Investigative Summary Findings of Fraud and Other Irregularities Related to the Manufacture and Sale of Combat Helmets by the Federal Prison Industries and ArmorSource, LLC, to the Department of Defense Investigations Division August 2016 INVESTIGATIVE SUMMARY Findings of Fraud and Other Irregularities Related to the Manufacture and Sale of Combat Helmets by the Federal Prison Industries and ArmorSource, LLC, to the Department of Defense The Office of Inspector General (OIG) initiated two joint investigations with the Defense Criminal Investigative Service (DCIS), and supported by elements of the U.S. Army, regarding allegations that the Federal Prison Industries (FPI) and ArmorSource LLC (ArmorSource), manufactured and sold Advance Combat Helmets (ACH) and Lightweight Marine Corps Helmets (LMCH) to the Department of Defense (DOD) that did not meet contract specifications and were defective. The FPI is a wholly-owned government corporation established by statute and Executive Order in 1934, to provide opportunities for education and work-related experiences to federal offenders. It makes products for sale exclusively to the federal government and that do not compete with private sector companies in the commercial market. FPI is required to be financially self-sustaining, and it is structured to be sufficiently diversified so as to avoid undue impact upon any particular industry. The FPI pays inmates for their labor from its revenues and distributes profits from sales to be deposited to a revolving fund that finances all industrial operations (including capital improvements) and helps subsidize other prison inmate programs. According to the Federal Bureau of Prisons (BOP), FPI is one of its most important correctional programs, providing federal inmates with training, marketable job skills, and work experience. BOP considers FPI as integral to its mission of public safety and effective inmate reentry. ArmorSource is a private company established in 2005, and its production, marketing, and operational divisions are located in Ohio. In 2006, ArmorSource became an official supplier of the ACH helmet to the DOD. On August 16, 2006, ArmorSource was one of four companies awarded DOD contract W911QY-06-D-0006, a fixed price, indefinite delivery/indefinite quantity, performance specification based contract to manufacture ACH helmets. From 2006 to 2009, ArmorSource and the FPI, as subcontractor, produced 126,052 helmets, for which ArmorSource received $30,336,461.04. The FPI began research and development of helmets in the 1980s. In May 2008, the FPI was awarded contract SPM1C1-08-D-C102, a firm fixed price, performance based, indefinite quantity contract to manufacture LMCH helmets for an initial cost of $23,019,629. The price of an LMCH helmet ranged from approximately $229 to $239, depending on the size of the helmet and term year option. The FPI produced approximately 23,000 helmets at its facility in Beaumont, Texas, of which 3,000 were sold and delivered to the DOD. However, the FPI did not receive payment for these 3,000 helmets because more than half of them were subsequently determined to be defective, and all 23,000 helmets were ultimately quarantined. The non- payment and quarantine were due to actions taken by the OIG and DCIS that resulted in a stop work order. The investigations further disclosed that the ACH helmets produced by FPI were also defective, and that both the ACH and LMCH helmets posed a potential safety risk to the user. The ACH helmet (Figme 1) is a "critical safety item" designed to replace the Personnel AllnOf System Group Troop (PASGT) helmet and to provide an improved helmet to soldiers. The ACH is a personal protective equipment system that provides ballistic and impact protection for the head, including increased 9mm protection. The ACH is also a mOlmting platfollu for electronic devices that is designed to be compatible with existing night vision equipment; conlllllmication equipment; nuclear, biological, and chemical defense equipment; and body allnor. The ACH also provides improved field of vision and hearing capability. The use of unauthorized manufactming practices or defective materials reduce the ballistic and fragnlentation protection the ACH is designed to provide, potentially resulting in serious injury or death . Figure 1: ACH belmet. The LMCH helmet (Figure 2) like the ACH is also classified as a "critical safety item" requiring a higher level of review, as nonconfolllling helmets would likely cause serious injury or death to the wearer. The LMCH is larger and offers more protection than the ACH, but it is lighter than the PASGT. The LMCH has brackets on the front for mounting night vision devices, and can be issued with a sling or pad suspension to fit the inside of the helmet to the head. Additionally, a nape protection system adds ballistic protection to the rear of the head. The LMCH is compatible and typically worn with other components of infantry combat equipment such as body allUOf, protective goggles, and night vision equipment. 