SCANDAL: Contracts Worth $500,000,000 Fraudulently Given to IRS Manager's Stolen Valor Buddy

One of the more despicable things an American can do is fraudulently claim military service and a combat injury to get a competitive advantage in getting federal contracts. It's even worse when those same people also receive a fraudulent HUBzone ( Historically Underutilized Business Zone) designation on top of the fake military claims.  And when the contractor is getting extra props because he is a good friend of the senior manager doing the awarding it's typical of what we hear about our government these days.

In a new report released by the House Oversight Committee reveals that personal relationship between an IRS contracting official and the owner of a company, Strong Castle/Signet Computers, facilitated contracts in a six month period that could be worth nearly $500 million. Before that six month period the company had only $250,000 in annual revenue .

According to Chairman Darrell Issa, R-Calif., the IRS handed a its biggest contract ever a $266 million purchasing agreement to Strong Castle, an information technology company based in Leesburg, Va., based on the company owner’s “longstanding relationship,” with an IRS deputy director Gregory Roseman, who is in charge of the agency’s Enterprise Networks and Tier Systems Support (its nice to have good friends).

The Oversight Committee reviewed over 350 text messages between Roseman and Company President Castillo.  The messages show a relationship far closer than an arms-length relationship between a contractor and government contracting customer. Throughout the report, numerous examples from texts, emails, and witness testimony show that the IRS contracting officer played an often hands-on role in tilting the table in Strong Castle’s favor in numerous contract competitions.  Text messages include grossly inappropriate homophobic slurs that underscore a problematically close relationship.  Castillo said months of records for other text messages, at critical contract junctures, were "accidentally" deleted and unavailable.

The company was recently named “small business contractor of the year,” by the Treasury department. According to Issa, the company earned a Service-Disabled Veteran-Owned Small Business designation based on the owner’s injuries sustained during military prep school and not during active duty or in combat for the U.S. armed forces.

Apparently Strong Castle’s business strategy revolved around this fraudulent preference contracting.  Strong Castle secured the designation of a Service-Disabled Veteran-Owned Small Business as a result of an injury its owner suffered at a military prep school.  He was able to get this designation despite the fact that he never actively served as a member of the armed services, he played college football after the injury, and twenty-seven years went by before he sought the designation as a disabled veteran.  Castillo sought the disabled veteran designation only months before he purchased the company and was so focused on its ability to help secure contracts that he didn’t even know it would entitle him a $450 monthly payment.

Gee I have a hang-nail from when I was in the boy scouts maybe I should apply.

Strong Castle gained a competitive edge by winning a designation from the Small Business Administration as a HUBzone contractor Strong Castle did this by (1) hiring full time college students from Catholic University to fulfill the 35% requirement; (2) falsely dubbing more senior employees who lived in other areas as “consultants” so that they would not harm the 35% employee threshold minimum; and (3) although the company opened a new “headquarters” office in Leesburg, Virginia, it also opened a small office in Chinatown that it said was its “principal office.”  One student employee was fired after Strong Castle discovered she did not live in the HUBzone area.  Another student supposedly worked 9 hours at the office the same day he had 12 hours of final exams.  Strong Castle said this was simply a discrepancy in its records.

The Director of the IRS’s Office of IT Acquisition told investigators that he would cancel a $266 million IBM blanket purchase agreement made with Strong Castle if it was shown that it had intentionally misrepresented facts about its HUBzone certification.  The contract had been described at the biggest contract put out by IRS in 15 years.  Despite SBA revoking Strong Castle’s HUBzone status, IRS now says that cancelling the contract would be too disruptive and doesn’t currently plan to do so.

There is a bright side to this scandal. At least it is of the more typical cronyism type of bureaucratic scandal, with out the political targeting of the teaparty scandal or the leaving Americans to die as in the Benghazi scandal.

What this scandal and others like it indicates is that the federal government is too big. Too many things can fall into the holes. Bureaucratic cronyism is very easy to get away with in an organization of this size, so is presenting the lies which give a company a competitive advantage.  

Tomorrow Messrs Roseman and Castillo face the wrath of Chairman Issa and friends as they testify before the House Oversight Committee.  Buy the BIG bag of Popcorn...this is going to be fun.

UPDATE: Rep Duckworth who was injured in as a helicopter pilot while serving in Iraq really laid into Castillo today...this video is a MUST see.  It starts slow but she really heats up about 30 seconds into it: