Father and Son Sentenced to Prison for Million-Dollar Fraud
SAN DIEGO – A father and son who fraudulently won over $4 million of federal contracts using false financial statements and other lies were sentenced to prison today and ordered to pay over $1 million in restitution. The father also admitted to stealing more than half a million dollars from his consulting clients, and then using some of the laundered money to close escrow on a Rancho Santa Fe mansion.
U.S. District Judge Roger T. Benitez sentenced Joseph Glenn Osborne, Sr., 68, to 57 months in prison for wire fraud and participating in a wire fraud conspiracy with his son and codefendant, Joseph Glenn Osborne, II, 31. Osborne, II was sentenced to 12 months for falsely making a writing to obtain money from the United States.
In handing down the sentence, Judge Benitez told the father it appeared he’d “made a life out of lying and cheating.”
In his plea agreement, Osborne, Sr. admitted that he stole $588,489 from three different small businesses that had hired him as a consultant for securing federal contracts. According to court documents and his own admissions, Osborne, Sr. promised to help the victims get contracts with the U.S. Department of Agriculture (USDA). Osborne, Sr. then misused his position as their agent to change banking information in an online government system, so when USDA paid on his clients’ contracts, Osborne, Sr. diverted the funds to his own accounts.
According to his plea agreement, Osborne, Sr. laundered some of the stolen money and used it to make a down payment on a $2.7 million mansion in Rancho Santa Fe, California. Osborne, Sr. then forged a pair of emails to conceal the source of the money by falsely claiming that it was an early retirement withdrawal from his government benefits account. In fact, according to court filings, Osborne, Sr. had no such account; the agency he impersonated did not actually exist; and he had simply altered an email from a real government employee.
In 2013, after Osborne, Sr.’s clients terminated him, the Osbornes agreed to submit fraudulent financial statements to qualify Osborne, II’s new business—Worldwide Connect LLC (WWC)—as an approved USDA contractor. As set out in their guilty pleas, the Osbornes recruited Osborne, II’s friend and bookkeeper to prepare false financial statements that substantially overstated WWC’s financial health. For example, the statements fraudulently converted WWC’s 2013 year-end cash position from a $5,546 shortfall to a $37,954 surplus.
The Osbornes also falsely certified that none of WWC’s principals was suspended or debarred from federal contracting. In fact, according to documents filed in the case, Osborne, Sr. was suspended and debarred from all federal contracting from November 2013 to October 2016, due to conduct at his prior business, Global Health & Safety.
As a result of its fraud, WWC was approved for federal contracting and won over $4 million of USDA food supply contracts. Four of the five contracts were terminated for contractor default, however, after WWC failed to deliver over 100,000 cases of fruit juice and raisins to community food banks and lunch programs. The Osbornes admitted that WWC caused its suppliers and financing company over $1.5 million in losses. Meanwhile, as set out in the plea agreements and court filings, the Osbornes paid themselves approximately $285,245 of WWC funds in little more than a year. They also used other company money for personal expenses—including almost $10,000 of nightclub charges and luxury hotel stays, and thousands more for escrow and renovating expenses for Osborne, Sr.’s new personal residence.
After their contracts were terminated, the Osbornes applied to the Small Business Administration (SBA) to be readmitted to federal contracting. As part of that application, Osborne, II misstated Osborne, Sr.’s military history, falsely claiming his father was a retired colonel in the Marine Corps. Osborne, II also supplied a variety of falsified tax returns to the SBA for himself and WWC, including an altered tax return that converted his real $14,870 tax liability into a fake $5,427 tax overpayment.
In addition to their prison terms, each defendant was ordered to pay restitution to their victims in the amounts of approximately $1.7 million for Osborne, Sr. and $1.5 million for Osborne, II.
“Government contracting depends upon the basic integrity and honesty of the people who seek to do business with the United States,” said U.S. Attorney Adam L. Braverman. “We will investigate and prosecute white collar criminals who think that they can manipulate the contracting system and enrich themselves through lies and deception.”
