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Contractors running amuck in war-zones, REALLY?

Suspending or barring bad contractors from getting government work is a powerful tool, but agencies don’t take such action often enough, the commission said. That’s in part because the suspension and debarment process is so cumbersome, especially in a war zone, where locating witnesses and compiling evidence is difficult. The result is that poorly performing or misbehaving companies can keep getting more work, undercutting any incentive for them to improve. – Commission on Wartime Contracting

Commission critical of war-zone contracting

Richard Lardner – The Washington Post – February 23, 2011 – President Obama pledged nearly two years ago to fix the broken system of awarding and managing federal contracts. But a new report paints a grim picture of the government’s reliance on the private sector for support in war zones and urges a series of reforms to prevent more tax dollars from being wasted.

The Commission on Wartime Contracting concluded that the use of hired hands has become a “default option,” pointing to the estimated $177 billion spent since 2001 on contractors in Afghanistan and Iraq, according to a draft of the report expected to be released Thursday. Yet vigorous oversight and management of contractors by the Pentagon, State Department and U.S. Agency for International Development is too often “an administrative after-thought,” the report said.

The bipartisan commission is urging Congress to provide the agencies with more people and authority to control the army of contractors, which at times has nearly equaled the size of U.S. forces in Afghanistan and Iraq.

“Unless Congress provides resources to oversee and evaluate contractor performance, waste will continue and national objectives will suffer,” according to a draft of the report obtained by the Associated Press. The investment “will be amply repaid in reduced waste and increased effectiveness” of war-zone contracting, it said.

Obama announced plans in March 2009 to curb the government’s appetite for contractors while also pledging to crack down on fraud, cost overruns and shoddy work. War-zone contracting is a major part of the government-wide problem that Obama targeted.

The panel’s findings underscore the difficulty of enforcing changes to a business sector long dominated by well-connected companies, such as KBR and DynCorp International, that handle construction, transportation, food services, training and aspects of security in combat areas.

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Sabre Defence Industries indicted in Arms Trafficking Scheme

Five Individuals and One Tennessee Company Charged with Conspiracy to Violate Arms Export Control Act and Related Offenses in International Arms Trafficking Scheme

Photo from Sabre Defence Industries Website

WASHINGTON – February 8, 2011 – Five individuals and a Nashville, Tenn., firearms manufacturer have been indicted by a federal grand jury on charges relating to international firearms and trafficking violations of the Arms Export Control Act (AECA), announced Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney Jerry E. Martin for the Middle District of   Tennessee; Special Agent in Charge Glenn N. Anderson of the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) Nashville Field Division; and Special Agent in Charge Raymond R. Parmer Jr. for Homeland Security Investigations’ (HSI) New Orleans Office. 

The defendants named in the 21-count indictment unsealed today are Guy Savage, 42, a citizen of the United Kingdom; Sabre Defence Industries LLC (SDI-US), a Nashville-based arms manufacturer owned by Savage; Charles Shearon, 55, of Ashland City, Tenn., and president of SDI-US; Elmer Hill, 64, of Brentwood, Tenn., and chief financial officer of SDI-US; Michael Curlett, 44, of Hermitage, Tenn., and director of sales for SDI-US; and Arnold See Jr., 54, of Antioch, Tenn., who is the international shipping and purchasing manager of SDI-US.   According to the indictment, the defendants were part of a conspiracy to illegally import and export regulated firearms and firearm components and technology to and from the United States.   The indictment alleges that Savage directed the illegal activities from his personal residences in the United Kingdom, as well as from a related company owned by Savage, Sabre Defence Industries LTD (SDI-UK), which is a licensed manufacturer, distributor and importer of firearms and firearms headquartered in the United Kingdom.    

“The indictment unsealed today alleges a nearly decade-long scheme to thwart U.S. import/export restrictions on firearms and their components,” said Assistant Attorney General Breuer.  “The defendants allegedly went to great lengths to conceal their activities and evade U.S. laws – mislabeling packages, falsifying shipping records, and maintaining a fictitious set of books and records, among other things.  The illegal trade of firearms and their components poses serious risks and, as this case shows, we cannot and will not tolerate it.”

