Yeah. Just after we got through reminding our readers that as much fraud, waste and abuse takes place in the government and commercial sectors as takes place in the government marketplace comes a story about yet another defense contractor who pleaded guilty to some egregious wrongdoing.

Let’s add Staff Gasket Manufacturing Corporation, of Bergen County, New Jersey, to the list of especially stupid defense contractors that already includes such notables as Kustom Products, Inc. of Coos Bay, Orgeon—who allegedly sold the DOD counterfeit “Jesus Nuts” (the little doodads that secure the main rotors of helicopters to the aircraft)—and Rocky Mountain Instruments, who exported sensitive technical data to overseas manufacturers so it could be the low bidder to its DOD prime contractors.

Before we get into Staff Gasket’s wrongdoing, let’s state up front that the FAR is a complicated and complex beast, and that it’s unreasonable to expect anybody to have mastery of its entire panoply of regulations and contract clauses—especially when the judiciary has a tendency to reinterpret those regulations and clauses in a counter-intuitive way, and when the FAR Councils have a tendency to issue Federal Acquisition Circulars revising the regulations every month or so. Compared to much of the FAR, Part 25 (“Foreign Acquisition”) is a fairly arcane piece of work, covering such fun topics as the Buy American Act, the Trade Agreements Act, customs/duties, prohibited sources, and other similar things that make the life of acquisition professionals so much fun.

And let’s not forget that the Part 25 solicitation and contract clauses establish compliance criteria that contractors violate at their own risk….

Staff Gasket Manufacturing Corporation was one such contractor. Let’s get back to its story, and that of the company’s President, Eric Helf, age 38. According to the linked story, Staff Gasket pleaded guilty to wire fraud and a violation of U.S. export control laws, while Helf pleaded guilty to conspiracy to commit wire fraud in connection with the company’s “scheme”.

What was the scheme?

According to the story—

From August 2004 through March 2006, Staff Gasket — which was previously located in Englewood — won bids and entered into contracts with the U.S. Department of Defense to provide replacement parts for equipment to be used in military operations, including lock pins for HH-60 helicopters

The problem was, those contracts required that the equipment had to be manufactured in the United States, to exact (and sensitive) specifications. Staff Gasket decided to cut corners by procuring parts from manufactures outside the U.S., including those located in China. The story reported that Staff Gasket made “fraudulent statements in its bids, saying ‘it was the manufacturer of these parts and the parts would be manufactured in accordance’ with the specifications required [by contract].”

Instead, Staff Gasket “would ‘purchase similar and less expensive parts from other manufacturers, including foreign manufacturers located in China, or unauthorized distributors that did not meet the DoD requirements.’” The story reported—

The company and others operating under its direction would also direct that certain production and packaging of foreign-manufactured parts be disguised so the true manufacturer was hidden, making it look like Staff Gasket had built the parts … Some parts would be ‘non-conforming’ ….

When questioned about the process used to build certain parts, Staff Gasket would allegedly submit false information back to the government.

Staff Gasket caused the DoD to lose about $751,091 in connection with the fraudulent contracts, authorities said.

We have previously discussed the issue of counterfeit parts in contractors’ supply chains. While it is surely possible that a company might unknowingly acquire counterfeit parts, prime contractors also need to be on the lookout for subcontractors and suppliers that knowingly source parts from uncontrolled (and unmonitored) sources, who do so in order to lower their bid prices through such unlawful means.

If the bid price is too good to be true, it very well may be.