FBI Special Agent in Charge John Brown said, “The FBI and our partner at USDA-OIG uncovered repeated deceit, theft and fraud by the Osbornes. Today, the personal greed and self-promotion ended with a federal sentence of custodial time and $1.7 million ordered in restitution to the victims. The American taxpayers and their government funded programs deserve the dogged pursuit of justice exemplified by this case.”
Special Agent-in-Charge Lori Chan, United States Department of Agriculture (USDA), Office of Inspector General (OIG), Western Region, stated, “The USDA OIG has the responsibility for protecting the integrity of the Agriculture Marketing Service, Commodity Procurement Program. OIG conducts investigations in each region of the U.S. to deter and uncover criminal activity that undermines the Commodity Procurement Program. Contractors who engage in financial fraud exploit the public’s trust. The OIG at USDA works to ensure the integrity of USDA programs.”
This case was investigated by the U.S. Department of Agriculture, Office of Inspector General, and the Federal Bureau of Investigation. The case is being prosecuted by Assistant U.S. Attorneys Nicholas W. Pilchak and Andrew J. Galvin.
DEFENDANT Case Number 16CR2546-BEN
Joseph Glenn Osborne, Sr. Age: 68 Carlsbad, California
Joseph Glenn Osborne, II Age: 31 Carlsbad, California
SUMMARY OF CHARGES
Osborne, Sr.: Wire Fraud, in violation of Title 18 U.S.C. § 1343; term of custody including 20 years in prison, $250,000 fine, 3 years of supervised release, and mandatory restitution.
Osborne, Sr.: Wire Fraud Conspiracy, in violation of Title 18 U.S.C. § 1349; term of custody including 20 years in prison, $250,000 fine, and 3 years of supervised release, and mandatory restitution.
Osborne, II: Falsely Making a Writing to Obtain Money From the United States, in violation of Title 18 U.S.C. § 495; term of custody including 10 years in prison, $250,000 fine, 3 years of supervised release, and mandatory restitution.
U.S. Department of Agriculture, Office of Inspector General
Federal Bureau of Investigation
Alleged Fraudulent Activity in SAM - Updated April 26, 2018
GSA's System for Award Management (SAM) is supporting an active investigation by the GSA Office of Inspector General (OIG) into alleged, third-party fraudulent activity in SAM. At this time, only a limited number of entities registered in SAM are suspected of being impacted by this alleged fraudulent activity. GSA has already taken proactive steps to address this issue and has notified affected entities. GSA will continue to work with the OIG and law enforcement agencies to take additional action as appropriate.
These proactive steps include requiring submission of an original, signed notarized letter identifying the authorized Entity Administrator for the entity associated with the Data Universal Numbering System (DUNS) number before the registration will be activated. GSA posted instructions for domestic entities and instructions for international entities for easy reference. This requirement went into effect on March 22, 2018 for new entities registering in SAM and goes into effect on April 27, 2018 for existing registrations being updated or renewed in SAM.
What is GSA doing to address the problem? GSA’s SAM team is supporting GSA’s OIG in an active investigation into alleged, third-party fraudulent activity related to SAM. GSA has taken a number of proactive steps to address this issue and is in the process of making system modifications to prevent improper activity going forward. In the interim, GSA expired, then deactivated any entity registrations that appeared to have been affected. These entities are being advised to validate their registration information in SAM, particularly their financial information and points of contact, before reactivating the entity registrations. Further, GSA has begun implementing additional reviews during the registration process to prevent future issues.
Who was impacted? Entities with registrations that appeared to be impacted were notified. Instructions were provided explaining how to validate registration information and how to reactivate the registration. In addition, entities whose bank account information for Electronic Fund Transfer (EFT) changed within the last year were notified. Although not associated with suspicious activity, these entities are required to validate their registration information, particularly their EFT information.
What is an entity? In SAM, you, your company, business, or organization is referred to as an “entity.” Individuals register themselves or their entity to do business with the U.S. Federal Government by completing the registration process in SAM.
