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Akal Security subsidiary pays $1.65 million to settle claims it covered up fraudulent bills paid by U.S. taxpayers

April 7, 2016

After two managers of a federal security contractor were sentenced in criminal cases, the U.S. Department of Justice, the U.S. Department of State’s Office of Inspector General, and the FBI coordinated an investigation into Akal Security’s subsidiary, Coastal International Security. The company agreed to pay $1.65 million to resolve criminal and civil allegations that the company defrauded the State Department during performance of a security contract and later concealed the fraud from contracting officials, and civil allegations that the company improperly obtained and used competitors’ pricing information to underbid competitors on government task orders. The charges concerned allegations of violations of the False Claims Act and the Federal Procurement Integrity Act.

Before this settlement, Coastal’s president, Curtis Wrenn, pled guilty in a criminal case, after admitting he covered up the fraudulent scheme, even though he knew he had a legal responsibility to disclose the fraud to the State Department. According to a statement of facts that he signed as part of his plea agreement, “Wrenn intentionally deceived the [State] Department … in part, to prevent [Coastal] from getting a ‘black eye’ if the entire story was disclosed.” Wrenn was sentenced to a year of probation for his false statement to the federal government.

The criminal cases involving the fraudulent behavior and cover-up also resulted in prison sentences for two other individuals. Marvin Hulsey was a program manager for Coastal when he conspired with Tony Chandler, who was a contracting official at the State Department. According to court documents, Hulsey hoped to gain favor with Chandler, who was in a position to influence decisions about which companies won contracts with the federal government.

Although the criminal cases originally centered on a six-figure scheme orchestrated by Hulsey and Chandler around fraudulent invoices for nutritional supplements, the case was later amended to include additional fraudulent billings through a travel consulting company owned by Hulsey’s wife.

In addition, the Department of Justice’s investigation of Coastal uncovered alleged illegal activity above and beyond the alleged violations of the False Claims Act. Investigators claimed that Coastal violated the Procurement Integrity Act when it obtained and used the private bid information of a competing company to underbid the competition on various contracts with the Department of State over multiple years. No liability determination was reached as to the civil allegations, although Coastal paid $1.5 million (of the total $1.65 million) to resolve these claims.

This news is just the latest in a long string of accountability issues at Akal Security and its subsidiaries. You can read more here.