Wrist Slap for CEO Who Defrauded USAID out of Hundreds of Millions
Former CEO Derish Wolff of Louis Berger Group, one of the country’s largest engineer contracting firms will be confined to his home for a year and have to pay a $4.5 million fine for helping to defraud the federal government out of hundreds of millions of dollars over 20 years. The fine represents a tiny fraction of the amount the company collected from the government.
Wolff, 70, was sentenced by U.S. District Court Judge Anne Thompson for leading a “conspiracy to defraud USAID by billing the agency on so-called ‘cost-reimbursable’ contracts—including hundreds of millions of dollars of contracts for reconstructive work in Iraq and Afghanistan” and for inflating overhead costs.
Related: U.S. Blew $500k on Melting Afghan Buildings
Federal prosecutors said the company, tasked with building roads and bridges in Afghanistan and Iraq, charged the government 140 percent of the actual cost for every project it did. That means that for every one dollar of work the contractor did, it received $1.40 extra. Louis Berger was paid more than $2 billon by the U.S. government for its infrastructure work in war zones.
Prosecutors said that between 1990 and 2009, Wolff and his colleagues inflated the costs of their work for USAID by telling accountants to “pad time sheets with hours ostensibly devoted to federal government projects when it had not actually worked on such projects.”
Related: Pentagon Won’t Verify $300 Million a Year in Afghanistan is Spent Properly
Beyond logging false work hours, the prosecutor said Wolff routinely instructed his subordinates to bill USAID for all of their overhead expenses—like rent at Louis Berger’s Washington office even though the D.C. office worked on other projects that had nothing to do with the federal government.
After two other company executives pleaded guilty to conspiring to defraud the federal government in 2010, Louis Berger Group agreed to make full restitution to USAID. It settled civil and criminal charges and had to pay $18.7 million in criminal fines and an additional $50.6 million to resolve allegations that it violated the False Claims Act by significantly overbilling USAID.
Map of the Day: Navigating the IRS
The Taxpayer Advocate Service – an independent organization within the IRS whose roughly 1,800 employees both assist taxpayers in resolving problems with the tax collection agency and recommend changes aimed at improving the system – released a “subway map” that shows the “the stages of a taxpayer’s journey.” The colorful diagram includes the steps a typical taxpayer takes to prepare and file their tax forms, as well as the many “stations” a tax return can pass through, including processing, audits, appeals and litigation. Not surprisingly, the map is quite complicated. Click here to review a larger version on the taxpayer advocate’s site.
A Surprise Government Spending Slowdown
Economists expected federal spending to boost growth in 2019, but some of the fiscal stimulus provided by the 2018 budget deal has failed to show up this year, according to Kate Davidson of The Wall Street Journal.
Defense spending has come in as expected, but nondefense spending has lagged, and it’s unlikely to catch up to projections even if it accelerates in the coming months. Lower spending on disaster relief, the government shutdown earlier this year, and federal agencies spending less than they have been given by Congress all appear to be playing a role in the spending slowdown, Davidson said.
Number of the Day: $203,500
The Wall Street Journal’s Catherine Lucey reports that acting White House Chief of Staff Mick Mulvaney is making a bit more than his predecessors: “The latest annual report to Congress on White House personnel shows that President Trump’s third chief of staff is getting an annual salary of $203,500, compared with Reince Priebus and John Kelly, each of whom earned $179,700.” The difference is the result of Mulvaney still technically occupying the role of director of the White House Office of Management and Budget, where his salary level is set by law.
The White House told the Journal that if Mulvaney is made permanent chief of staff his salary would be adjusted to the current salary for an assistant to the president, $183,000.
The Census Affects Nearly $1 Trillion in Spending
The 2020 census faces possible delay as the Supreme Court sorts out the legality of a controversial citizenship question added by the Trump administration. Tracy Gordon of the Tax Policy Center notes that in addition to the basic issue of political representation, the decennial population count affects roughly $900 billion in federal spending, ranging from Medicaid assistance funds to Section 8 housing vouchers. Here’s a look at the top 10 programs affected by the census:
Chart of the Day: Offshore Profits Continue to Rise
Brad Setser, a former U.S. Treasury economist now with the Council on Foreign Relations, added another detail to his assessment of the foreign provisions of the Tax Cuts and Jobs Act: “A bit more evidence that Trump's tax reform didn't change incentives to offshore profits: the enormous profits that U.S. firms report in low tax jurisdictions continues to rise,” Setser wrote. “In fact, there was a bit of a jump up over the course of 2018.”