What should entities registered in SAM do to protect themselves and confirm that their bank account information has not been changed? Entities registered in SAM are advised to log into SAM and review their registration information, particularly their bank account information for Electronic Funds Transfer (EFT) on the financial information page. Contact the supporting Federal Service Desk at www.fsd.gov, or by telephone at 866-606-8220 (toll free) or 334-206-7828 (internationally) Monday through Friday from 8 a.m. to 8 p.m. (EDT), for FREE assistance. Entities are responsible for ensuring that their information is current and correct in SAM in accordance with paragraph (b) of Federal Acquisition Regulation (FAR) clause 52.232-33 or Title 2 of the Code of Federal Regulations Part 25 (2 CFR § 25.310 and Appendix A), as applicable, and should routinely review such information for accuracy.
Who should entities contact if they find that payments due them from Federal agencies have been paid to a bank account that other than their own? If an entity suspects a payment due them from a Federal agency was paid to a bank account other than their own, they should contact the Federal Service Desk at www.fsd.gov, or by telephone at 866-606-8220 (toll free) or 334-206-7828(internationally), Monday through Friday from 8 a.m. to 8 p.m. (EDT), for FREE assistance.
What interim changes have been made to the SAM registration process? The proactive steps taken by SAM to address this fraudulent activity include requiring an original, signed notarized letter identifying the authorized Entity Administrator for the entity associated with the DUNS number before a new SAM.gov entity registration will be activated or an existing entity is updated or renewed.
Who should an international entity contact if they are unable to complete the notarized letter process? Entities not located in the U.S. or its outlying areas should read the international entity instructions posted at the Federal Service Desk that outline procedures and provide links to letter templates. If they have additional questions, international entities should contact the Federal Service Desk at www.fsd.gov, or by telephone at 866-606-8220 (toll free) or 334-206-7828 (internationally), Monday through Friday from 8 a.m. to 8 p.m. (EDT), for FREE assistance.
70,000 contractors must get notarized letters in next 60 days to continue working for government
April 16, 2018 7:25 am
These are the first details of the impact on vendors emerging from the latest case of fraud to affect GSA’s System for Award Management (SAM).
A GSA spokeswoman confirmed the agency already received 7,500 notarized letters.
“GSA is making internal business process improvements based on our analysis of the first set of letters received,” the spokeswoman said in an email to Federal News Radio. “We are continuously updating the instructions on SAM.gov to make it easier for entities to be in compliance. Additionally, we have posted templates on SAM.gov for entities to use when submitting their notarized letters.”
This all stems from a third incident in the last five years in which a third party either stole or changed contractor data. GSA alerted vendors on March 22 after it found a third-party changed the financial information of “a limited number” of contractors registered on the governmentwide the SAM.gov portal.
GSA issued initial details of the fraud at that time and then updatedthe frequently asked questions on April 4.
An internal presentation from April 12, Federal News Radio obtained, sheds even more light on the impact of the SAM.gov fraud incident.
GSA officials said more than 33,000 contractors needed to confirm a change in their bank account information in the past year. Now this is not to say all 33,000 vendors were potential victims of fraud, but it’s not a stretch that many of them were swept up in this incident as we all know how difficult it is to change bank accounts. I’m not sure anyone would voluntarily change banks.
The GSA spokeswoman wouldn’t confirm how many vendors were victim of this latest fraud, citing an active law enforcement investigation.
It seems vendors are struggling with GSA’s notarization process. Of the 7,500 notarized letters received, GSA processed more than 3,300 and rejected almost 56 percent of them (1,910) for one reason or another.
GSA said it added staff to its Federal Service Desk to support the response and continues to evaluate the overall impact of this fraud incident, including call volume and wait times.
The presentation shows GSA plans to take several other steps to further improve the process. GSA said it modified its process for international entities and partially masked sensitive data elements on SAM.gov.
By the end of June, GSA plans to end the requirement for a notarized letter “by implementing a data-driven, risk-based approach” by combining technical and analytic processes “to reduce risk and focus any additional burden only on those entities with the highest risk profile.”
The goal, GSA said, is to “provide confidence” in that approach so it would deter known fraud paths.
Finally, GSA said by April 30 it would present details to improve the governance of SAM.gov to the joint governance board.
Beyond the impact on contractors and GSA, the SAM.gov modernization effort also now will be delayed.
The presentation said “the combined fraud response will have cost/schedule impacts on modernization,” and GSA will know about the extent of the impact by mid-May.
