Corruption in humanitarian relief and development programs: How to report USAID fraud
Late last week, the Department of Justice announced that the International Rescue Committee had agreed to pay $6.9 million to settle allegations that it had participated in a scheme to rig contract bids and then passed on inflated costs to the United States Agency for International Development (USAID). IRC, a New York-based humanitarian relief organization, received funding from USAID to provide humanitarian assistance to people affected by the conflict in Syria. Between 2012 and 2015, IRC staff allegedly received kickbacks and steered procurements to a Turkish supply ring engaged in a bid-rigging scheme, then billed USAID for these unreasonably expensive procurements in violation of the False Claims Act, a federal law that prohibits recipients of federal funds from submitting false or fraudulent claims for payment to the United States government.
Media, government overseers, and other watchdogs have previously shined a light on rampant fraud in humanitarian programs related to the Syrian civil war. The IRC matter is the latest in a long and lamentable line of cases exposing fraud and corruption in humanitarian relief programs the United States government funds, in Syria and around the world.
What is humanitarian relief and what role does the United States government play in providing it?
Humanitarian relief programs bring essential aid to those who need it most, delivering food, water, shelter, and health care to victims of natural disasters, armed conflicts, and famines. In general, such programs provide short-term help, until governments and other institutions in the affected areas take over.
Both international organizations and national governments fund humanitarian relief programs. In the United States, USAID is the main federal agency that funds and delivers humanitarian relief. USAID has an annual budget of nearly $20 billion to carry out its work in humanitarian relief and international development. On average, USAID responds to 75 crises in over 70 countries each year, providing humanitarian aid to tens of millions of people.
Are USAID humanitarian relief and international development programs at risk for fraud?
In a word, yes. Humanitarian relief and international development programs can become targets for fraud.
The humanitarian relief community is filled to the brim with caring individuals who want to help those in need and do good in the world. But that doesn’t mean that relief efforts are immune from fraud and other misconduct.
There are many reasons for this. One is that government agencies that often fund humanitarian aid efforts are worlds away from where the work they fund is actually done. A USAID grant administrator, for example, may work in Washington, D.C., but distribute millions of dollars in funds that are spent in Afghanistan or Eritrea. Another reason is that unscrupulous individuals take advantage of humanitarian aid, lining their own pockets at the expense of vulnerable people these resources are supposed to help. They can do this because places that necessitate humanitarian relief lack the institutional structures to hold contractors that receive humanitarian-aid funds accountable for their use. Corrupt, non-existent, or woefully under-resourced law-enforcement authorities, judicial officers, and regulators are too often the norm in parts of the world ravaged by natural or man-made disasters.
Of course, it’s not just USAID humanitarian relief programs that are vulnerable to fraud and abuse. International development programs face many of the same fraud risks. The United States government spends hundreds of billions of dollars a year on international development efforts, including through USAID, the Department of State, and other agencies. For example, the U.S. International Development Finance Corporation has nearly $60 billion to finance private sector projects in poor countries, with the aim of developing their economies and creating strong trading partners. And these programs, too, may be magnets for fraud.
Can the False Claims Act help expose fraud in USAID programs and other humanitarian and international development programs?
Yes, it can—and it repeatedly has. USAID contractors and grant awardees must comply with all terms and conditions of their grants and awards, and can face liability under the False Claims Act if they fail to do so. The goods and services contractors and awardees provide must meet contract and award specifications; they must submit accurate and timely required reports; they must appropriately use government resources and account for costs; and, they must not engage in other fraud, waste, or abuse including bribery or gratuity violations. Contractors and awardees must also ensure that sub-recipients adhere to all relevant requirements.
The following is a sampling of successful FCA cases alleging fraud related to USAID funds and programs.
- Louis Berger Group paid more than $69 million in 2010 to settle civil and criminal charges that, in connection with USAID and other contracts to build roads and bridges in Afghanistan and Iraq, the company illicitly charged the government 140 percent of its actual project costs, logged false work hours, and billed USAID for improper overhead expenses.
- Harbert Companies paid $47 million in 2012 to resolve allegations that they conspired to rig bids on a USAID-funded construction contract to build a sewer system in Egypt, causing potential bidders to either not bid or bid intentionally high in return for a payoff from Harbert, in order to ensure Harbert won the bid.
- Three companies that received USAID funds to build water and wastewater infrastructure projects in Egypt paid more than $13.5 million to settle FCA allegations that they defrauded USAID by concealing the identity of a partner ineligible to participate in the joint venture.
- The Academy for Educational Development, an NGO that is part of FHI360, paid more than $5 million to settle allegations that it submitted false claims to USAID in connection with providing foreign assistance in Afghanistan and Pakistan, by failing to ensure compliance with rules concerning competition in procurements, adherence to contract specifications, and supervision of its subcontractors, who may have engaged in corruption and other wrongful activities.
- Jacintoport International and Seaboard Marine, companies involved in freight housing and maritime transport, paid $1.075 million in 2016 to settle allegations that they overcharged USAID for keeping and shipping over 50,000 tons of humanitarian food aid.
- Norwegian People’s Aid, an NGO that receives USAID funds, paid over $2 million in 2018 to settle an FCA suit that alleged it provided material support to certain state and non-state actors in the Middle East involved in terrorism financing, which USAID requirements prohibit. American University of Beirut, a university located in Lebanon, paid $700,000 to settle similar allegations.
In addition to the FCA, other federal laws can be used to go after those who illicitly use humanitarian relief funds, by, for example, receiving millions of dollars from USAID to distribute bogus mosquito nets needed to fight malaria in West Africa or taking bribes from would-be local subcontractors on USAID-funded projects in Afghanistan.
How can you report USAID fraud or other humanitarian and international development fraud?
If you have information about USAID fraud, you may be eligible to bring an action as a whistleblower under the False Claims Act. Individuals can bring an FCA action on the government’s behalf even if they have already reported the fraud internally or to another government agency, such as the USAID Inspector General. Indeed, whistleblowers often have raised objections to wrongful conduct for some time before they contemplate bringing an action under the False Claims Act. Unlike other reporting options, an FCA action is reviewed by the Department of Justice and, if the lawsuit is successful, the whistleblower can receive between 15 and 30 perfect of the government’s recovery.
Whistleblowers play a critical role in maintaining the integrity of taxpayer-funded humanitarian relief efforts. Without whistleblowers stepping up to expose fraud, most such wrongs would go undetected. But blowing the whistle can be complicated, personally and professionally. It’s not for everyone. But it may be for you.
If you would like more information or want to speak to a member of our team, please contact us for a confidential consultation. Our lawyers have unmatched experience representing whistleblowers under the False Claims Act, an unsurpassed track record of successes, and substantial resources to handle your case. We can help you do what’s right.
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