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Semiannual Report to Congress October 1, 1995 through March 31, 1996

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Semiannual Report to Congress

October 1, 1995 through March 31, 1996

The report listed below is an electronic rendering of the official printed document. It has been formatted for electronic presentation and may not contain all the charts, figures, or other graphical information in the official report.

Prosecutive Actions

The following is a summary of investigative activities during this reporting period. These include investigations of alleged criminal violations which may result in prosecution and conviction, investigations of alleged violations of Agency regulations and policies, and OIG personnel security investigations. The Office of Investigations tracks investigations in the following categories: preliminary inquiries and investigations, joint investigations with other agencies, and OIG background investigations.

Summary Of Investigative Activities

Pending Investigations as of September 30, 1995: 181
New Investigations Opened This Period: 71
Investigations Closed This Period: 71
Pending Investigations as of March 31, 1996: 181

Prosecutive and Administrative Actions

In this period, investigative efforts resulted in 5 convictions and 1 indictment (not including indictments obtained in cases in which we provided investigative assistance. Fines and recoveries, including those associated with civil actions, amounted to $ 3,448,953. Eleven administrative actions were taken as a result of investigations. This total does not include suspensions and debarments resulting from Office of Investigations activities or actions resulting from reviews of personnel security investigations.

Profiles of Pending Investigations by Type Profiles of Pending Investigations by Type

Description of Selected Prosecutive and Administrative Actions

Below is a brief description of some of of the prosecutive actions which occurred during the reporting period. Some of these actions resulted from investigations initiated before October 1, 1995.

Former Water Association Official Sentenced

Brian Burns, a former program manager of the Northeast Rural Water Association (NERWA), was sentenced on January 4, 1996, in United States District Court, Burlington, Vermont, to 6 months in jail and 4 months of home detention based on his conviction by a federal jury in July 1995 on charges of felony fraud, false statements, and wire fraud. Burns was also ordered to pay restitution to the Federal government of $21,186 and $150 in court costs.

As reported in our previous Semiannual Report, NERWA was funded by EPA and the U.S. Department of Agriculture (USDA) to provide training and technical assistance in safe drinking water and wastewater matters. Burns concealed and/or manipulated material information provided to the National Rural Water Association, NERWA's oversight organization, by misrepresenting his work on daily time logs. Burns used Federal funds of approximately $5,000 to pay for an apartment, $7,000 in travel expenses for trips to attend Harvard, and a $30,000 salary while attending school.

The case was investigated by the EPA OIG with the assistance of the IRS Criminal Investigation Division and the USDA OIG.

Former California Lab Manager and Director Sentenced

In May 1995 Eureka Laboratories, Inc., of Sacramento, California, pleaded guilty to conspiracy to defraud the United States; making and using false documents and concealment of material fact by trick, scheme and device; and filing false claims. Later that month, a jury found Kuen Lee, former Eureka GC/MS Laboratory manager, and Chung Li, former Eureka Director of Laboratory Services, guilty on the same charges.

Eureka is an analytical services laboratory that was hired by various government agencies, including EPA, the Army, and the Air Force, to test numerous water, soil, and air samples for environmental pollutants and toxins in connection with the remediation of hazardous waste sites. Contractually required quality control methods identified specific laboratory procedures, such as tuning, calibration, and performance testing of laboratory equipment, that were designed to ensure that the data produced were accurate and reliable. The primary methods employed by Eureka were gas chromatography (GC) and gas chromatography/mass spectrometry (GC/MS).

The defendants conspired to falsify analytical test results in order to make it appear that Eureka had properly calibrated and maintained its laboratory equipment. Eureka concealed its fraudulent manipulations of the data by removing various computer-generated "flags" or identifiers from the documents it delivered to its government clients. As a result, the accuracy and reliability of the test results vital to the successful identification of hazardous substances and the remediation of Superfund hazardous waste sites were compromised. In November 1995, Chung Li was sentenced to 24 months incarceration, followed by 36 months supervised probation, 250 hours of unpaid community service, a payment of a $400 special assessment , and $60 in fees. Also as a special condition of probation, Li is prohibited from employment involving chemical analyses for Government contracts unless a fully operational Quality Assurance/Quality Control procedure is implemented by the employer and reviewed by the probation officer.

