Category Archives: Horror.Stories

Lawmakers Aim to Restrict Use of Lowest-Price Contracts

Source: Charles S. Clark, Government Executive, July 10, 2017
 
A contractors group has welcomed a bipartisan House bill placed in the hopper last month aimed at curbing agency use of lowest price technically acceptable contracts.  The Promoting Value Based Procurement Act (H.R. 3019), introduced by Reps. Mark Meadows, R-N.C., and Don Beyer, D-Va., would amend the Federal Acquisition Regulation to require civilian agencies to align themselves with the Defense Department and stiffen their rationales for resorting to lowest price technically acceptable contracts, which have grown in use in recent years but are controversial. …

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The Challenge of Applying the LPTA Process to the Procurement of Complex Services

Source: TASC, Inc., 2012

From the press release:
Increased reliance by government customers on the Lowest Price Technically Acceptable (LPTA) acquisition strategy poses unnecessary risks such as budget overruns, delivery delays and, in the worst cases, mission failure. According to a new report by TASC, Inc., the LPTA process can be appropriate for commoditized services with clearly defined requirements, but not for complex services that support sophisticated, high-risk missions. In cases where the government does elect to use the LPTA process, it should rigorously define and evaluate technical acceptability and past performance to avoid compromising the performance of the program or system and, ultimately, the success of the mission….

…The TASC report makes the case that using the LPTA approach in the acquisition of complex mission services can compromise mission success and increase total program costs over time when factoring in rework and related costs. To achieve the best value, TASC recommends that solicitations for complex services adopt a classic best-value, cost-technical tradeoff approach that considers innovation, scheduling rigor and program cost containment. When the government does use the LPTA process, technical and past performance requirements should be defined precisely. In addition, applying detailed technical criteria using scenario-based evaluations, high standards of past performance and price-realism analyses are essential to mitigate the risk of unsuccessful performance on a given contract solicited on an LPTA basis. The TASC report offers examples of solicitations that utilize these recommendations….

Did Miami’s biggest developer avoid labor taxes? The feds are investigating.

Source: Nicholas Nehamas, Miami Herald, July 6, 2017

Federal investigators are seeking to learn if the Related Group, Miami’s biggest developer, lowered costs on an affordable-housing project by hiring subcontractors who failed to pay employment taxes, the Miami Herald has learned. … Related’s business practices are under scrutiny because of a long-running federal investigation into South Florida’s affordable-housing industry. … Even so, the U.S. Attorney’s Office and IRS are investigating the project’s cost structure to determine if Related padded bills and hung onto profits illegally, violations which could bring criminal charges, sources said. Prosecutors have already successfully targeted three other affordable-housing developers in Miami-Dade — Carlisle Development GroupBiscayne Housing Group and Pinnacle Housing Group — that used federal tax credits. The new investigation focuses on whether developers misused county funds.

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Miami Developer in Hot Seat Over Low-Income Housing Fraud
Source: Samantha Joseph, Daily Business Review, March 21, 2017

A South Florida developer is in the hot seat after an uptick in fraud among developers using government credits to fund low-income housing ventures grabbed prosecutors’ attention. Pinnacle Housing Group Inc. affiliate DAXC LLC is accused of inflating construction costs to gain about $4.2 million from low-income apartment complexes in Miami, Sunrise, Homestead and Winter Haven. It paid $5.2 million, including forfeiture, and a $1 million fine to the federal government under a deferred prosecution agreement released Monday. Pinnacle’s affiliated contractor solicited bids for concrete shell work for housing developments from 2009 to 2011. It received final bids from a subcontractor to build the concrete structures, but instead of signing contracts with that company, it entered agreements with DAXC at rates of up to $1.5 million above the bids. DAXC in turn paid the subcontractor at the lower rates, making net profits of about $3.1 million. … The apartments rose during the housing market collapse, when contractors tasked with creating concrete shells often went out of business, leaving developers on the hook for stranded projects. Pinnacle’s use of DAXC as a middleman might have been part of a strategy to shield the developer from potential liens. The company has developed more than 8,500 affordable housing units over about 20 years in business. …

Oregon hired a company to paint the Ross Island Bridge without knowing its safety record. Then a worker fell.

