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Houston Chronicle
April 15, 2008 White House reverses its stance on the crackdown
By Lara Jakes Jordan, Associated Press
WASHINGTON — A loophole that would have helped conceal billions of dollars of fraud in government contracts overseas has been eliminated from a Bush administration proposal to protect taxpayer dollars, according to documents obtained Monday by The Associated Press.
Reversing itself after months of criticism, the administration closed the loophole that was quietly slipped last year into a proposed Justice Department crackdown on contract fraud. The loophole specifically exempted contractors from reporting evidence of fraud or abuse in overseas work that cost taxpayers at least $5 million.
Original rule written quickly
An updated version of the proposal, drafted April 4, requires reporting on all contracts — whether at home or abroad.
The government has spent more than $102 billion since 2003 on contracts in Iraq and Afghanistan alone.
"This change would result in making the clause requirements for a contractor code of business ethics and conduct, business ethics awareness and compliance program, and internal control system applicable to contracts performed outside the United States," the new draft rule states.
Government policywriters said the original rule was drawn up quickly, and chided the Justice Department for not explicitly making sure that overseas contracts should be included in the crackdown. "It was only after publication of the proposed rule ... that DOJ and other respondents expressed concern about the overseas exemption," the draft states.
The draft was provided to the AP on the eve of a hearing by a House panel investigating whether the loophole was slipped into the crackdown at the request of lobbyists who represent giant global government contractors.
'Oversight works'
The draft is still tentative, and the regulations requiring the contract reporting are not expected to become final until later this year. The Democratic congressman who called for the House inquiry, Rep. Peter Welch, D-Vt., vowed Monday to "close this multibillion-dollar loophole" for good.
"This investigation proves why oversight works," said Welch, who is sponsoring legislation to eliminate the overseas exemption whether or not the Bush administration does so.
The government spends an estimated $350 billion a year on contracts. For decades, contractors have been asked to voluntarily report internal fraud or overpayment on government-funded projects.
But over the last 15 years, the number of company-reported fraud cases has declined steadily, according to Justice Department data. And since the start of the so-called war on terror, prosecutors have charged 44 people in investigations into kickbacks, bribes and other abuses of taxpayer money in Iraq and Afghanistan.
The increased violations led the Justice Department in May to ask for regulations that would force companies to notify the government if they find evidence of contract abuse of more than $5 million.
Failure to comply could make a company ineligible for future government work.
April 15, 2008 White House reverses its stance on the crackdown
By Lara Jakes Jordan, Associated Press
WASHINGTON — A loophole that would have helped conceal billions of dollars of fraud in government contracts overseas has been eliminated from a Bush administration proposal to protect taxpayer dollars, according to documents obtained Monday by The Associated Press.
Reversing itself after months of criticism, the administration closed the loophole that was quietly slipped last year into a proposed Justice Department crackdown on contract fraud. The loophole specifically exempted contractors from reporting evidence of fraud or abuse in overseas work that cost taxpayers at least $5 million.
Original rule written quickly
An updated version of the proposal, drafted April 4, requires reporting on all contracts — whether at home or abroad.
The government has spent more than $102 billion since 2003 on contracts in Iraq and Afghanistan alone.
"This change would result in making the clause requirements for a contractor code of business ethics and conduct, business ethics awareness and compliance program, and internal control system applicable to contracts performed outside the United States," the new draft rule states.
Government policywriters said the original rule was drawn up quickly, and chided the Justice Department for not explicitly making sure that overseas contracts should be included in the crackdown. "It was only after publication of the proposed rule ... that DOJ and other respondents expressed concern about the overseas exemption," the draft states.
The draft was provided to the AP on the eve of a hearing by a House panel investigating whether the loophole was slipped into the crackdown at the request of lobbyists who represent giant global government contractors.
'Oversight works'
The draft is still tentative, and the regulations requiring the contract reporting are not expected to become final until later this year. The Democratic congressman who called for the House inquiry, Rep. Peter Welch, D-Vt., vowed Monday to "close this multibillion-dollar loophole" for good.
"This investigation proves why oversight works," said Welch, who is sponsoring legislation to eliminate the overseas exemption whether or not the Bush administration does so.
The government spends an estimated $350 billion a year on contracts. For decades, contractors have been asked to voluntarily report internal fraud or overpayment on government-funded projects.
But over the last 15 years, the number of company-reported fraud cases has declined steadily, according to Justice Department data. And since the start of the so-called war on terror, prosecutors have charged 44 people in investigations into kickbacks, bribes and other abuses of taxpayer money in Iraq and Afghanistan.
The increased violations led the Justice Department in May to ask for regulations that would force companies to notify the government if they find evidence of contract abuse of more than $5 million.
Failure to comply could make a company ineligible for future government work.