In December 1995, Kuen Lee was sentenced to 5 months incarceration, followed by 36 months supervised probation, 250 hours of unpaid community service, and 5 months of participation in a residential community correction center. Lee was also ordered to pay a $400 special assessment and $60 in fees. Lee also is subject to the same special condition of probation regarding employment as Li.

In December 1995, Eureka was sentenced to 60 months probation, fined $1.5 million, ordered to pay restitution of $322,442 and a $1,600 special assessment. The company was also ordered for five years to establish a committee to monitor its compliance with industry standards for GC/MS tuning, calibration, and recalibration and compliance with the terms of probation and to develop and implement an effective prevention and detection program during the period of probation.

This investigation was investigated by the EPA OIG, the U.S. Army Criminal Investigation Command, the U.S. Air Force Office of Special Investigations, and the California Environmental Protection Agency.

Former Officers of a Midwest Engineering Firm Sentenced

A major Midwest engineering firm, Tenney Pavoni Associates, Inc., and two of its principals, Mark W. Tenney and Joseph L. Pavoni, were charged in February 1995 with submitting false and inflated claims to the EPA for their company's engineering and inspection services on the construction of a nitrification project through the Hammond Sanitary District and to the U.S. Department of Transportation on a Federally-funded bridge project in Hammond, Indiana. The company was also charged with conspiracy to submit false claims. Also, company vice-president Gary T. Boblitt was charged with and pled guilty to filing a false and inflated statement to the Hammond Sanitary District, which was submitted to EPA for reimbursement.

Tenney Pavoni Associates, Inc. (TPA), formerly known as TenEch Engineering, was an engineering firm with offices in South Bend and Highland, Indiana; Louisville, Kentucky; and Chicago and Springfield, Illinois. Mark Tenney was the chief executive officer and Joseph Pavoni was the president of the company. TPA was the primary engineering firm on over $17 million of EPA-funded grant work at the Hammond Sanitary District, Hammond, Indiana. According to the criminal information, Tenney and Pavoni established policies and practices which resulted in the falsification of time sheets to reflect inflated hours worked by their employees on cost-reimbursement contracts that TPA received from EPA and the U.S. Department of Transportation. Further, the information charged that persons supervised by Tenney and Pavoni reviewed time sheets of engineers and others and also boosted the amount of hours reflected for these government contracts, resulting in the company submitting invoices seeking payment for work that had not been performed.

On July 24, 1995, Mark Tenney pleaded guilty to one count of making a false claim and one count of aiding and abetting. On December 22, 1995, Tenney was sentenced to five months incarceration, five months home detention, 300 hours of community service, restitution of $372,771 and a fine of $250,000, and a special fee of $50. On March 15, 1996, Joseph Pavoni pleaded guilty to making a false claim and was sentenced to three years probation, 500 hours of community service, restitution of $372,771, a fine of $250,000 and a special fee of $50. The restitution of $372,771 and fine of $250,000 were imposed jointly and severally on co-defendants Mark Tenney, Joseph Pavoni, and Tenney Pavoni Associates, Inc. This case was investigated jointly by the EPA OIG, FBI, and the Department of Transportation OIG.

False Inspector Convicted and Sentenced

Tim Gusler pleaded guilty in October 1995 to theft by deception in New Jersey Superior Court after an OIG investigation revealed that Gusler, while posing as an EPA and/or state environmental inspector, extorted money from at least two automobile body repair shops under threat of reporting them for alleged violations of environmental laws. Gusler was sentenced in January 1996 to 5 days imprisonment, 36 months probation, and 50 hours of community service and a fine of $140. This case was investigated jointly by the EPA OIG and the New Jersey Division of Criminal Justice, Office of the Attorney General.

Former Stay-in-School Employee Sentenced

Delron Gant, a former stay-in-school employee, was sentenced in January 1996 to 12 months probation, fined $10, and ordered to pay restitution of $431, the cost of an airline ticket, after pleading guilty to a misdemeanor charge of second degree theft. Gant submitted an altered travel authorization in order to receive a round trip airline ticket which she used for personal travel.