The GSA spokeswoman said the agency remains committed to ensuring that the existing SAM.gov and the future SAM.gov systems are reliable.
“We are continuing to make progress on the modernization and utilization of beta.SAM.gov. Users may provide feedback on the new beta SAM website at beta.SAM.gov,” the spokeswoman said.
The presentation provides a bit more details about the beta.SAM.gov initiative.
By the end of May, GSA expects to decommission the current site that hosts the Catalog of Federal Domestic Assistance (CFDA). The CFDA provides a full listing of all federal programs available to state and local governments, tribal entities and public and private organizations.
Also starting in May, GSA plans to begin “alpha testing” the reports, opportunities, federal hierarchy and wage determinations modules of SAM.gov.
GSA has been trying to improve and consolidate the 10 portals that are a part of SAM.gov for almost a decade. During that time, it has now suffered three incidents — both cyber and fraud — during that time. Maybe GSA should consider adding two-factor authentication, maybe even those new Login.gov capabilities that it added to USAJobs.gov earlier this year, to SAM.gov and limit the number of vendors who have to go through the notarization process.
Government Contractor Admits that it Violated Federal Laws Designed to Enhance Contracting Opportunities for Our Nation’s Service-Disabled Veterans
Academy Medical, LLC and its Owners to Pay $335,000 to Resolve False Claims Act Liability
ALBANY, NEW YORK – West Palm Beach, Florida-based government contractor Academy Medical, LLC (Academy) and its owners, Edward D. Desser and Daniel M. Shaw, have agreed to pay $335,000 to resolve allegations that they took advantage of federal contracting opportunities reserved for certified service-disabled veteran-owned small businesses (SDVOSBs), announced Acting United States Attorney Grant C. Jaquith. During the time at issue, Academy was not a SDVOSB.
“We will continue to hold accountable individuals and entities who defraud federal programs and take opportunities away from our nation’s service-disabled veterans,” said Acting United States Attorney Jaquith. “Settlements like this one help to ensure the integrity of programs designed to help our wounded warriors succeed in starting and growing small businesses.”
The United States has long used government contracting to promote small businesses in general, and specifically small businesses owned by veterans who have service-connected disabilities. Congress has established a targeted procurement program for the U.S. Department of Veterans Affairs (VA), which requires the VA to set annual goals for contracting with SDVOSBs. To be eligible for these contracts, an applicant must qualify as a small business. In addition to being a small business, a service-disabled veteran must own and control the business and handle its strategic decisions and day-to-day management.
The settlement resolves allegations that Academy exploited the SDVOSB certification of a service-disabled veteran to profit from VA contracting opportunities that Academy would not have qualified for on its own. To do this, Academy prepared teaming and other business agreements for the parties to sign. Before Academy signed the documents, however, it was specifically warned that the veteran must have tangible and substantive tasks to perform in their relationship and must not act as a “pass-through” for Academy. Rather than heed that warning, Academy structured its dealings with the veteran so as to relegate the veteran to the role of a pass through. For example, an Academy employee prepared and submitted a bid to the VA in the name of the veteran’s company. After the VA awarded that contract to the veteran as a SDVOSB set-aside, Academy arranged to procure the goods for the VA from a third party. When the VA paid the veteran under the contract, an Academy employee (who was also a signatory on the veteran’s bank account) transferred that money to Academy. Academy, Desser, and Shaw each admitted in the settlement agreement that their conduct violated federal regulations designed to encourage contract awards to SDVOSBs.
“There are significant consequences to those who wrongfully obtain benefits from the Small Business Administration’s (SBA) preferential contracting programs,” said Acting Inspector General Hannibal “Mike” Ware. “It is particularly troubling when opportunities set aside for our nation’s service disabled veterans are involved. I want to thank the Department of Justice for its leadership and dedication to serving justice in this case.”
SBA General Counsel Christopher M. Pilkerton said: “This case is yet another example of the tremendous results achieved through the joint efforts of the SBA and the Department of Justice to uncover and forcefully respond to civil fraud committed by a participant in a Federal Government contracting program such as the Service-Disabled Veteran-Owned Small Business Concern Program. Identifying and aggressively pursuing instances of civil fraud by participants in these procurement programs is one of SBA’s top priorities.”
