Floor Statement by Sen. Bernie Sanders on Federal Contracting Fraud

See amendment on the right sidebar.  Watch the floor speech here.

Mr. President, this country has a $12 trillion national debt, and this year, we are running up the largest deficit in the history of our country.  The taxpayers of this country want to know that the money we expend – whether it is for defense, housing, education, or any other purpose – is spent as wisely and as cost effectively as possible.  They also want to know that the corporations and institutions and individuals who receive this funding are honest and trustworthy in terms of how they expend these federal dollars. 

Mr. President, several weeks ago, as you’ll recall, the Senate voted to prohibit any funding going to an organization called ACORN.  This decision was largely motivated by a videotape which showed employees of ACORN involved in an outrageous and absurd discussion with actors who were posing, as I understand it, as a prostitute and a pimp.  Those employees, appropriately enough, were fired.  As I understand it, over a period of 15 years, ACORN has received about $53 million to promote affordable housing and encourage voter registration.

Mr. President, I voted against the ACORN resolution obviously not because I condoned the behavior of these employees or other problems associated with this organization over the years – I don’t.  I opposed it because we need a process to determine what the criteria are in terms of defunding an organization engaged in improper or illegal behavior.  And frankly I don’t think a video tape appearing on television is quite good enough.  And that’s what this amendment is about.

Mr. President, the sad truth of the matter is that virtually every major defense contractor in this country has, for a period of many years, been engaged in systemic, illegal, and fraudulent behavior, while receiving hundreds and hundreds of billions of dollars of taxpayer money.  We’re not talking here about the $53 million that ACORN received over 15 years.  We’re in fact talking about defense contractors who have received many, many billions in defense contracts and year after year, time after time, violated the law, ripping off the taxpayers of this country big time.  And in some instances, these contractors have done more than ripping off the taxpayers.  In some instances, they have endangered the lives and well being of the men and women who serve our country in the armed forces.

Let me give you some examples of what I am talking about.  According to the Project on Government Oversight, a non-partisan, widely respected organization focusing on government waste, the three largest government contractors, Lockheed Martin, Boeing, and Northrop Grumman, all have a history riddled with fraud and other illegal behavior.  Combined, these companies have engaged in 109 instances of misconduct just since 1995, and have paid fees and settlements for this misconduct totaling $2.9 billion.  Let me repeat that – these three companies, Lockheed Martin, Boeing, and Northrop Grumman, have engaged in 109 instances of misconduct just since 1995, and have paid fees and settlements for this misconduct totaling $2.9 billion. 

And here’s the kicker.  Despite violating the law time after time after time; despite being fined time after time after time – Guess what?  In 2007, their punishment was . . . $77 billion in government contracts, $77 billion in government contracts.

Now, based on a video on TV, we took away funding for ACORN, which received $53 million over a 15 year period.  What are we going to do with major defense contractors who have been found guilty in courts of law time after time after time?

Mr. President, let me give you just a few specifics now:  Lockheed Martin, the largest defense contractor in the United States, has engaged in 50 instances of misconduct since 1995, paying fines and settlements totaling $577 million, yet it still received $34 billion of government contracts in 2007.  Here’s the type of behavior that we are talking about:

According to the U.S. Attorney’s Office, 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.

According to the Department of Justice, 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

But, in fairness to Lockheed Martin, we should be clear that they are not the only defense contractor involved in fraud.  Frankly, it’s endemic to the industry.  Boeing is the world's leading aerospace company and the largest manufacturer of commercial jetliners and military aircrafts.  Since 1995, Boeing has either been found guilty, liable, or reached settlements, in 31 instances of misconduct and, as a result, paid $1.5 billion in fines, judgments, and settlements. 

In 2000, for example, according to the Department of Justice, Boeing agreed to pay $54 million to settle charges that it placed defective gears in more than one hundred and forty CH-47D "Chinook" helicopters and then sold these defective helicopters to the United States Army.  When one of the gears failed in flight, it caused an Army Chinook helicopter to crash and burn while on a mission in Honduras. Five servicemen aboard were killed.

And in a report made public just this past Tuesday, the DOD Inspector General reported that Boeing may have recovered $271 million in “unallowable costs” from the government. 

Still, Boeing received $24 billion in federal contracts in 2007. 

And finally, Northrop Grumman, the third largest contractor, has a similar history, with 27 instances of misconduct totaling $790 million over the past fifteen years. 
Just six months ago, the Justice Department announced that Northrop Grumman and its Space and Mission Systems subsidiary paid $325 million to settle charges that Northrop provided and billed the National Reconnaissance Office for defective microelectronic parts, known as Heterojunction Bipolar Transistors, or HBTs.  The government’s investigation concluded that Northrop failed to properly test and qualify the HBTs before providing them to the government.

In 2005, Northrop Grumman paid $62 million 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.” In the second instance, the plaintiffs alleged that Northrop “lied to the government during a ‘Critical Design Review’” for a B-2 Bomber radar jamming device.

In 2003, according to the Project on Government Oversight, 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, that Northrop Grumman subsidiary engaged in five separate schemes that increased the costs the government paid for space projects.

Also in 2003, according to the Department of Justice, 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 $18.5 billion in government contracts in 2007 alone. 

Mr. President, just to reiterate, a few weeks ago, this Senate voted to strip funding for an organization called ACORN, which received $53 million in federal funds over a period of 15 years.  The basis of that decision was a video tape shown repeatedly on national television in which several ACORN employees were involved in a totally absurd and reprehensible discussion.  Those employees have since been fired, and should have been fired, and ACORN should be extremely ashamed that people like that were employed by them.

But now, we are involved with an issue of far greater consequence than ACORN.  Not of $53 million of federal funds over 15 years but of hundreds and hundreds of billions of dollars going to large corporate defense contractors who year after year after year engage in illegal behavior and rip off the American taxpayer.  One has got to be pretty blind not to perceive that this type of behavior is systemic to the industry and that it is part of their overall business model.  And, let me just add, what I’ve described now is just some of what these companies have been caught doing.  Who knows what other illegal activities have taken place which have not yet been discovered.

Mr. President, the time is long overdue for us to get to the bottom of this situation.  We owe that not only to the taxpayers of this country but to the men and women in our Armed Forces.

For that reason, I am proposing an amendment today under which the Secretary of Defense would calculate the total amount of money that goes to companies that have engaged in fraud against the United States and then make recommendations about how to penalize repeat offenders.  It is absurd that year after year after year, these companies continue doing the same things and they continue to get away with it.

I hope this study will receive bi-partisan support and will be a first step in the process of cleaning up the world of defense contracting.