“The investigation and indictment are an excellent example of how the United States Attorney’s Office, the Criminal Division, HSI, ATF and international law enforcement agencies are working together to prevent firearms and firearm components from being diverted to locations around the world,” said U.S. Attorney Martin. “We recognize the role that weapons play in a sometimes violent world and we will vigorously enforce the laws to prevent the illegal importation of firearms and firearm components.”

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Kustom Products provided military with faulty helicopter parts, U.S. alleges

Pentagon targets CB firm

Jessica Musicar, Staff Writer – October 18, 2010

Military personnel call it “the Jesus Nut.”

So important is the aviation locknut to helicopter construction that its failure could mean death or serious injury for chopper crews.

The “flight critical” locknuts attach main rotors of some helicopters to their masts, including on the “Kiowa” OH-58 A/c helicopter.

“It would be like the lug nuts of your tire coming off while you’re driving,” said Jeffery Bass, President and CEO of the Hiller Aviation Museum, in San Carlos, Calif.

“It’s just going to fall apart.”

According to a Department of Defense special agent’s application for a search warrant against Kustom Products Inc., and Southern Oregon Sterling Parts and Service Inc., both located at 1084 S. Fifth St., Coos Bay, the companies may have provided 1,900 defective locknuts in the military aviation supply chain.

$31M in contracts
“By providing less-expense substitute parts, contrary to what the contracts and purchase orders required, KPI and SOS were able to secure contracts by underbidding its competitors, delivering nonconforming substitute parts, and substantially profiting from this practice,” Special Agent James E. McMaken wrote to the United States District Court for the District of Oregon.

Since September 2005, Southern Oregon Sterling and Kustom have received about $31 million in contracts from the Defense Department.

Both businesses are owned by Harold Bettencourt II, who employs his four sons.

Properties searched
Late last month, agents from the FBI, the IRS Criminal Investigation Division and the Department of Defense Inspector General’s Office with the Defense Criminal Investigative Service, searched several properties and vehicles belonging to the Bettencourt family in Coos Bay, North Bend and Myrtle Point.

The searches were part of an investigation into allegations of fraud involving aircraft or space vehicle parts, false claims, conspiracy to commit or defraud the government, wire fraud, tampering with a witness, victim or informant, engaging in monetary transactions in property derived from specified unlawful activity, and money laundering.

No arrests
Gerri Badden, spokesman for the U.S. Attorney’s office, District of Oregon, said no one from the Bettencourt family has been arrested and the investigation continues.

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Accused contractor on the defensive – KBR blames Army for ill guardsmen

By Bill Straub – Monday, July 5, 2010
WASHINGTON — The Texas-based company responsible for restoring a water-pumping station near Basra, Iraq, months after the U.S. invasion in 2003 is defending itself against claims that it failed to properly protect scores of Indiana National Guardsmen who came in contact with a known carcinogen while providing security for the project.

KBR Inc. of Houston, a one-time subsidiary of Halliburton, maintains that only prolonged exposure to hexavalent chromium can produce life-threatening ailments. It also insists the Army was primarily responsible for making sure the work site was safe.

“The Army was obligated to provide KBR a site free of all environmental and war hazards,” said Heather Browne, KBR’s director of communications. “They did not inspect the site for chemical contamination. Once KBR discovered the potential contamination, it acted properly to notify the Army and to address the problem with the Army’s consent, approval and participation.”

At issue are hazards surrounding the Qarmat Ali water-pumping station, a facility that provided water pressure required to extract oil from nearby fields. Members of the Indiana National Guard provided security beginning in June 2003 and encountered an orange, powdery substance that, according to court records, was piled several feet deep and blew in the desert wind. The substance was identified as sodium dichromate, which contained hexavalent chromium, an agent that can cause nosebleeds and severe respiratory problems, as well as heightened risks of cancer and kidney and liver diseases.

A group of attorneys, led by Houston-based Mike Doyle, representing about 140 Indiana guardsmen has filed suit in U.S. District Court, Houston, alleging that KBR knew about the existence of hexavalent chromium but failed to notify anyone in a timely manner.