Source: Gordon R. Friedman, The Oregonian, July 6, 2017
 
The Oregon Department of Transportation’s method for vetting contractors leaves the state open to hiring companies with troubling safety records, a review by The Oregonian/OregonLive has found. That’s exactly what happened when the department hired Abhe & Svoboda Inc. to repaint the Ross Island Bridge this year. Officials at the agency said when they chose the firm, they knew nothing of its safety history. The company’s track record includes accidents that killed and injured workers who were not wearing fall protection gear. Also on its record are repeated failures, as recently as 2011, to outfit bridge painters with adequate safety harnesses, safety records show. … Before awarding contracts, department officials don’t check publicly available online Occupational Safety & Health Administration records showing safety violations, workplace injuries and deaths from every state. Running such a check on Abhe & Svoboda takes minutes and shows violations from around the country spanning decades. …

Hundreds of millions of taxpayer dollars on the table in closed-door Medicaid haggling

Source: Tony Leys, Des Moines Register, July 3, 2017

The three companies running Iowa’s $4 billion Medicaid program contend they need millions more dollars from taxpayers, starting this month — but there’s been no public hint of how much more money the state will have to fork over. Iowa hired the companies last year to manage the state’s Medicaid program, which covers health care for about 600,000 poor or disabled residents. The shift has been intensely controversial, with critics complaining it has led to tangles of red tape for care providers and cuts in services for Medicaid recipients. Supporters, including Gov. Kim Reynolds, say the new system is saving money for the state by leading to more efficient, effective care. …

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Disabled Iowans, fed up with cuts under privatized Medicaid, sue Gov. Reynolds
Source: Tony Leys and Jason Clayworth, Des Moines Register, June 13, 2017
 
Iowa’s roiling controversy over its for-profit Medicaid management spilled into federal court Tuesday when six Iowans with disabilities filed a lawsuit against Gov. Kim Reynolds.  The lawsuit alleges that the state’s chaotic shift to a privately run Medicaid program is depriving thousands of Iowans with disabilities the legal right to live safely outside of care facilities. The suit holds Reynolds and her human services director responsible for the private management companies’ actions. …

Complaints about Iowa’s privatized Medicaid are spiking
Source: Jason Clayworth, Des Moines Register, May 9, 2017
 
Centered largely on allegations of terminated or reduced health services, complaints about Iowa’s privatized Medicaid program have spiked in recent months, according to information presented to state officials Tuesday.  State quarterly reports show grievances and appeals filed with the three companies managing Iowa’s Medicaid program have spiked by almost 270 percent — from 343 to 1,268 — in the latest three-month report published in March. …

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Betsy DeVos Picked A Student Loan CEO To Run The Student Loan System

Source: Molly Hensley-Clancy, Buzzfeed News, June 20, 2017
 
When the Trump administration announced its pick to run the $1.3 trillion federal student loan system on Tuesday, there was one notable thing about the candidate that wasn’t mentioned in the press release: He’s the CEO of a private student loan company.  The Education Department’s statement described A. Wayne Johnson as the “Founder, Chairman and former CEO” of a payments technology company called First Performance Corporation. … But what wasn’t noted was Johnson is currently the CEO of Reunion Student Loan Services, a detail confirmed by a company representative reached by phone on Tuesday afternoon. Reunion originates and services private student loans, and offers refinancing and consolidation for existing loans. …

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Betsy DeVos undoes Obama’s student loan protections
Source: Danielle Douglas-Gabriel, Chicago Tribune, April 11, 2017

