Shell Companies Set Up Shop to Dupe the PentagonJuly 01, 2011
Ever since the 1990s, when the Pentagon tried to save money by purchasing components off-the-shelf, its supply chain has been flooded by counterfeits or parts that do not match its requirements. That trend accelerated in recent years with some companies setting up shop just to win contracts while providing sub-par products. Most of these shell companies incorporate in Wyoming, a state with liberal incorporation laws. According to an investigation by Reuters, more than 2,000 companies are registered through Wyoming Corporate Services, a company that specializes in incorporating businesses and providing anonymity. Many of these 2,000 companies represent themselves as minority-owned to improve their chances of winning contracts from the Pentagon. The Reuters investigation found that nine firms registered with Wyoming Corporate Services had received 93 contracts worth more than $1.6 million from government agencies, including the Pentagon, the IRS and the Veterans Administration. However, more than 90% of the contracts were awarded by the Department of Defense, according to the investigation. Two companies in particular stand out. The Defense Logistics Agency banned Eagle Logistics Solutions and Eagle Logistics Aerospace from doing business with the Pentagon for three years after the agency's investigators found the companies were knowingly selling parts that had been reverse engineered in Turkey to resemble the required parts. The Reuters review found that Eagle Logistics Solutions and its related company, Eagle Logistics Aerospace, had been awarded 44 parts contracts for more than $715,000. What remains unclear is whether the Pentagon screens for such “shell” companies. Wyoming Corporate Services declined to comment about specific companies it has registered. |
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