For some of us, Algebra was our Waterloo.  Others had trouble with Geometry.  Still others made it to Trigonometry, Statistics, Calculus, and/or other college and graduate-level courses.  The point is, almost everybody struggles with math at some point in their lives.  Most of us get just so far, but no further.  At point, we hit the math wall and we give up.

For Donna Mitchell, her moment of surrender came at age 69, when she encountered Government Contract Math.  Her sad story can be found here.

Ms. Mitchell was employed by Dragon Development Company, a government contractor.  Dragon Development was acquired by CACI, International, Inc.—another government contractor—in November, 2007.  At the time of acquisition, Dragon Development was a subcontractor to the Titan Corporation, who had a prime contract with the National Security Agency (NSA) for “document delivery services.”

From the period January, 2006 through December 28, 2007 (a full two years), Ms. Mitchell—

--submitted timesheets to Dragon and CACI falsely claiming that she had worked 752 hours more than she had actually worked on the Services Contract. Mitchell represented in some of the timesheets that on 24 days she worked an average of eight hours, when in fact, she did not work at all on those days.

So over a two-year period, Ms. Mitchell over-reported her time by about 20 percent (752 / 4,360 = 17.25%, to be exact).

Dragon/CACI invoiced Titan for Ms. Mitchell’s inflated labor costs.  In turn, Titan invoiced NSA.  NSA paid the contractors “approximately $81,859” for the unworked hours. 

On July 21, 2010, Ms. Mitchell pleaded guilty to “making false statements arising from the number of hours she claimed she worked.”  According to the DoJ press release (link above), “Mitchell faces a maximum sentence of five years in prison and a $250,000 fine.”

We call that learning math the hard way.

Post-script—

In August, 2009, we posted a point of view regarding the necessary due diligence to be performed during a merger/acquisition between two government contractors.  At that time, we said—

When contemplating the acquisition of any business that sells goods and/or services to the Federal government, it is important to evaluate the probability of contingent liabilities, and factor them into the deal. Government contracts, by their very nature, have long tails. … Thus, after an acquisition an allegation of wrongdoing can surface that relates to actions that took place literally years before. Records can be missing, personnel may have departed, but the acquiring company still has to deal with the issue(s). It is critical to structure the deal so as to protect the acquiring entity from such contingent liabilities.  Typically this is done either through purchase price adjustment, establishment of an escrow fund, or both.

During the due diligence phase of the acquisition, it is critical to evaluate existing internal and operational controls, administrative attention to detail, and to try to assess the probability that a contingent liability will surface after acquisition. …

We see no reason to change our point of view on this topic.  We don’t know the depth and/or rigor of CACI’s due diligence efforts during its acquisition of Dragon Development.  We don’t know whether CACI was held liable in a separate proceeding, or if the company was able to negotiate its way out of trouble.  But we do know that if Ms. Mitchell’s “math difficulty” had been identified as a potential contingent liability prior to the acquisition, CACI could have taken steps to protect itself.