Education Secretary Betsy DeVos on Tuesday withdrew a series of policy memos issued by the Obama administration to strengthen consumer protections for student loan borrowers.  The Education Department is in the middle of issuing new contracts to student loan servicing companies that collect payments on behalf of the agency. These middlemen are responsible for placing borrowers in affordable repayment plans and keeping them from defaulting on their loans. But in the face of mounting consumer complaints over poor communication, mismanaged paperwork and delays in processing payments, the previous administration included contract requirements to shore up the quality of servicing. Companies complained that the demands would be expensive and unnecessarily time consuming. … DeVos has withdrawn three memos issued by former education secretary John King and his under secretary Ted Mitchell. One of the directives, which was later updated with another memo, called on Runcie to hold companies accountable for borrowers receiving accurate, consistent and timely information about their debt. … The Obama administration requested routine audits of records, systems, complaints and a compliance-review process. … The exhaustive list of demands were a direct response to an outpouring of complaints to the Education Department and the Consumer Financial Protection Bureau. The CFPB, in particular, has documented instances of servicing companies providing inconsistent information, misplacing paperwork or charging unexpected fees. Because the federal government pays hundreds of millions of dollars to companies such as Navient, Great Lakes and American Education Services to manage $1.2 trillion in student loans, advocacy groups and lawmakers argue that more should be required of these contractors. …

Federal Student Loan Servicing: Contract Problems and Public Solutions
Source: Eric M. Fink, Roland Zullo, Elon University School of Law, University of Michigan, June 2014

One consequence of the 2007–2008 financial crisis was an abrupt shift from bank-based to direct federal student loans. This momentous change required the Department of Education to rapidly establish the capacity to service loans, which was achieved by outsourcing this responsibility to four large for-profit firms and a group of smaller regional entities. Loan servicing involves routine payment processing, account management and borrower communication, as well as the non-routine yet more labor intensive role of assisting borrowers that face hardship with debt repayment. Borrowers have expressed dissatisfaction with the present system. Complaints jumped significantly in the first two years of the loan servicing contracts and remain at historic highs. Several factors contribute to this increase, including the lackluster job market for graduates. However, upon close inspection it appears that loan servicers bear part of the blame for neglecting their responsibility to counsel borrowers with distressed loans. The Student Loan Ombudsman’s Office of the Consumer Finance Protection Bureau has issued several reports that further validate this assertion. To understand why the system is underperforming, we draw attention to the public-private contract. A question for any public-private contract is whether the incentives within are adequate to encourage contractor behavior consistent with the mission of the service. In our review of the contract terms, we conclude that the incentives to reduce operational costs far outweigh the incentives to be responsive to the needs of borrowers…This case illustrates the inherent limitations of a performance-based contract as an administrative tool. Regardless of design, contractors will strive to minimize operational commitment to any labor-intensive task, in this instance attending to the personal needs of borrowers….

In Georgia, Citizens Can Redirect Their Taxes to Private Schools

Source: Ty Tagami, Tribune News Service, June 26, 2017
 
Georgia’s highest court has determined that a state law allowing taxpayers to steer some of what they owe the state to private schools instead does not violate the state constitution. The unanimous ruling Monday by the Georgia Supreme Court strikes a blow against the claim by Raymond Gaddy and other taxpayers that the state law establishing tax credit student scholarships is unconstitutional. … Taxpayers pledge money — up to $1,000 for an individual, $2,500 per married couple and $10,000 for shareholders or owners of businesses (except “C” corporations, which can contribute up to three quarters of their state tax debt) — to specific private schools and get a tax credit off what they owe the state for the same amount. The money passes through nonprofit scholarship organizations that assign it as scholarships to students and keep up to 10 percent as fees.

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Public Money Finds Back Door to Private Schools
Source: Stephanie Saul, New York Times, May 21, 2012

When the Georgia legislature passed a private school scholarship program in 2008, lawmakers promoted it as a way to give poor children the same education choices as the wealthy. …A handout circulated at the meeting instructed families to donate, qualify for a tax credit and then apply for a scholarship for their own children, many of whom were already attending the school. … The exchange at Gwinnett Christian Academy, a recording of which was obtained by The New York Times, is just one example of how scholarship programs have been twisted to benefit private schools at the expense of the neediest children. Spreading at a time of deep cutbacks in public schools, the programs are operating in eight states and represent one of the fastest-growing components of the school choice movement. This school year alone, the programs redirected nearly $350 million that would have gone into public budgets to pay for private school scholarships for 129,000 students, according to the Alliance for School Choice, an advocacy organization. Legislators in at least nine other states are considering the programs. …. One big proponent of the tax-credit programs is the American Legislative Exchange Council, a coalition of conservative lawmakers and corporations that strongly influences many state legislatures. The council became a flash point in the Trayvon Martin case because it had championed the controversial Stand Your Ground gun laws.

