View Full Version : Military pays $998,798 to ship 19-cent washers

08-17-2007, 09:18 AM
WASHINGTON -- A small South Carolina parts supplier collected about $20.5 million over six years from the Pentagon for fraudulent shipping costs, including $998,798 for sending two 19-cent washers to a military base in Texas, federal officials said Thursday.

The company also billed and was paid $455,009 to ship three machine screws costing $1.31 each to Marines in Habbaniyah, Iraq, and $293,451 to ship an 89-cent split washer to Patrick Air Force Base in Cape Canaveral, Fla., Pentagon records show.

The owners of C&D Distributors in Lexington, S.C. -- twin sisters -- exploited a flaw in an automated Defense Department purchasing system: bills for shipping to combat areas or U.S. bases labeled priority usually were paid automatically, said Cynthia Stroot, a Pentagon investigator.

C&D's fraudulent billing started in 2000, said Stroot, the Defense Criminal Investigative Service's chief agent in Raleigh, N.C. "As time went on, they got more aggressive in the amounts they put in."

The price the military paid for each item shipped rarely reached $100 and totaled just $68,000 over the six years in contrast to the $20.5 million paid for shipping, she said.

"The majority, if not all of these parts, were going to high-priority, conflict areas. That's why they got paid," Stroot said. If the item was earmarked priority, destined for the military in Iraq, Afghanistan or certain other locations, "there was no oversight."

The scheme unraveled in September after a purchasing agent noticed a bill for shipping two more 19-cent washers: $969,000. That order was rejected and a review turned up the $998,798 payment earlier that month for shipping two 19-cent washers to Ft. Bliss, Texas, Stroot said.

The Pentagon Defense Logistics Agency orders millions of parts a year. Stroot said the agency and the Defense Finance and Accounting Service, which pays contractors, have made changes, including thorough evaluations of the priciest shipping charges.

Dawn Dearden, a spokeswoman for the logistics agency, said finance and procurement officials examined all billing records. Stroot said the review showed that fraudulent billing "is not a widespread problem."

"C&D was a rogue contractor," Stroot said. While other questionable billing has been uncovered, nothing came close to C&D's, she said. The next-highest contractor billed $2 million in questionable transport costs.

C&D and two of its officials were barred in December from receiving federal contracts. A federal judge in Columbia, S.C., accepted the guilty plea Thursday of the company and one sister, Charlene Corley, to one count of conspiracy to commit wire fraud and one count of conspiracy to launder money, Assistant U.S. Attorney Kevin McDonald said.

Corley, 46, faces a maximum prison sentence of 20 years on each count and is to be sentenced soon, McDonald said. Stroot said Corley's sibling died last year.

Corley and her attorney have not returned telephone calls seeking comment.


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