One of the exposed soldiers, Lt. Col. James Gentry, 52, of Mitchell, Ind., died in November. Gentry, a nonsmoker, was diagnosed in 2006 with a rare form of lung cancer. Military doctors say it most likely was caused by the exposure.

Browne said KBR is unaware of any finding “tying Col. Gentry’s lung cancer to the six to 12 days he spent at the water treatment plant in 2003.”

“The medical literature is consistent in finding that cancer is only caused by prolonged industrial exposure over a period of years — not six to 14 days over several months,” Browne said.

Once the presence of sodium dichromate at the site was established, according to KBR, the company notified the Army Corps of Engineers and worked with it to remediate the area. The company took precautions to prevent exposure to those working in the general vicinity. On Oct. 23, 2003, the U.S. Army Center for Health Promotion and Preventive Medicine issued a report concluding that KBR had effectively minimized exposure.

KBR maintains it also posted signs warning about the presence of sodium dichromate. Regardless, tests showed that dangerous levels of hexavalent chromium were not found at Qarmat Ali, the company claims. According to KBR, none of the medical records indicates that nosebleeds and respiratory problems were caused by exposure to sodium dichromate. (Click HERE for original article)

Downgrades & investigations – DynCorp aquisition could be a bumpy ride

Rigrodsky & Long, P.A. Announces Investigation of DynCorp International Inc.

WILMINGTON, Del., Apr 12, 2010 (BUSINESS WIRE) — Rigrodsky & Long, P.A. announces that it is investigating potential claims against the board of directors of DynCorp International Inc. (“DynCorp” or the “Company”)  concerning possible breaches of fiduciary duty and other violations of law related to the Company’s entry into a definitive agreement to be acquired by Cerberus Capital Management, L.P. (“Cerberus”) in a transaction valued at approximately $1.5 billion.

Under the proposed agreement, DynCorp shareholders will receive $17.55 per share in cash for each share of DynCorp common stock they own. The investigation concerns whether DynCorp’s board of directors failed to adequately shop the Company and obtain the best price possible for its shareholders. At least one analyst has set a price target of $20.00 per share and as recently as DynCorp’s February 3, 2010 third quarter fiscal year 2010 financial results announcement, the Company announced a 15.5% increase in revenue over the third quarter of fiscal year 2009 and DynCorp’s CEO stated: “with a healthy backlog and pipeline, and two recent acquisitions opening up new channels to market, we are well positioned for continued growth and value creation supporting defense, diplomacy, and development initiatives around the globe.” In addition, affiliates of Veritas Capital Fund Management, L.L.C. have executed a Voting Agreement pursuant to which they have agreed to vote shares owned by them representing, in the aggregate, 34.9% of the outstanding shares of DynCorp in favor of the transaction. (Click HERE for full article)

Levi & Korsinsky, LLP Investigates Possible Breach of Fiduciary Duty by the Board of DynCorp International, Inc. – DCP

NEW YORK–(BUSINESS WIRE)– Levi & Korsinsky is investigating the Board of Directors of DynCorp International, Inc. (“DynCorp” or the “Company”) (NYSE: DCP) for possible breaches of fiduciary duty and other violations of state law in connection with their attempt to sell the Company to affiliated funds and/or managed accounts of private investment firm Cerberus Capital Management, L.P. (“Cerberus”). Under the terms of the transaction, DynCorp shareholders will receive $17.55 in cash for each DynCorp share of common stock they own for a total transaction value of approximately $1.5 billion. (Click HERE for full article)

Wells Fargo Downgrades DynCorp (DCP) to Market Perform Following $17.55/Share Cash Offer

DynCorp (DCP) Agrees To $1.5 Billion Private Equity Takeover Wells Fargo has just issued a mid-day downgrade on shares of DynCorp International (NYSE: DCP); the firm now rates the stock a Market Perform, down from Outperform previously. Wells Fargo raised its valuation range from $15-$17 to $17.55.

The downgrade follows news this morning that DynCorp will be acquired by PE firm Cerberus Capital for $17.55/share. Shares of DynCorp. have surged more than 48% today. (click HERE for full article)