For some cities, promises of privatization fall short

Source: Mark Niesse and Arielle Kas, The Atlanta Journal-Constitution, May 18, 2017

In the beginning, the gospel of privatization was as if etched in stone. It was handed down from Sandy Springs, the first new city, to generations of descendants: Dunwoody, Johns Creek, Brookhaven and Tucker. … Sandy Springs is still an adherent of the outsourcing theory. But privatization has gradually given way to more traditional government in many of the nine cities that followed. … While Brookhaven, founded in 2012, started in the Sandy Springs mold, the city brought once-outsourced programs in-house, including community planning, human resources and government technology systems. It still contracts for road paving, park maintenance, permitting and code enforcement. Even those that have backed away from blind faith in privatization still see it as the best way to start a new city. … In Sandy Springs, faith in the model remains unshaken, though it has evolved. … Jason Lary, the mayor of the new city of Stonecrest … [plans] to learn from other municipalities that outsource, and is contracting out city administration, planning and zoning, attorneys and building permitting. The Stonecrest City Council voted Monday to hire CH2M as its primary service provider. … South Fulton is taking the opposite tack. Leaders there want to assume control of the services currently under the county’s umbrella and the employees who provide them. They are negotiating agreements with the county to transfer those departments to South Fulton. …

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Is the ‘Sandy Springs model’ of government changing?
Source: John Ruch, Reporter Newspapers, July 8, 2016

Since its founding in 2005, Sandy Springs has drawn national notice for outsourcing most city government operations to competitively bidding private contractors. But last month, the city approved three-year, no-bid contract extensions due to fears of government disruption during a planning and development boom. The City Council approved the no-bid extensions only after voicing caution about not shifting to an “in-house,” public-sector government. But new local cities inspired by Sandy Springs, like Brookhaven and Dunwoody, already have brought more jobs and departments in-house. … But the model has changed. In 2011, the city dumped CH2M’s single deal to bid out multiple contracts, saying that saved $7 million. …

Georgia city shows pros, cons of going private
Source: Stanley Dunlap, barrowcountynews.com, April 27, 2014

While Barrow County leaders mull privatization, one Georgia city provides an example of both sides of the equation. Milton is one of three Fulton County cities that have undergone privatization in the last decade. The majority of operations in Milton, Sandy Springs and Johns Creek were contracted out when they incorporated in 2006, however two of them have since scaled back privatization in an effort to save money. ….. The majority of operations in Milton, Sandy Springs and Johns Creek were contracted out when they incorporated in 2006, however two of them have since scaled back privatization in an effort to save money. In 2008 the economy led to Milton officials renegotiating their contracts in order to save money. The city now has 144 employees and only contracts out a few departments. “What they figured out was that by ending the contract with CH2M Hill, and going with a more traditional model for most departments, Milton saved $1.2 million in 2010 and another $1 million in 2011,” said Milton Communications Manager Jason Wright. …. If Barrow officials decide to privatize on a large scale, then it would become the first county in Georgia to do so….

Union: Look to Circulator and D.C. Streetcar for evidence of why Metro shouldn’t be privatized

Source: Faiz Siddiqui, Washington Post, May 16, 2017
 
Reliability problems with the D.C. Circulator and planning and construction shortfalls of the city’s streetcar system are examples of why the District and Metro should be wary of privatizing more services, the transit agency’s union said Tuesday.  Although the District Department of Transportation owns the Circulator buses and oversees the D.C. streetcar, Amalgamated Transit Union International says there’s an implicit warning for Metro.  “Fix the service you have; take responsibility for the quality of service you have,” said Michael McCall-Delgado, a strategic researcher at ATU International and author of a new report, “Fool D.C. Twice.” … The union report holds the District partially responsible for the decline of the region’s transit system, saying that instead of investing in Metro, local leaders pushed seemingly “hip” and “premium ridership” projects to attract millennials to the city. …

