Yet another U.S. Postal Service manager has pled guilty to fraud and corruption charges relating to USPS transportation contracts. In March 2012, the former USPS Manager of Postal Vehicle Service Operations for the Bay Valley District in Oakland, CA was indicted in a $4.4 million fraudulent billing scheme. Last year, five Postal Service officials at the Detroit, MI Vehicle Maintenance Facility were charged with similar crimes. One might well wonder how many more such episodes need to be uncovered before the Postal Service issues binding procurement regulations and institutes effective protest procedures. Here’s what happened in the most recent case.

In March 2012, Balvinder Singh Chadha–former USPS Manager of Postal Vehicle Service Operations for the Bay Valley District in Oakland, CA–was indicted. The Government charged him with committing wire fraud and conspiring to violate federal conflict of interest charges. In April 2012, he entered into a plea agreement and sentencing is scheduled for August 2012.  

From July 2005 through August 2009, Chadha was Manager of Postal Vehicle Services (“PVS”) Operations for the Bay Valley District in Oakland, CA. His responsibilities included requesting and managing Postal Service contracts, handling relationships with outside vendors, monitoring their performance, approving payments, and certifying reports and other paperwork.

While serving in this capacity, Chadha was also an investor and de facto head of a private company called Golden Pacific Logistics, Inc. (GPL). Chadha used his position as Manager of PVS Operations to obtain Postal Service truck leasing contracts for GPL. He then deceived the Postal Service by submitting monthly invoices that overstated the number of trucks leased and mileage incurred. He also submitted invoices that sought reimbursement for service and maintenance costs that were never incurred or not authorized for reimbursement.

Chadha tried to conceal his involvement with GPL by substituting a false name for his own on GPL’s corporate documents. He also directed others to undertake efforts to create the appearance that GPL and Chadha were engaged in an arm’s length business relationship.

The net result was that over a roughly three year period, GPL received total contract revenues from the Postal Service of over $6.4 million. Of that amount, over $4.4 million was fraudulently billed for trucks that were never leased by the Postal Service, mileage that was never incurred by the Postal Service, and service/maintenance costs that were never authorized.

Similar incident at Detroit VMF

Last year, in May 2011, five Postal Service employees from the Detroit, MI Vehicle Maintenance Facility were indicted. They later pled guilty to conspiring with a private contractor to take bribes in exchange for directing over $13 million in maintenance work to a private contractor in Ohio and Michigan. The postal officials involved in the scheme included the Acting Manager of the Detroit VMF and the Manager of the VMF in Akron, OH, as well as various other supervisors. The indictment charged these officials with accepting cash bribes, “loans,” free services, tickets to sporting events, prostitutes, and even Viagra. Here is a link to our blog entry on that scandal.

Lack of binding procurement rules contributes to problem

Such fraudulent conduct was inadvertently facilitated by the Postal Service’s revocation of its purchasing regulations in 2006 and replacement with guidelines said to be non-binding. At the same time, the Postal Service proclaimed that contractors had no right to challenge its procurement actions based on violations of its purchasing policies. By deflating its purchasing rules from legally-binding regulations to non-binding policy guidance, and weakening the bid protest process, the Postal Service has made it easier for procurement errors and outright misconduct to develop, and harder to detect.

Eventually, the fraudulent schemes in Detroit, MI and Oakland, CA were exposed. But how many more such schemes exist that we don’t know about? And how many more such schemes do we need to hear about before the Postal Service joins ranks with nearly every other federal agency and issues binding procurement regulations and effective protest procedures?