With this past weekend marking the four-year anniversary of Hurricane Katrina and all the stories of government contracting fraud that arose in its wake, The National Law Journal spoke with Greg Bingham, a vice president of the Kenrich Group, about the issues the government faces as it attempts to curtail such fraud. The Kenrich Group helps lawyers assess costs associated with government contracting fraud.
NLJ: With government contracting on the rise as part of the stimulus program, where are you seeing alleged fraud the most?
Bingham: A lot of it is coming from companies who are not used to fraud rules and regulations in government contracting. They see the stimulus funding and they say that they would like to do federal contracting as well, but they may not understand what the rules and regulations are. As such, my business is booming in advising them on how to bid on and perform government contracts.
NLJ: So what kinds of fraud are we talking about?
Bingham: Well, in general there are several types of fraud. You have procurement fraud, which is where I focus my business. But you also have public corruption, benefit fraud and identity theft. The latter three make great stories, so politicians often focus on those. But what the public doesn't realize is that those kinds of fraud don't usually involve a lot of money. Many politicians would vote to spend far more to address identity theft, benefit fraud, etc., than the government loses on those types of fraud.
NLJ: But what about procurement fraud?
Bingham: I do a lot of investigations into alleged procurement fraud, and in that area you see that there is a great deal of money involved. Under the False Claims Act, the Justice Department discloses how much money is recovered under the act each year. Last year, as of Sept. 30, 2008, the Justice Department had recovered $1.34 billion from procurement contracting fraud, primarily from health care contractors.
NLJ: With Katrina, were the reports of major fraud stemming from the government contracts issued in the aftermath accurate?
Bingham: For emergency-related contracting it wasn't that bad. Comparing it to non-emergency situations is an unfair standard. If you're not in a war zone or you’re not in a hurricane, it's a very different situation. In those kinds of instances, you're often in a situation where auditors come to you after the fact and say you didn't dot all of your Is or cross all of your Ts.
NLJ: What were the fraud issues that arose after Katrina?
Bingham: Most of the press was on [the Federal Emergency Management Agency].
But many of the issues arose from the states not being prepared to take the
money that was being sent by the government. It was things as simple as not
having a list of people to call after an emergency to clean up debris. Most of
the states affected by Katrina and Rita are better prepared for the next
hurricane, but the next emergency may not be a hurricane.
NLJ: What lessons should we take away from Hurricane Katrina?
Bingham: Both the public and private sector learned many hard lessons from Katrina. By and large, private industry today approaches government contracts in a very thoughtful and deliberate way. Smart businesses employ a bevy of counselors who are intimately familiar with contract language, complex accounting practices, compliance issues and other matters so trouble spots can be identified well in advance.
NLJ: What about in Iraq and Afghanistan? The issues with government contracting there must be quite different.
Bingham: Well first of all, doing contracting work there is very different than doing work in North America. For example, in parts of Afghanistan a local tribal leader will come and say to a contractor that in order to be successful here, you have to hire a certain number of his tribe. But then you face questions of whether hiring them is a bribe or whether they are skilled enough to do the work. Another example is someone trying to hire a truck--so they have a piece of paper with a stick figure of a man and a drawing of a truck and a dollar amount. That’s their purchase order because they don’t speak the same language. But it’s very hard to find an auditor that will accept that as a purchase order.
NLJ: What advice would you give to businesses who might be unfamiliar with the rules and regulations governing federal contracts?
Bingham: Mistakes happen when you don't know the rules. The best way to avoid
contracting disputes or inadvertently over billing the federal government is to
know the rules before you play the game. For example, contractors should know
that the federal regulations often apply to state contracts (e.g., when the
ultimate source of the funds is federal programs).... A company may be ignorant
of certain contracting regulations, but the government may determine its lack
of compliance as a "willful disregard" of the rules.
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