Pentagon Spends $1 Million for 19-Cent Washers

By Jeff Golimowski | July 7, 2008 | 8:23 PM EDT

( - In an action reminiscent of the infamous $400 hammers the Department of Defense bought in the 1980s, a South Carolina woman pleaded guilty Thursday to defrauding the federal government of more than $20 million over 10 years.

How? Shipping and handling.

According to documents filed this week in federal court, Charlene Corley and an un-indicted co-conspirator -- believed to be Corley's twin sister -- used an automated Pentagon invoice program to bill taxpayers exorbitant fees to ship plumbing parts. The highest dollar figure in the information: $998,798.36 billed last September to ship two lock washers, which cost 38 cents.

The U.S. Defense Department paid $998,798.36 for two lock washers, similar to the washers in the second row, from top, in the photo above."She feels terrible," said Corley's attorney, Greg Harris. "This whole episode of her life, it got turned upside down when her sister committed suicide."

Corley's sister died in late 2006. Harris says the vast majority of the fraud at C&D Distributors, the sisters' company, was not committed by Charlene.

"We vehemently, adamantly deny having ever pushed the button, licked the stamp, however you would transfer a bill to the Department of Defense for any over billing," said Harris. "We never did that, her sister did that."

Corley's guilty plea, however, is an admission of guilt that will carry with it a hefty fine and significant time in prison. Harris says Corley realizes now the gravity of her inaction when she became aware of aspects of the fraud.

"There were some activities that she took part in, active participation in some of the overt acts related to the fraud itself ... we're not saying she is completely without fault," said Harris. "I wish that her sister were still alive because her sister, better than anyone, could have clearly defined their respective roles."

Regardless of who took the biggest role in the fraud, Defense and Justice Department officials say this is an example of a contractor taking advantage of a system used by thousands of contractors every day.

"These people just decided to see what they could get away with," said Pentagon spokesman Lt. Col. Brian Maka. "They got caught."

The system Corley used, the Standard Automated Materiel Management System (SAMMS), is run by computers and automatically pays invoices submitted by DOD contractors. Hundreds of billions of dollars in payments go through the system every year, according to Maka. The errors were caught in an audit of the system.

"You've got some human eyes to go look at it to make sure the appropriate thing is done," Maka said. "A person at the supply center saw the invoice and said, 'This doesn't make any sense' and contacted the criminal investigative service."

A government examination of C&D Distributors' (Corley's company) invoices turned up an alleged 499 false shipping invoices for a total cost of $71,611,296.12, according to court filings. One hundred-twelve of those invoices were listed as paid, at a cost of more than $20 million.

"That's the most troublesome, that there's no system of checks and balances," said David Williams, vice-president of policy at the watchdog group Citizens Against Government Waste (CAGW). "This is very concerning that this is happening."

Williams says the Pentagon is in a difficult situation because it has to spend so much money on important items, but that doesn't absolve the government of its responsibilities to the taxpayer.

"When you spend $300 billion and have these massive contracts, there are very little opportunities to say 'Is this a legitimate contract?'" said Williams.

Pentagon officials say this case triggered a more intensive audit of the SAMMS, which revealed several other cases, though spokesman Maka said none were as extreme as the South Carolina case.

"The important thing here is that they're going to get caught," said Maka. "We have systems in place to make sure that ... we're going to go in and recoup the money and make sure that they are put into the justice system to be dealt with accordingly."

As part of Corley's plea bargain, court documents show she will have to reimburse the government for the money she obtained by fraud, and she'll forfeit many of the items she bought with the tax dollars. The list seems to show Corley has a penchant for expensive cars: up for forfeiture are four Mercedes, three Lexuses and a BMW.

Corley will also forfeit seven properties and close to $3 million in cash.

CAGW's Williams said there are two victims here: the taxpayers who were defrauded and America's soldiers fighting overseas.

"Every dollar that they are getting that they shouldn't get is money not going to protective gear or something the Pentagon should spend money on," said Williams.

(Cybercast News Service Correspondent Katherine Poythress contributed to this article.)

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