2 Figure 2: Light Weight Marine Corps Helmet. Both investigations detennined that FPI had endemic manufac huing problems at Fe I Beaumont, and that both the ACH and LMCH were defective and not manufachu ed in accordance with contract specifications. The investigations fOlmd that the ACH and LMCH had numerous defects, including serious ballistic fa ihues (FigllJe 3), blisters and im proper mOlmting-hole placement and dimensions, as well as helmets being repressed. Helmets were manufachued with degraded or lmauthorized ballistic materials (Figm es 4 and 5), used expired paint (on LMCH) and lmauthorized manufachuing methods. Hehnets also had other defects such as defonllities and the investigations fomId that rejected helmets were sold to the DOD. Indentation of projectile impact Figure 3: Post shot of head form. 3 Figure 4: LMCH Kevlar bonded together. Fignre 5: ACH torn and altered ballistic material. The investigations also fomId that FPI pre-selected helmets for inspection, even though the DOD and ACH contract required hehnets to be selected randomly, and substituted hehnets to pass testing. The investigation also fOlmd that manufactming dOCllllIents were altered by inmates at the direction ofFPI staff that falsely indicated helmets passed inspection and met contract specifi cations. Additionally, AnnorSomce did not provide adequate oversight of the manufactme of the ACH, which resulted in helmets that were not manufactmed according to contract specifications. Further, the investigations also fomId that Defense Contract Management Agency inspectors did not pelfol1n proper inspections, lacked training, and submitted false inspection records wherein they attested that ACH lots were inspected when in fact they were not . At least in one instance an inspector cel1ified the lots as being inspected over a fax machine . 4 The investigation fomld the following deficiencies: • finished ACH helmet shells were pried apart and scrap Kevlar and Kevlar dust was added to the ear sections, and the helmet shells repressed (Figme 6); • helmets were repressed to remove blisters and bubbles in violation of contract specifi cations; • LMCH and ACH had edging and paint adhesion failures, respectively; • FPI did not obtain approval from the DOD before it changed the manufactming process; • LMCH Certifi cates of Confonnance were prepared by inmates at the direction ofFPI staff and signed by FPI staff months after the LMCH helmets were delivered fal sely cel1ifying that the helmets were manufactured according to contract specifications and had the requisite material traceability; and • LMCH helmet serial lllllllbers were switched or altered. -----1 - Scrap ballistic material found in ear and rear helmet sections. A surprise inspection by OIG and military personnel on January 26, 2010, mlcovered inmates at the Bealllllont FPI facility openly using improvised tools (Figures 7 and 8), on the ACH helmets, damaging the helmets' ballistic material (Figme 9), creating the potential for the tools' use as weapons in the prison and, thereby, endangering the safety of factory staff and degrading prison security. 5 Figure 7: Hatchets used to remove paint. Figure 8: “Screw tool” used to strip Kevlar 6 Figure 9: Damaged ACH after paint removal. These investigations did not develop any information to indicate military personnel sustained injury or death as a result of the defective ACH helmets. However, 126,052 ACH helmets were recalled, and monetary losses and costs to the government totaled more than $19,083,959. The initial shipment of LMCH helmets to the DOD resulted in a complete quarantine of the 23,000 helmets and stoppage of any additional deliveries. The FPI Beaumont facility that manufactured the ACH and LMCH helmets was closed and its entire staff transferred to other duties within the Federal Bureau of Prisons. Criminal prosecution resulting from these investigations was declined, and the DOJ Civil Division, Commercial Litigation Section and the Eastern District of Texas, United States Attorney’s Office entered into a civil settlement agreement with ArmorSource in which ArmorSource agreed to pay $3 million, based on its demonstrated ability to pay, to resolve potential claims against it under the False Claims Act. 7 The Department of Justice Office of the Inspector General (DOJ DIG) is a statutorily created independent entity whose mission is to detect and deter waste, fraud, abuse, and misconduct in the Department of Justice, and to promote economy and efficiency in the Department's operations. Information may be reported to the DOJ OIG's hotline at www.justice.gov/oig/hotline or (800) 869-4499. Office of the Inspector General U.S. Department of Justice www.justice.gov/oig
Summary of Investigative Findings Concerning the Manufacture and Sale of Combat Helmets by the Federal Prison Industries and ArmorSource, LLC, to the Department of Defense
Published by the Department of Justice, Office of Inspector General on 2016-08-17.
Below is a raw (and likely hideous) rendition of the original report. (PDF)