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

[Richard Forno]

Pentagon Paid $998,798 to Ship Two 19-Cent Washers (Update3)

By Tony Capaccio

http://www.bloomberg.com/apps/news?pid=20601070&sid=ardg6DwCCMFI&refer=home

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.

To contact the reporter on this story: Tony Capaccio a