Defense Contractor Fraud

The Senate on Wednesday debated a Defense Department bill. An amendment proposed by Sen. Bernie Sanders would make the Pentagon strengthen efforts to fight fraud by contractors. His proposal also would require annual Pentagon reports on its efforts to root out fraud.   

Both provisions were triggered by the recent disclosure that the Pentagon paid more than $1.1 trillion during the past decade to contractors that had defrauded the Department of Defense. The amendment would send a simple message to the Pentagon, Sanders said. "Get your act together."

It was a Sanders provision in an earlier defense bill that required a Department of Defense report on how much it spent on contractors that engaged in fraud.

The report detailed how the Pentagon paid $573.7 billion during the past 10 years to more than 300 contractors involved in civil fraud cases that resulted in judgments of more than $1 million, $398 billion of which was awarded after settlement or judgment for fraud.  When awards to "parent" companies are counted, the Pentagon paid more than $1.1 trillion during the past 10 years just to the 37 top companies engaged in fraud. Another $255 million went to 54 contractors convicted of hard-core criminal fraud in the same period. Of that total, $33 million was paid to companies after they were convicted of crimes.

Some of the nation's biggest defense contractors were involved.

For example, Lockheed Martin in 2008 paid $10.5 million to settle charges that it defrauded the government by submitting false invoices on a multi-billion dollar contract connected to the Titan IV space launch vehicle program.  That didn't seem to sour the relationship between Lockheed and the Defense Department, which gave Lockheed $30.2 billion in contracts in fiscal year 2009, more than ever before.

In another case, Northrop Grumman paid $62 million in 2005 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."  Despite the serious charges of pervasive and repeated fraud, Northrop Grumman received $12.9 billion in contracts the next year, 16 percent more than the year before.

At the time the Pentagon turned over the report to Sanders in October, he said aggressive steps were needed to ensure taxpayer dollars aren't wasted.  "It is clear that DOD's current approach is not working and we need far more vigorous enforcement to protect taxpayers from massive fraud," Sanders said.

Read the Pentagon report (pdf) »

View a detailed spreadsheet of the fraud (pdf) »  

Lockheed Martin/Boeing F-22 Raptor fighter plane