“This civil settlement should send a clear message to individuals who exploit opportunities meant to support our nation’s veterans,” said Michael J. Missal, Inspector General for the Department of Veterans Affairs (VA-OIG). “VA-OIG and its law enforcement partners will vigorously investigate and expose procurement fraud in order to safeguard the American taxpayer and deserving veteran business owners with disabilities who should properly be receiving these contracts.”
The government’s investigation was triggered by a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act, which allows private persons, known as “relators,” to file civil actions on behalf of the United States and share in any recovery. The relator in this case will receive $67,000 of the settlement proceeds. The case is docketed with the U.S. District Court for the Northern District of New York under number 14-cv-17.
The investigation and settlement were the result of a coordinated effort among the U.S. Attorney’s Office for the Northern District of New York, the SBA-OIG, and the VA-OIG. The United States was represented by Assistant U.S. Attorney Adam J. Katz.
DLA set to expire CAGE codes
The Defense Logistics Agency is changing the way it manages Commercial and Government Entity codes by assigning an expiration date to all new or updated codes after Aug. 25.
This is the first time in the 44 years since CAGE codes have been assigned that DLA will expire CAGE codes, and it will be accomplished in a phased approach, said Wyoma Smith, CAGE program manager in DLA Information Operations.
“Taking action to expire CAGE codes is a step in the right direction for data quality,” Smith said. “Requiring customers to renew their business information through an update to their CAGE record on a regular basis is good business for all. Ultimately, the goal is to provide current and correct information to everyone using this data.”
In the first phase, expiration dates will only be applied to domestic U.S. CAGE codes that are new or updated after Aug. 25, Smith said. Records used in verification transactions will have an expiration date set if the record is saved. Records that are associated with System for Award Management registration will have their expiration dates reset based on the date of an update or assignment of a CAGE code, Smith said. For example, if a customer renews their registration every year, their expiration date will reset every year. Or, if a customer renews an expired SAM registration, CAGE will pick up that data and reset the expiration date.
CAGE code expiration dates will be displayed in CAGE Search & Inquiry, the new search tool that launched in February as part of the new CAGE Public website. Downstream systems will receive the updated CAGE status code just like the systems do today.
Existing CAGE records will not be assigned an expiration date until a way forward is determined for Phase 2, Smith said. Phase 2 will require auto-generated email notifications to customers whose codes will have an expiration date assigned; these notifications will be modeled after the SAM notifications and customers will receive four separate notifications to take action. After Phase 1 is complete, a test set of old CAGE records will be expired to determine the effect on the system and plan how to handle the rest of the records, she said.
Doing Business with the Defense Logistics Agency (DLA)
The Defense Logistics Agency (DLA) is the Department of Defense's (DOD) logistics combat support agency. DLA's mission is to provide best value integrated logistics solutions to America’s Armed Forces and its Interagency Customers in peace, during national disasters/emergencies and in war, around the clock, in the homeland, and around the world. DLA supplies its military and civilian agency customers with critical resources needed to accomplish worldwide missions.
The DLA Office of Small Business Programs (OSBP) provides training, guidance, and strategies that maximize opportunities for small businesses so they can participate in DLA's acquisition program. OSBPs are located at each DLA procuring activity. They advise and assist contracting, program manager, and requirements personnel on matters affecting small firms.
- Click here for DLA Small Business Programs Contacts
- Click here for more details about doing business with the Defense Logistics Agency - Small Business Overview for Vendors
WOSB repository to be replaced with new SBA portal
On Wednesday, March 23, 2016, the U.S. Small Business Administration (SBA) posted a notice on its website indicating that the on-line repository where women-owned small businesses (WOSBs) upload ownership and control documentation has been inactivated. SBA’s notice indicates that the WOSB repository will be replaced within “several weeks” by a new portal in support of the WOSB certification program.
The new portal is located at https://certify.sba.gov however, as of March 25, the site is labeled as follows: “This site is a work in progress.” SBA says that documents previously uploaded to the repository are to be migrated to the new site.
