U.S. government awards millions in contracts to companies owned by fictitious people

Tuesday, August 13, 2013 by: J. D. Heyes
Tags: U.S. government, business contracts, fraud

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(NaturalNews) One of the major problems with the size of the American bureaucratic state is the fact that it is difficult, if not impossible, to manage. Oversight of programs is haphazard and spotty, if it exists at all, and the few people assigned to ensure that the American taxpayer isn't being mistreated face the insurmountable task of accounting for every dollar.

What's more, human nature being what it is, if you provide a plethora of benefits to people without adequate accountability, those benefits are going to be abused, pure and simple. One of the most recent examples of this occurred in Maryland, where, according to The Washington Examiner, a woman pleaded guilty "to charges related to setting up at least 15 false businesses in six states that received government contracts despite often being registered to people who did not exist."

'The case illustrates how little federal officials know...'

The paper said that the false businesses would subcontract all work to other companies, then take federal dollars without paying the companies to actually do the work.

The guilty, Larayne Whitehead, 34, agreed to give up $2.4 million in illegal proceeds, along with a luxury car.

"The conspirators typically operated under a particular business name for a period of six to 12 months until the business was either disqualified from the FedBid marketplace or was otherwise burdened with lawsuits or liens," said the plea bargain.

"The conspirators initially used their true names and addresses to register their businesses, but later attempted to conceal their true identities by using aliases to register the businesses and by renting commercial mail box store fronts."

Per the Washington Examiner:

The case illustrates how little federal officials know about where goods and services they purchase come from, with one Whitehead firm selling ammunition to the Army, according to government contracting records, thus raising questions about whether bullets of dubious quality wound up in soldiers' hands.

With apparently little oversight and investigation into the firm's background, the Department of Homeland Security nevertheless issued it a government credit card "to use for payment for goods provided pursuant to a government contract," on which the suspect tallied up $40,000 in charges.

In addition, this incident - like so much other fraudulent activity repeated across the federal bureaucracy every year - brings to light the severe lack of scrutiny of Americans receiving contracts under special conditions for small businesses and minorities, who are only required to self-certify, "and who the government is pressured to source goods through over established vendors, even for goods like ammunition, which few fly-by-night firms are legitimately equipped to manufacture or supply," the paper said.

Included in the gaggle of phony companies is the Emcompass Group, registered to a dilapidated house in Maryland. It was touted as a black-owned firm which got contracts to conduct work for many things - from English instruction to furniture sales, the paper found in an investigation:

As recently as last November, Sharper Consulting Inc., one of the companies used by Larayne Whitehead under her own name, got government business totalling nearly $145,000 by bidding on contracts for which only woman-owned businesses were eligible.

It got some $210,000 in business set aside for small businesses, and $19,000 in open competition. A phone call to its listed number went to an answering service that forwarded to a cell phone with no answer.

Set up to fail - you, the taxpayer

It's all standard procedure and a typical minority contracting scheme: The minority-owned company wins a contract that most other firms are not eligible to even bid on, but then has another company do all the work. Whitehead's scheme differed in one respect, however - she never paid her subcontractors.

Lax - or even non-existent - oversight by the federal government leads to such abuses of the taxpayer's money. And with the way the entire system of awarding contracts in this manner is set up, it is virtually impossible for the government to enforce rules forbidding firms from subcontracting work in the first place.

The group, Citizens Against Government Waste, is one of the best taxpayer watchdog groups in the country. But given the scope and size of the federal administrative branch, it's a tough job. Nevertheless, you can follow the organization's progress here.


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