OIG INVESTIGATIONS...• Office of Audit and Evaluation • Office of Investigations – Criminal – Civil ... methamphetamines and a Rolex watch. The one- year grant was for developing

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

OIG INVESTIGATIONS

2019 NOAA Financial Assistance Workshops

San Diego, CA Silver Spring, MD

OVERVIEW

• Dept of Commerce, Office of Inspector General • What is Grant Fraud? • Types of Grant Fraud • Investigation Examples • Playing it Safe: “Do” and “Don’t” • Whistleblower Protection • Consequences

U.S. Department of Commerce | Office of Inspector General 2


DOC – OFFICE OF INSPECTOR GENERAL

• Created by IG Act of 1978 to: – Combat fraud, waste, and abuse within the DOC – Conduct audits and investigations of DOC operations – Keep the DOC and Congress informed

• Mission – To improve the programs and operations of the Department of Commerce through independent and objective oversight

This includes oversight of NOAA Grant Programs


• Office of Audit and Evaluation • Office of Investigations

– Criminal – Civil – Administrative – Employee misconduct – Public corruption



What We Investigate • Grant Fraud • Contract Fraud • Employee Misconduct • False Statements/Certifications • Conflicts of Interest • Bribery/Kickbacks • False Claims • Money Laundering • Embezzlement • Theft • Antitrust Violations


WHAT IS GRANT FRAUD

What is Grant Fraud?

An act of deceit, trickery or deliberate neglect, committed by a federal funding recipient against the funding agency for the purpose of gaining something of value.

Otherwise known as . . . Lying, Cheating, Stealing

One or more of the following has usually occurred:

• Deliberate Falsification of Information (“Lying”) • Conflict of Interest (“Cheating”) • Theft/Misappropriation of Federal Funds/Property

(“Stealing”) U.S. Department of Commerce | Office of Inspector General 6

WHAT IS GRANT FRAUD

Grant Fraud Can Take Many Forms

• Programmatic, financial, or both • Hidden, discreet, or completely overt • Large or small portions of an award • One-time incident or ongoing matter • May involve a conspiracy

– subcontractors/subgrantees and/or government officials


WHAT IS GRANT FRAUD

Although it can take many forms, fraud, at its core, is deception through the misrepresentation or omission of material facts for the purpose of illegitimate gain.


WHAT IS GRANT FRAUD

Examples of fraud within Grant Programs include, but are not limited to:

• Creating fictitious records • Forgery • Diverting funds • Double billing • Inflating enrollment and attendance records • Fees for non-existent consulting services • Issuing checks payable to friends or relatives

9 U.S. Department of Commerce | Office of Inspector General

WHAT IS GRANT FRAUD

Examples of fraud within Grant Programs include, but are not limited to:

• Submitting invoices for personal expenses • Using credit cards for personal use • Using funds for unintended purposes • Submitting false claims in travel vouchers/cost reports • False statements on grant application • Not providing services • Falsifying research/data • Diverting funds to phantom companies


WHAT IS GRANT FRAUD

Who Commits Grant Fraud • Recipients:

• Company Officers • Board Members • Employees

• Business Partners

• Contractors/Subcontractors

• Consultants


WHAT IS GRANT FRAUD

Deliberate Falsification of Information (“Lying”) • Grant Agreement = Your contract with the Federal Government

• Legally binding • Grantees are obligated to use funds as outlined in the agreement • Must act with integrity when applying for funds and reporting actual usage

• Grantees must track the use of funds and maintain adequate supporting documentation

• The typical issues in this area include: • False statements • Matching funds • Labor hours/wages • Indirect cost rates • Redirecting funds


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WHAT IS GRANT FRAUD

Conflicts of Interest (“Cheating”) Grantees are required to use federal funds in the best interest of their program and these decisions must be free of undisclosed personal or organizational conflicts of interest– both in appearance and fact.

• The typical issues in this area include: • Less than Arms-Length or Related Party Transactions • Sub Grant Award Decisions and Vendor Selections • Consultants


WHAT IS GRANT FRAUD

Theft/Misappropriation of Gov’t Property (“Stealing”) • Most common • Embezzlement of funds • Cost reimbursement schemes • Weak (or lack of) internal controls • “Profit” not allowed


INVESTIGATION EXAMPLES

Investigation Examples 1. A grant recipient was convicted for misapplying approximately

$500,000 of grant funds to pay for personal expenses, including rent, home renovations, cleaning services, restaurant meals, and miscellaneous household items.

1. Four officials of a grantee (Revolving Loan Fund program) were convicted of fraud, conspiracy and money laundering after converting nearly $800,000 to their personal use.

1. The Controller of a grantee embezzled grant funds from his employer by contracting out unnecessary construction services to a company that a co-conspirator owned, and who kicked back a portion of the proceeds. The controller paid these through spare company checks.


INVESTIGATION EXAMPLES

Investigation Examples 4. A grantee shifted rent expenses for a related private company to

make it appear costs were for the grantee.

4. A grantee disguised hockey and baseball season tickets by breaking up the costs in the accounting records – submaterial costs

17

4. A grantee used about 55% of the total grant to buy, among other things, methamphetamines and a Rolex watch. The one-year grant was for developing a small boat tuna pole and line training program.

U.S. Department of Commerce | Office of Inspector General

SAFEGUARDS

Process Safeguards • Grantee’s Internal Controls • Grant Management / Desk Audit • Grantor Monitoring • OIG Audits • A-133 / Single Audit Act • Public Availability of Reports


PLAYING IT SAFE: “DO” AND “DON’T”

“Do” TIPS FOR KEEPING IT SAFE

• Avoid “Grey Areas” • Require Full Disclosure • Reward for Reporting Fraud/Waste/Abuse • Stay Organized • Report Problems • Communicate Openly • Follow Government Rules, Regulations and Guidelines • Act in Good Faith • Ask Questions • Report Accurate Information • Promote Efficiency, Honesty, and Professionalism • Fraud Awareness


IMPORTANT TO REMEMBER!

