With a massive operation that delivers mail daily to over 160 million addresses in America, the Postal Service relies on many contractors to meet its ever-growing needs. But hundreds of contracts with countless transactions can be fertile ground for fraudsters.
Take the Postal Service’s Facilities portfolio, which manages about 50,000 repairs and maintenance jobs yearly. Those contracts cost the Postal Service over $100 million each year. A large government contractor, a company with over 100 suppliers under its umbrella, handles USPS’s facility maintenance contract.
In early 2023, our special agents found a supplier was in breach of contract. The supplier had submitted invoices with fraudulent mark-ups, and it had subcontracted over 50 percent of the work the large contractor had assigned it. Suppliers can subcontract the work with up to an additional 10% mark-up, but they must disclose this to both the contractor and the Postal Service. This supplier not only failed to disclose its subcontracting to both parties — it also inflated labor, materials, procurement, and service fee charges.
The fraud wasn’t just repetitive — it was methodical, and it cost the Postal Service almost $673,000 in overpayments. Our special agents presented a solid case for prosecution for wire fraud conspiracy charges, and, because of this investigation, the OIG recommended the contractor permanently stop using the supplier for its postal contracts. The supplier was ordered to pay restitution of almost $673,000, and the investigation saved the Postal Service over $384,000 in future fraudulent payments. As for the supplier? The company is prohibited from doing business with the Postal Service and the rest of government for five years.
Believe it or not, an earlier case we investigated had a similar profile. A painting and maintenance supplier managed by the same contractor had billed the Postal Service fraudulent mark ups. Like the other supplier, this company routinely violated the terms of the contract, in that the supplier wasn’t disclosing the use of subcontractors and was marking nearly all invoices up an additional 15 to 800 percent.
This supplier was also charged with wire fraud conspiracy and was ordered to pay over $500,000 in restitution and was suspended and then debarred from postal and government work for five years. Thanks to our special agents, the Postal Service saved over $9 million in future fraudulent payments and the CEO was ordered to spend six months in jail.
Fraudsters may be clever in covering their tracks, but with our investigations, they don’t stand a chance.
If you suspect or know of contract fraud involving Postal Service employees or contractors, please report it to our Hotline.