try to undo any defense cuts if the trigger is hit.

Last week, Secretary of Defense Leon Panetta testified before Congress that if the trigger is hit and that amount is cut from military spending, “it’ll truly devastate our national defense.” As I noted, Panetta said President Obama agreed with him—a comment the White House has not yet corrected.

This stance is ludicrous giving the sheer amount of waste at the Pentagon. The military’s own auditors have admitted that it cannot track 25 percent of the money it spends—in 2010, that would amount to $165.95 billion. For perspective, the entire budget of the State Department last year was $27.4 billion.

The report commissioned by Sanders offers a grim accounting of how a lot of money can be wasted—by continuing to pay companies that have brazenly been ripping off the government for years. Battling that waste seems like a prime target for any legislators truly concerned with the country’s debt.

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