CONCORD - Enco Industries, Inc., a company located in Plaistow, New Hampshire, pleaded guilty to making false statements to the U.S. Department of Defense’s Defense Logistics Agency, announced United States Attorney Scott W. Murray.
According to court documents and statements made during a hearing earlier today, the Defense Logistics Agency (“DLA") purchases operating supplies (“items") for the U.S. military from government contractors through the federal supply system. The Department of Defense (“DoD") requires that all items conform to strict military specifications identified in its contracts. Contract solicitations include the DoD’s specifications for the requested item.
An oil sorbent mat is one item the DLA acquires through the federal supply system. Because the mats are used to absorb flammable liquids, the mats are required to meet specifications requiring them to dissipate electrical charges to the ground.
According to court documents, in December of 2011, the DLA posted a solicitation to acquire approximately 96,000 units of hazardous material mats over a five-year period. The solicitation required, among other things, that the mats pass standards established in National Fire Protection Association for Static Decay and Surface Resistivity. The solicitation also required the selected government contractor to purchase mats manufactured by a company in Tipton, Pennsylvania or another company in Pennsylvania.
Enco has been an approved government contractor since 2004. On Jan. 13, 2012, Enco’s government contracting manager submitted Enco’s bid for the contract. The bid stated that Enco would purchase the mats from the company in Tipton for $29.15 for each unit containing 100 mats during the first year of the five-year annually renewable contract. This statement was false because, at the time the bid was submitted, Enco did not intend to purchase the mats from the company in Tipton.
The court documents further allege that on June 18, 2012, the DLA awarded the contract to Enco and sent the company a purchase order that incorporated all the required specifications for the mats. From June of 2012 to October of 2013, Enco provided approximately 21,700 units to the DLA. To obtain payments, Enco’s office manager submitted claims to the DoD. Most of claims were false because only seven units contained mats that were manufactured by the company in Tipton. Enco received payments totaling $683,513.55 for these claims.
In August of 2013, an independent company concluded that several of the mats it tested did not meet the contract’s requirements for static decay or surface resistivity. As a result, the DLA sent Enco a letter on October 7, 2013, that notified the company that the contract might be terminated due to non-conformance.
In an October 2013-email addressed to the DLA, Enco’s president stated that Enco bought the mats from a non-approved manufacturer because the amount charged by the company in Tipton was prohibitive. In the same email, Enco’s president stated that Enco was not able to identify the non-approved manufacturer. This statement was false because, at the time of the email, Enco was able to identify the manufacturers from whom it had purchased the mats.
While speaking with Special Agents from the Naval Criminal Investigative Service (“NCIS") and Defense Criminal Investigative Service (“DCIS") on Feb. 21, 2014, Enco’s president stated that before Enco submitted its bid on the contract, the company received price quotes from the two approved manufacturers. According to the court documents, Enco’s president also stated that Enco decided to buy the mats from the company in Tipton because its price was lower. This statement was false and misleading because when Enco submitted its bid for the contract, it intended to fulfill the contract by purchasing mats from a non-approved manufacturer.
A sentencing hearing has been scheduled for September 11th, 2019. At sentencing, the company could be placed on probation for up to five years and fined up to $500,000.
“Defense procurement fraud is a serious crime that can jeopardize the safety of military personnel," said U.S. Attorney Murray. “Those who seek to do business with the government should be truthful and candid. We will always work closely with our law enforcement partners to identify and prosecute individuals or entities that seek to defraud the government or who are dishonest in their dealings with federal agencies."
"Ensuring the integrity of the U.S. Department of Defense's (DoD) procurement process is a top investigative priority for the Defense Criminal Investigative Service (DCIS)," said Leigh-Alistair Barzey, Special Agent in Charge of the DCIS Northeast Field Office. "The guilty plea announced today is the direct result of a joint effort and it demonstrates DCIS' ongoing commitment to partner with the U.S. Attorney's Office, NCIS and AFOSI to investigate and prosecute companies that provide false statements to the DoD in an effort to improperly receive defense contracts."
“Fraud is never a victimless crime," said Special Agent in Charge Leo S. Lamont of the NCIS. “This case of using inferior and substandard materials damaged the readiness and safety of U.S. forces. The victims are not just our men and women in uniform, but all American taxpayers. NCIS will continue to tirelessly pursue all those who seek to take advantage of the Department of the Navy and its interests while keeping the procurement system fair and honest."
"The Air Force Office of Special Investigations (AFOSI), along with its law enforcement partners, has, and always will, aggressively identify, investigate and neutralize anyone who attempts to defraud the US Government and put our nation's warfighters at risk," said Special Agent-in-Charge Jason T. Hein, AFOSI, Office of Procurement Fraud.
The case was investigated by the NCIS, DCIS, and the AFOSI, Office of Procurement. Assistant U.S. Attorney Robert Kinsella is prosecuting the case.
Source: U.S. Department of Justice, Office of the United States Attorneys