Employee Sentenced in Theft Case

Carlton Nadolney, an EPA toxicologist, was sentenced in November 1995 to 60 months probation including 4 months of monitored home detention, fined $25 and ordered to pay restitution of $15,014 after pleading guilty to theft of government property. As reported in our previous semiannual report, Nadolney's plea was the result of an OIG investigation which disclosed approximately $15,000 in unauthorized long distance telephone calls that were charged to EPA.

Former Employee Sentenced in AMEX Scam

On December 19, 1995, Jean Stafford, a former EPA secretary, was sentenced to 24 months in prison, fined $120,000, and ordered to pay restitution of $7,200. Upon release from prison, she will be placed on probation for three years.

As reported in our previous semiannual report, Stafford pleaded guilty to access device fraud in August 1995 after an investigation disclosed a scheme to defraud, traffic in, use, and cause to be used at least eight fraudulently obtained American Express government credit cards. The case was initiated based on information that an unknown EPA employee had obtained an EPA American Express government credit card by using false identification and charged over $10,000 in goods and services over a three-week period. As a result of this matter, the Agency's Financial Management Division instituted a retail block on all Headquarters American Express accounts to prohibit purchases in retail-type facilities.

This case was investigated jointly by the EPA OIG, Secret Service, and the Postal Inspection Service.

Civil and Administrative Actions to Recover EPA Funds

Investigations and audits conducted by the Office of Inspector General provide the basis for civil and administrative actions to recover funds fraudulently obtained from EPA. Through the Inspector General Division (IGD) of the Office of General Counsel (OGC), the OIG uses a variety of tools to obtain restitution. These include cooperative efforts with the Department of Justice in filing civil suits under the False Claims Act, the Program Fraud Civil Remedies Act, and other authorities; working with grantees using their own civil litigation authorities; invoking the restitution provisions of the Victim and Witness Protection Act during criminal sentencing; using the Agency's authority to administratively offset future payments and to collect debts; and negotiating voluntary settlements providing for restitution in the context of suspension and debarment actions. Civil and administrative actions to recover funds usually extend over several semiannual reporting periods.

Construction Companies Settle Claims That They Falsely Took Part in Programs for Minorities and Women

Several construction companies involved in federally-funded public works projects in the Seattle-Tacoma area agreed to pay the Federal government $715,000 to settle two lawsuits alleging that they used sham minority subcontracting companies in order to qualify under state and local programs for the socially and economically disadvantaged. The projects were the West Seattle Bridge replacement project, the Seattle Transit Access project, and the upgrading of the City of Tacoma Waste Water Treatment Plant, all of which took place in the late 1980's.

The lawsuits resulted from the investigative efforts of a multi-agency task force consisting of the EPA OIG, U.S. Attorney's Office, FBI, IRS, DOT OIG, and DOL OIG.

In one lawsuit, the government alleged that Peter Kiewit Sons, Inc., an Omaha, Nebraska, holding company, through its operating subsidiaries, Kiewit Construction Group, Inc., of Omaha, and Kiewit Construction Company, Inc., and Kiewit Pacific Company of Seattle, falsely represented that it was using a minority female owned company in Seattle, Global Consultants Construction, Inc., to do nearly $8 million worth of work when, in fact, Global did not actually perform the work.

In the other lawsuit, the government alleged that General Construction Company, formerly a division of Wright-Schuchart, Inc., and now owned by Fletcher-General, Inc., a Seattle-based firm, used 3A Industries, Inc., as a sham minority business enterprise in order to meet participation goals on the EPA-funded Tacoma Waste Water Treatment Plant. 3A, which was supposed to do $3 million worth of steel and concrete construction, was found to have little more than small tools, brooms, and shovels at the site.

In answering the government's allegations, all defendants denied any wrongdoing, asserted that their conduct was entirely lawful, and did not admit liability. As a condition of settlement, Fletcher General Construction paid $140,000, and Kiewit Construction Group, Inc., paid $575,000 to resolve the matter, and the district court dismissed the case on January 2, 1996.

LNS Environmental Services

LNS Environmental Services, Inc. (LNS) and Niranjan G. Shah, LNS's owner and president, entered into an agreement with the U.S. Attorney's Office for the Eastern District of Texas, paying $9,000 to settle a civil False Claims Act case. The agreement and payment were the culmination of an OIG investigation relating to LNS's submission of a fraudulent invoice for testing samples from a Superfund site. EPA paid LNS $4,687 on the fraudulent invoice.

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