USPS OIG advisory report: Procurement-Related Ethical Violations at Vehicle Maintenance Facilities

This report presents the results of our review of the U.S. Postal Service’s procurement-related ethical violations at vehicle maintenance facilities (VMF) (Project Number 13YG011SM000). This self-initiated review examines potential control deficiencies related to ethical violations within the Postal Service’s procurement environment. Our objective was to assess procurement-related ethical violations involving current and former Postal Service employees at VMFs to identify internal control deficiencies. See Appendix A for additional information about this audit.

Postal Service employees are required to adhere to prescribed standards of ethical conduct in the performance of their official duties. For example, employees are prohibited from using their public office for private gain and soliciting or accepting any gift or item from those doing business with the Postal Service. The U.S. Postal Service Office of Inspector General (OIG) has completed several investigations in recent years that identified ethical violations committed by VMF employees in supervisory and nonsupervisory positions.

Conclusion
During fiscal years (FY) 2009 through 2013 OIG investigations closed 11 instances of VMF employees with corrupted interests receiving bribes in exchange for steering work, receiving kickbacks for arranging fraudulent payments to contractors, or concealing personal relationships with a supplier to secure contract work. The Postal Service paid these contractors more than $14.5 million during the period of these violations, which occurred during FYs 2004 through 2012. We also benchmarked procurement cases from other government agencies and found the other agencies reported violations similar to the Postal Service cases.

Distribution of Repair Work
Eight ethical violations involved two businesses with the same owner who paid bribes to VMF employees to steer vehicle repair work to the businesses when other suppliers existed to perform the repairs. VMF managers, supervisors, lead technicians, and mechanics participated in the scheme by accepting bribes in the form of cash, gifts, entertainment, and personal services in exchange for sending work, valued at more than $13 million, to these two businesses over about 7 years:

 Seven of these employees received frequent cash and noncash bribes from a contractor,— , during FYs 2004 through 2010 to ensure the employees continued to steer contract work to the business. The briberies continued until the contractor reported the briberies in a deal to protect his wife, who was under investigation by the U.S. district attorney in an unrelated case. PR link: Five Postal Supervisors Indicted For Taking Bribes and Lap dances

 From FYs 2004 to 2008, another employee received bribes to steer work to , a related contracting business at a different location. Once the employee was promoted to management and moved to the other location, the manager continued to accept the bribes for sending work to until the summer of 2008 when the manager’s boss was charged with embezzling from the Postal Service and the contractor closed its business at that location. The Postal Service made more than $13 million in Voyager eFleet Card2 or money order payments to these contractors during the period of the bribes, which occurred during FYs 2004 through 2010.

Fraudulent Payments
Two ethical violations involved a VMF manager and supervisor who conspired with contractors to defraud the Postal Service by submitting fraudulent requests for payment in exchange for a portion of the payments:
 A VMF supervisor requested two contractors, , to submit fraudulent requests for payment through the Voyager eFleet Card system during FYs 2008 through 2011 to receive payments for repairs they did not perform. The supervisor approved the payments without the contractors submitting invoices and the contractors obtained cash from their accounts to provide kickbacks to the supervisor. The Postal Service paid the contractors $955,056 during the period of the fraud, which occurred during FYs 2008 through 2011. The supervisor and contractors were ordered to pay restitution totaling $330,000.

 A VMF manager approved the payment of fictitious invoices submitted by a contractor, , in exchange for a portion of the payments. The contractor, who received $270,516 for vehicle washing and cleaning services between FYs 2004 and 2007, conspired with the manager to submit false invoices for services not performed and, in turn, paid kickbacks to the manager who approved the payments. The VMF manager and contractor were ordered to pay restitution of $190,000.

Business Provided to Family Member Under Verbal Agreement

Another ethical violation involved a nonsupervisory VMF employee who assisted a family member in securing Postal Service repair and maintenance business. The employee and his son concealed their relationship in pursuit of Postal Service work by having the son assume a false identity. The employee introduced his son, who was using a different name, as a prospective contractor to VMF management, which led to the employee’s son’s inclusion in a Postal Service network of approved vendors. Once approved, the employee could directly award work to his son. In addition, the VMF manager at the facility did not secure a VMRA but allowed the contractor to work under a verbal agreement. The Postal Service paid the contractor $293,187 during FYs 2011 and 2012, with payments made via Voyager card and the VMF manager approved the payments without additional oversight.

full report

Related link: California USPS Vehicle Manager Gets Prison and Ordered to Forfeit $6.4 Million For Fraud