… ATU, which represents more than 9,000 Metro employees through its Local 689 chapter, has rejected Wiedefeld’s shift toward privatization, including a proposal that would use private contractors to fill station manager or track inspection jobs on the second phase of the Silver Line. Contractors could also be used to operate such facilities as new bus garages. Separately, Metro has nearly doubled its spending on private contractors over the past two years. In its report, however, the union takes D.C. officials to task for failing to hold contractors accountable for construction, planning and service failures. The report highlights how the Circulator, operated by Cincinnati-based First Transit, has been beset by maintenance problems for years “while avoiding government oversight,” according to the union. Circulator buses have a notoriously poor reliability record, with the 2016 audit finding an average of 22 defects per bus. Many of the defects — nearly three per bus — were tied to safety equipment and should have been caught during routine inspections, the audit said. And the problems have persisted: A report this week from WAMU said reliability issues have left the Circulator up to 10 buses short of its quota when buses depart its lots each day. …

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Privatize Metro? Wiedefeld’s Outsourcing Plan Provokes Union Wrath And May Not Save Money
Source: Martin Di Caro, WAMU, May 1, 2017
 
In his long-term financial proposal to get Metro back on track and back on budget released April 19, General Manager Paul Wiedefeld included a few vague sentences that could open the door to a partial privatization of the system.  The sentences, while far from a proposal for a large-scale privatization, have raised alarm among members of Amalgamated Transit Union Local 689, which represents 9,200 frontline employees. “They’re attacking us anyway they can,” Union president Jackie Jeter said to reporters, just moments after the transit workers turned their backs on WMATA’s leaders and staged a walkout during a board meeting last week. …

Transit Union Turns Back on Metro Leadership, Stages Walkout Source: Martin Di Caro, WAMU, April 27, 2017

Dozens of members of the D.C. region’s largest transit union turned their backs on Metro’s leaders during a tense board meeting on Thursday, then raised their fists to the air and marched out of WMATA headquarters in downtown Washington, defiantly chanting “We move this city.”  The labor action was to protest Metro general manager Paul Wiedefeld’s new proposals to reduce costs at the nation’s second-busiest mass transit system, and the union’s president took the unusual step of divulging confidential details of ongoing contract negotiations. …

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Justice Department moves forward in its case against ETMC, Paramedics Plus

Source: Roy Maynard, Tyler Morning Telegraph, May 12, 2017

The U.S. Department of Justice continues to build its case against East Texas Medical Center and its ambulance division, Paramedics Plus, in what they say is a $20 million kickback scheme to ensure Paramedics Plus retained lucrative contracts. Most recently, Justice Department attorneys filed a list of people they expect to depose in coming months. In all, more than 100 people could be deposed as this case moves forward. The government also filed a proposed schedule, which outlines when fact discovery will take place, when expert discovery will occur, deadlines for motions and trial preparation and finally, an expected timeframe for the start of the trial – summer of 2018. … In January, the Justice Department announced it would intervene in a lawsuit against ETMC and Paramedics Plus brought by a whistleblower – former employee Stephen Dean, who was Paramedics Plus chief operating officer. According to the suit, ETMC and Paramedics Plus paid more than $20 million in kickbacks and bribes, including cash payments to Oklahoma officials. …

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You Paid For It: Pinellas Commissioners discuss ambulance kickback settlement Tuesday
Source: Mark Douglas, March 21, 2017

Former U.S Attorney Brian Albritton told Pinellas County Commissioners Tuesday that a federal lawsuit alleging ambulance fee kickbacks could have cost taxpayers as much as $1 billion if they lost in court. Commissioners agreed to settle the case involving Paramedics Plus Sunstar ambulance service for $92,700 and to forgo an estimated $500,000 in uncollected ambulance fees from patients. They will also have to pay legal fees to Albritton who the county secretly hired last year to resolve the case. Pinellas commissioners discussed the case publicly Tuesday for the first time since Eight On Your Side first broke the story of alleged kickbacks and a federal investigation of Pinellas County’s ambulance contract last month. That settlement, signed March 7 by Vice-Chair Kenneth Welch, requires the county to pay $92,700 to federal prosecutors, the Florida Attorney General and attorneys for the whistleblower–a former executive with Paramedics Plus. It also requires Pinellas County to turn over all documents and evidence gathered in the course of the county’s own internal investigation, and to cooperate with an ongoing federal investigation and whistleblower action filed against Paramedics Plus in Texas.

