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US Senate report: DOD contract fraud is widespread!


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Since 1997, our defense budget, including the wars in Iraq and Afghanistan has tripled from $254 billion to over $700 billion. Much of this money is unfortunately contracted out to companies with a well-documented history of fraud. If we are to get our defense budget under control, the Defense Department has got to start taking the problem of contractor fraud more seriously.
In the past, I have examined this problem by looking at the behavior of the three largest defense contractors, Lockheed Martin, Boeing, and Northrop Grumman.

A. Lockheed Martin. According to non-profit watchdog groups, the largest contractor, Lockheed Martin, has engaged in 12 instances of government contract fraud since 1995, paying fines and settlements totaling, at the very least, $68.4 million. We can’t be sure of the total amount because some of Lockheed’s settlements are confidential, but to give just a few examples:
– In 2008, Lockheed Martin’s Space Systems Company paid $10.5 million to settle charges that it defrauded the government by submitting false invoices for payment on a multi-billion dollar contract connected to the Titan IV space launch vehicle program.
– In 2003, Lockheed Martin paid $38 million to resolve allegations that it fraudulently inflated the cost of performing several Air Force contracts for the purchase and navigation and targeting pods for military jets.
– And in 2001, Lockheed Martin paid $8.5 million to settle criminal charges that it lied about its costs when negotiating contracts for the repair and restoration of radar pedestals installed in U.S. warships, costing the Navy millions of dollars, also according to the Department of Justice
Lockheed Martin received $234 billion in contracts from FY01-FY10.

B. Boeing. This behavior is not unique to Lockheed Martin. Boeing, the world’s leading aerospace company and the largest manufacturer of commercial jetliners and military aircrafts, has paid $88.9 million since 1995 in fines and settlements for government contract fraud.
– In 2000, for example, according to the Department of Justice, Boeing agreed to pay $54 million to settle charges that it defrauded the Army by selling it more than one hundred and forty helicopters containing defective gears. These defective gears resulted in the death of at least five servicemen.
Boeing received $196 billion in contracts from FY01-FY10.

C. Northrop Grumman. Perhaps the worst offender is the third largest contractor, Northrop Grumman, which paid $519.8 million since 1995 to settle government contract fraud charges.
– In 2003, Northrop Grumman paid $111.2 million to settle charges that a subsidiary
overcharged the United States on government contracts. According to the
Department of Justice, the Northrop Grumman subsidiary engaged in five separate
schemes that increased the costs the government paid for space projects.
– Also in 2003, Northrop Grumman paid the United States $80 million to settle charges
that it overcharged the government and knowingly installed substandard parts in
target drones designed for the Navy.
Northrop Grumman nonetheless received $147 billion in government contracts from FY01-
FY10.