Small businesses that are interested in submitting an offer on a solicitation that has been set aside for WOSBs under the WOSB Program must submit a checklist of certification documentation prior to responding to a federal bid or proposal solicitation. Before SBA’s new portal is functional, it is unknown what options WOSBs have for submitting their documents. Once certification uploads are complete, agency Contracting Officers are responsible for checking the repository to ensure all required documents have been submitted.
SBA says that it has notified Contracting Officers (COs) that the WOSB system may be unavailable for several weeks and has instructed COs to contact the SBA with individual requests to verify self-certification compliance for specific WOSBs.
More information on the WOSB program and the features of the new portal can be found at: https://www.sba.gov/content/women-owned-small-business-program.
Top 20 federal contract opportunities for FY16 are identified
Bloomberg Government has published what it calls a “cheat sheet” showing the top 20 federal contract opportunities for fiscal year 2016.
Each opportunity is worth more than $1 billion in lifetime value – and each opportunity’s RFP is expected to be released this fiscal year (Oct. 1, 2015 – Sept. 30, 2016). Thirteen of the opportunities are Defense Department related, and seven are related to other federal agencies, worth a combined total value of $253 billion.
Registration with Bloomberg Government is necessary to download this report. The download is available at: http://goo.gl/7wxpaH.
SBA to Allow Sole Sourcing Under WOSB Federal Contract Program
Effective October 14, 2015, the U.S. Small Business Administration (SBA) issues final rule authorizing federal agencies to award sole-source contracts to women-owned small businesses
eligible for the Woman-Owned Small Business (WOSB) Federal Contract Program.
VA CVE Certification - online training now available
CVE is hosting recurring training for interested Service-Disabled Veteran-Owned and Veteran-Owned Small Businesses on different aspects of the verification process. At the conclusion of each webinar, CVE will host a Town Hall on the Verification Program to solicit feedback from participants. Discussion during this part of the session will not be limited to the topics of Re-verification, Pre-Application, or How to Stay Verified.
Selling to the Defense Logistics Agency
The Defense Logistics Agency (DLA) Wants to Buy from Small Business!
DLA is looking for small business suppliers in all socio-economic categories, including Service-Disabled Veteran Owned Small Businesses (SDVOSB), Women-Owned Small Businesses, 8(A)s and Historically Underutilized Business (HUB) Zones.
NYS Launches NEW Procurement Website
Procurement Services, a division of the Office of General Services, is the State’s central procurement office, responsible for establishing and managing contracts for goods and services needed by government entities across the State, including agencies, local governments, and other authorized users. This State is comparable to a Fortune 500 business and as such, has remarkable purchasing power. The State works to harness this power using innovative, strategic methods to give customers timely, cost effective ways to buy the goods and services they need.
DCMA Packaging Webinar
DCMA Packaging and Labeling Workshop
You can download the presentation in parts, click on each link below:
DFARs Final Rule re: Counterfeit Electronic equipment
DIBBS (DLA’s Internet Bid Board System) – The Way to Sell to DLA - Free Webinars
Scam targets GSA schedule holders using spoofed federal email addresses
OFPP dispels 8 more agency, vendor communications myths
There are ".coms" charging $500+ to complete your SAM registration. This is a free registration. Call the PTAC for assistance.
HUBZones: Historically Underutilized Business Zone
Are you located in a HUBZone? Want to find out if qualify for HUBZone certification? Contact us, we can help.
HOW THE HUBZone PROGRAM WORKS
The US Small Business Administration (SBA) regulates and implements the program and
- determines which businesses are eligible to receive HUBZone contracts,
- maintains a listing of qualified HUBZone small businesses that Federal agencies can use to locate vendors,
- adjudicates protests of eligibility to receive HUBZone contracts, and
- reports to the Congress on the program's impact on employment and investment in HUBZone areas.
A small business must meet all of the following criteria to qualify for the HUBZone program:
- it must be located in a "historically underutilized business zone" or HUBZone.
- it must be owned and controlled by one or more US Citizens, and
- at least 35% of its employees must reside in a HUBZone.
- Click here to find out if you located in a HUBZone.