… Since 2004, Paramedics Plus has operated as Pinellas County’s exclusive ambulance provider under the county-owned brand name Sunstar. The current county contract with Paramedics Plus amounts to about $50 million a year. In 2014, a former high-ranking executive of Paramedics Plus filed a whistleblower action in Texas that alleged an ongoing ambulance fee kickback scheme that stretched from Pinellas County to Oklahoma and California for over a decade. The scheme alleged by the whistleblower and federal prosecutors in a related legal action included so-called “profit cap” rebates that essentially funneled overcharges from Medicaid and Medicare to Pinellas County and other local governments that oversee public ambulance contracts. County leaders in Pinellas insist the “rebates” or “kickbacks’ in Pinellas totaled only $35,000 or so and ended up in county bank accounts, not someone’s pockets. In Oklahoma, the whistleblower suit alleges those kickbacks amounted to as much as $20 million. Federal prosecutors in Texas have cited specific acts of corruption in Oklahoma that include kickbacks, political payoffs and self-enrichment involving Paramedics Plus executives and government overseers in Oklahoma. … Pinellas County Administrator Mark Woodard says the settlement has no impact on the county’s ongoing $50 million a year contract with Paramedics Plus because the company has not been charged criminally or been found guilty of anything.

Feds Intervene in Alleged $20M Ambulance Kickback Scheme
Source: Eric Topor, Bloomberg BNA, January 27, 2017

A Texas health system paid an Oklahoma agency and its president $20 million in cash bribes in exchange for lucrative ambulance service contracts over 15 years, federal prosecutors said ( United States ex rel. Dean v. Paramedics Plus, LLC , E.D. Tex., No. 14-cv-203, complaint in intervention 1/23/17 ). The U.S. Attorney’s Office for the Eastern District of Texas partially intervened Jan. 23 in a whistle-blower lawsuit, filed under court seal in 2014, accusing East Texas Medical Center Regional Healthcare System (ETMC) of paying the kickbacks to Oklahoma’s Emergency Medical Services Authority (EMSA). Specifically, the government said ETMC concocted the kickback scheme with EMSA president and co-defendant Herbert S. Williamson, and paid the kickbacks through checks, bank wires and inflated service contracts, mostly through ETMC’s ambulance service company, Paramedics Plus LLC. The government said it paid the defendants over $70 million in Medicare reimbursements and over $38 million in Medicaid reimbursements just from 2009 through 2013, and it was seeking treble damages on all payments tainted by the kickback scheme, plus monetary penalties for each individual false claim submitted. The FCA authorizes monetary fines of up to $11,000 for each false claim submission. The U.S. Attorney’s Office declined to comment on whether criminal charges against Williamson would be coming in the future. … The complaint describes how Paramedics Plus, which contracted with the EMSA to provide ambulance services within the EMSA’s jurisdiction, was forced to “cut corners” due to the amount of its revenue that went to paying kickbacks. Paramedics Plus “avoided training and personnel expenses” to make sure enough money was available to pay kickbacks to the EMSA and Williamson, according to prosecutors. The complaint alleges Paramedics Plus executives were forced to forgo paying drivers and paramedics retention bonuses to stem high paramedic turnover because the company “would not have enough excess profits to make [Williamson] whole.”

U.S. settles with contractor for $4.6 million after alleged False Claims Act violations

Source: Mark Iandolo, Legal Newsline, May 4, 2017

The U.S. Department of Justice announced April 24 that Energy & Process Corporation (E&P) of Tucker, Georgia, will pay $4.6 million after allegations of violating the False Claims Act. According to the department, E&P had a contract to construct a Department of Energy (DOE) nuclear waste treatment facility. The company is purported to have knowingly failed to perform required quality assurance procedures. Additionally, it allegedly supplied defective steel reinforcing bars. … “Our complaint alleges that after actively touting its experience with nuclear construction and quality assurance work, and then being hired to perform such work in connection with an important project, E&P chose to forego the agreed to quality assurance work, and then compounded this failure by falsely certifying to the government that it had performed the quality assurance work,” said U.S. attorney John A. Horn for the Northern District of Georgia. …