If you are unsure about any of the requirements relating to the award of a NOAA grant/cooperative agreement:

• Contact the appropriate NOAA POC and provide all relevant facts

• Request written guidance from the NOAA POC, and

• Follow it!


PLAYING IT SAFE: “DO” AND “DON’T”

“Don’t” POST-AWARD THINGS NOT TO DO

• Embezzlement • Misappropriation • Deliberate Waste • Unauthorized Costs • Conflicts of Interest • Fictitious Vendors • Falsify Records


CONSEQUENCES

Consequences (Why You Should Care) • Program Impairment / Failure • Administrative Penalties

• Termination or restructuring of awards • Recover funds / withhold future funds • Suspension & Debarment

• Corrective Action/Forced Compliance Plans • Civil False Claims Act (Treble Damages) • Criminal

• Prison • Fines & restitution • Asset seizure


CONSEQUENCES OF COMMITTING FRAUD

Criminal Prosecution Lying to obtain a grant, or lying about the work performed may violate several criminal laws:

• 18 U.S.C. §1001, False Statements (up to 5 years in prison, forfeiture and $250K fine)

• 18 U.S.C. §641, Theft of Federal Property (up to 10 years in prison, forfeiture and $250K fine)

• 18 U.S.C. §1343, Wire Fraud (up to 20 years in prison, forfeiture and $250K fine)

• 18 U.S.C. §666, Theft or bribery concerning programs receiving Federal funds (up to 10 years in prison, forfeiture and $250K fine)

Fines for organizations may be as high as $500KCriminal forfeiture = full amount of the grant; personal assets can be seized to satisfy forfeiture or fine


CONSEQUENCES OF COMMITTING FRAUD (CONTINUED)

Civil Prosecution In addition to or in lieu of criminal prosecution Civil False Claims Act, 31 U.S.C.§§3729-3733

• Liability includes up to treble damages (3x actual damages) and a civil penalty of up to $22,363 for each false claim

• False claims liability may include payments received when the government relied upon false information in the award proposal, in a certification of current cost or pricing data, in a request for payment, or in progress reports

• Although the statute requires knowledge that the claim was false, knowledge includes “deliberate ignorance” or “reckless disregard of the truth”

• Whistleblowers can receive up to 30% of the recovery amount for reporting fraud via qui tam provisions of the False Claims Act


CONSEQUENCES OF COMMITTING FRAUD (CONTINUED)

Administrative Remedies • Government can terminate contracts/grants tainted by fraud

• Government can suspend/debar the entity, owner, and/or employees • Results in prohibition from receiving any federal grants or contracts, or working as a sub-grantee on federal grants or a sub-contractor on federal contracts

• Debarment is typically for three years, but can be for a longer period

• Administrative remedies are in addition to or in lieu of criminal and civil liability


COMPLIANCE REQUIREMENTS

Mandatory Disclosure of Fraud

2 CFR§200.113 - Mandatory disclosures

The non-Federal entity or applicant for a Federal award must disclose, in a timely manner, in writing to the Federal awarding agency or pass-through entity all violations of Federal criminal law involving fraud, bribery, or gratuity violations potentially affecting the Federal award.

Failure to disclose could result in the remedies detailed in 2 CFR§200.338


WHISTLEBLOWER PROTECTIONS

Federal employees, applicants, and employees of federal contractors and grantees who make certain disclosures―to OIG or elsewhere―are protected under the law from suffering retaliation because of those disclosures.

Basic elements of whistleblower protection law: (1) you make a protected disclosure; (2) you are subject to certain retaliatory acts; and (3) there is a causal connection between your protected disclosure and the retaliatory act.

OIG receives, reviews, and where appropriate, investigates allegations of whistleblower reprisal.

Whistleblower complaints may be submitted to the OIG via the hotline: https://www.oig.doc.gov/Pages/Online-Hotline-Complaint-Form.aspx

Whistleblower complaints may also be submitted to the Office of Special Counsel via their website: https://osc.gov/pages/file-complaint.aspx

DOC-OIG Whistleblower Protection Coordinator contact information: Email: [email protected] Phone: 202-482-1099


https://www.oig.doc.gov/Pages/Online-Hotline-Complaint-Form.aspx

https://osc.gov/pages/file-complaint.aspx

mailto:[email protected]

REPORTING FRAUD, WASTE, OR ABUSE

Reporting Fraud, Waste, or Abuse

OIG wants to hear ANY CONCERNS you may have regarding grant and procurement recipients or other DOC program or employee fraud – lying, cheating and stealing.

• We DO NOT require that you detect evidence of a crime

• We DO NOT require a specific allegation

• If you have suspicions, please contact us.


REPORT FRAUD, WASTE, OR ABUSE

U.S. Department of Commerce Office of Inspector General

Office of Investigations

OIG HOTLINE Phone: (800) 424-5197

Online Complaint Form: https://www.oig.doc.gov/Pages/Online-

Hotline-Complaint-Form.aspx

For more information please visit our

website www.oig.doc.gov


https://www.oig.doc.gov/Pages/Online-Hotline-Complaint-Form.aspx

http://www.oig.doc.gov/

Documents

OIG INVESTIGATIONS...• Office of Audit and Evaluation • Office of Investigations – Criminal – Civil ... methamphetamines and a Rolex watch. The one- year grant was for developing