Lawmakers push Defense fraud, waste report to influence supercommittee cuts

Liberal lawmakers will soon send the congressional deficit panel the details of a Pentagon report that shows defense firms over the last decade ripped off the military to the tune of $1.1 trillion, Democratic sources told The Hill.

Pro-military lawmakers from both parties have warned the supercommittee to avoid Pentagon spending cuts beyond the $350 billion ordered by the August debt deal. 

But several Senate Democrats want the panel to keep in mind that dollars sent to the Pentagon are often lost to fraud and waste, even as some conservatives raise the possibility of retroactively exempting the Pentagon from the $600 billion cut that will be triggered if the supercommittee fails. 

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Sen. Bernie Sanders (I-Vt.) last week highlighted what he called a “shocking” internal Pentagon report that concluded defense companies defrauded the military by $1.1 trillion.

“The ugly truth is that virtually all of the major defense contractors in this country for years have been engaged in systemic fraudulent behavior, while receiving hundreds of billions of dollars of taxpayer money,” Sanders said in a statement. “With the country running a nearly $15 trillion national debt, my goal is to provide as much transparency as possible about what is happening with taxpayer money.”

More than $250 million “went to 54 contractors convicted of hard-core criminal fraud in the same period,” Sanders said, summarizing tables included with the DoD report. “Of that total, $33 million was paid to companies after they were convicted of crimes.”

The Pentagon revealed defense behemoth Lockheed Martin paid $10.5 million in 2008 to settle fraud charges related to the Titan IV rocket program. Northrop Grumman paid $62 million three years prior to settle allegations it was involved in a fraud scheme. 

And the list of contractors linked to waste goes on, the DoD tables show, ranging from the other largest defense firms to smaller companies.

Yet most continued to receive massive contracts.

And that does not sit well with Sanders and several other liberal lawmakers, Democratic sources say.

Sanders “believes numbers like these are very relevant for the supercommittee when some are talking about cutting social programs,” an aide to the Vermont liberal told The Hill on Friday.

“The supercommittee also should see the extent to which these companies committed fraud on behalf of the government,” the Sanders aide said. “We will get this to the supercommittee, at least at the staff level.”

Another Democratic aide said his boss intends to highlight the DoD fraud report as the special panel ramps up its search for $1.5 trillion in federal cuts. It must finish its work by Nov. 23 or automatic triggers will be enacted, including $600 billion in cuts to security spending.

“As debate goes forward, I’m sure you’ll see a number of Democrats on the left use that report and others like it. There’s a movement on the right to go back and exempt defense spending from the trigger if the supercommittee fails,” the Democratic aide said Friday. “That’s going to be unacceptable to [liberals who are] likely to use reports like this as proof that there is room to cut Defense spending without harming security.”

The Aerospace Industries Association, a leading defense industrial lobbying organization, declined to comment on the report.

But one prominent defense analyst and industry consultant blasted the Pentagon’s findings.

“Sen. Sanders is correct in stating the report is shocking — it's shockingly wrong. The report confuses isolated cases of wrongdoing with the dominant culture in the defense industry, which is the most heavily regulated and audited industry in the nation,” said Loren Thompson of the Lexington Institute.

“Critics of Defense spending like Sen. Sanders routinely make sweeping allegations of malfeasance in military contracting while ignoring far worse behavior in major entitlement programs like Medicaid,” he said.

What’s more, the yearly waste within the military largely comes from “decisions by legislators and policymakers that disburse funds to unnecessary projects” and mandate “superfluous tests, reports and contracting procedures,” Thompson told The Hill. “That's where the real waste occurs in military contracting, but Sen. Sanders would prefer to focus on the handful of cases of malfeasance that more closely match his ideological leanings.”

But one government watchdog group called the findings “mind-boggling.”

“The amount of money given to these companies is staggering, but what is really mind-boggling is the willingness of the DoD to provide additional taxpayer dollars to the same bad actors again and again,” Scott Amey, general counsel for the Project on Government Oversight (POGO) said in a Friday statement. 

“Despite the report’s findings, the DoD’s over-reliance on contractors may hinder reform,” Amey said. “Taxpayers are unlikely to see any changes until DoD holds contractors more accountable, especially those defrauding the government.”