Reward for fraud: $285 billion in Pentagon contracts

The Corruption Perception Index produced annually by Transparency International becomes meaningless relative to the scale of fraud and corruption with large contracts in the developed world and which do not seem to be reflected in the CPI.

An AP report carried by reports:

Hundreds of defence companies that defrauded the U.S. military between 2007 and 2009 still received $285 billion in contracts from the Pentagon during the same period, a U.S. senator said Wednesday.

Citing a January report prepared by Pentagon acquisition officials at Sanders request, the senator said the bulk of the contracts, just over $280 billion, went to 211 companies that had civil judgments against them or settled fraud charges of more than $1 million.

During the same period, 30 defence contractors were convicted of criminal fraud, but still were awarded $682 million in new work, according to the Pentagon’s report.

Among the contractors listed in the report is AEY Inc., a Miami, Florida-based company that received a $300 million contract to supply ammunition to Afghan security forces. AEY got the work despite a record of poor performance on other government contracts.

The fraud involved shipment of millions of rounds of banned Chinese-made military ammunition that was repackaged to appear of Albanian origin. After nearly $67 million in payments, the Afghan ammunition contract was terminated in May 2008. The owner of AEY was sentenced to four years in federal prison after pleading guilty in 2009 to a fraud conspiracy charge.

In the report, defence officials listed a series of actions the military has taken to guard against contractor wrongdoing, including the formation of a working group focused on procurement fraud.

I am quite sure that many lobbyists, middlemen, bureaucrats and politicians all received their share of the largesse in these Defence Contracts. The margins available in Defence contracts far exceed those available in other large infrastructure contracts.

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