DISA awards $578M contract to company with history of fraud

The Defense Information Systems Agency is defending its decision to award a $578 million contract to Red River Computer  to provide IT equipment and services – services strikingly similar to some of those Red River was last year fined more than $2 million for failing to provide to government agencies.

According to an FBI release, the Claremont, N.H.-based reseller of information technology products and services was forced to pay $2.3 million amid allegations of violating the False Claims Act in doing business with a number of federal agencies. Those agencies include the Defense, Commerce and Interior departments, the Environmental Protection Agency, the Library of Congress and the General Services Administration.

Breck Taylor, a company co-founder and former president who admitted to some of the charges, parted ways with the company several years ago, according to reports.

Red River was accused of failing to provide IT systems and services on a number of different contracts. One item on the list includes a 2005 contract with the Army that called for Red River to provide Cisco SMARTNet; the company reportedly did not complete registration for services with Cisco and in turn received a partial refund, which it did not reimburse to the Army.

The DISA contract awarded to Red River in late June includes provisions for Cisco SMARTNet capabilities, which according to a Nextgov report, the military heavily relies on.

A DISA spokesperson said DOD is confident in their processes for adequately vetting contractors and awarding contracts.

“For every procurement, DITCO [DISA’s Defense Information Technology Contracting Office] performs requisite background research using established government-approved databases including the Excluded Parties List System and the Federal Awardee Performance and Integrity Information System,” a DISA spokesperson said in an e-mailed statement. “In this case, DITCO followed established procedures and made a responsibility determination as required by Federal Acquisition Regulation 9.104. In addition, all companies that submitted a bid were not listed as debarred or excluded.”

According to a release from the Justice Department, Taylor, “admitted that he arranged for Red River to enter into a contract in which the Army paid over $48,000 to obtain services for certain Cisco products at Fort Bragg. However, Red River did not register for all of the services and Taylor arranged for Red River to receive a refund. Taylor never told the Army about the refund and did not refund the money to the government.”

In the weeks after the fine was levied last year, Taylor entered a plea agreement pleading guilty to charges that he defrauded nearly $1.1 million from government agencies, according to the Concord, N.H., Valley News. He was sentenced to three years and prison and ordered to pay $443,000 in restitution, roughly the same amount as he gained from the fraudulent activities, the Valley News reported.

The newspaper also reported that Red River said Taylor parted ways with the company in 2008 and that it cooperated with federal investigations. Red River did not respond to an FCW request for comment.

The Red River contracts in question appear to have been awarded between 2003 and 2008. According to public documents, Red River agreed to obtain Sun Microsystems service support coverage for certain server boards, but did not arrange with Sun to obtain all of the requested service coverage despite being paid to do so. It also agreed to provide Cisco SMARTNet for the Army in a 2005 contract, but did not complete registration of the service with Cisco and subsequently obtained a partial refund without reimbursing the Army;

The company also agreed in contracts in 2004 and 2006 to provide Sun software support for the Navy, but did not arrange for Sun to provide the service despite being paid to do so. And it greed to provide Panasonic-branded memory for use in computers, but provided third-party memory without advising the appropriate government customers of this product substitution. The Valley News reported that Taylor pocketed $150,000 from this scheme alone, which reportedly involved Panasonic ToughBooks that deployed troops frequently use in Afghanistan.