BRIEFING: In 1993, the Jacksonville Division of the FBI received an anonymous tip that a certain company (COMPANY A) had committed fraud against the government by bid-rigging a contract awarded by the National Aeronautics & Space Administration (NASA) at the Kennedy Space Center. According to the tip, COMPANY A had purposely submitted false and inflated bills and committed outright theft on the contract.

To establish the basis for this case, we need to look back to 1992. At that time, Congress passed legislation mandating that a substantial percentage of federal government contracts be awarded to small disadvantaged businesses and/or small woman-owned businesses.

The new legislation hurt COMPANY A's chance of winning the NASA contract -- it was neither a small disadvantaged business nor a small woman-owned business. That's when the owners of COMPANY A had an idea of how they could comply with the "small woman-owned business requirement" of the law. They created a fake company called COMPANY B and installed their wives as sole employees and officers. The plan? Once COMPANY B won a contract, it would hire COMPANY A as a subcontractor to perform the actual work.

It was soon announced that quotes were being solicited for repairs to Launch Pad 39A, the launch pad for NASA's Space Shuttle Fleet. Being near the Atlantic Ocean, corrosion and constant use required the entire structure to be sand blasted, repaired, rewired, and cleaned at an estimated cost of $3.2 million. This meant repairing what was essentially a giant jungle gym the size of a twenty-story building!

COMPANY B submitted the lowest bid, matching NASA's estimate perfectly. In fact, the company matched the costs of the different parts of the project exactly, line by line. A coincidence? Sources said that COMPANY B obtained the estimate from someone on the inside.

Once the company began its work it realized it couldn't make a profit, so it began to inflate work costs. COMPANY B claimed more resources were needed to complete the job on time, eventually submitting a total of approximately $10 million in claims, about 90% more than the amount of its original bid.

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