Major Fraud Investigations Division

USPS OIG Investigations

To promote integrity and accountability related to allegations of major fraud that impacts the Postal Service, in April 2009, the Office of Inspector General (OIG)established a Major Fraud Investigations Division (MFID). The MFID is responsible for investigating all allegations of fraud within the Postal Service’s programs and operations with a contract award price (individual or aggregate) of $250,000 or more, as well as allegations that become national or multi-jurisdictional in nature.

During Fiscal Year 2009, the OIG conducted 147 contract fraud investigations, resulting in 19 arrests and nearly $12 million in funds returned to the Postal Service.

The Postal Service expends $11 to $12 billion per year on goods and services and maintains an overall procurement portfolio of close to $42 billion. Applying the Certified Fraud Examiners Association’s professionally recognized “5 percent average of procurement dollars susceptible to fraudulent activity” to Postal Service expenditures means that $600 million in Postal Service funds are potentially lost to fraud each year.

Major contract and health care provider fraud investigations by their nature are time consuming and complex. Outcomes of any significance can take years before they are realized; however, the return on investment for the Postal Service can be even more significant, leading to improved processes, cost avoidances, restitution, recoveries, and the suspension and debarment of companies and individuals.

OIG Investigation Brings $4.5 Million Fine to USPS After Air Cargo Carrier Pleads Guilty in Price-Fixing Scam

In 2006, the Postal Service accounted for over a third of the air cargo business in this country, spending about $700 million on air cargo costs. As one of the nation’s largest air cargo customers, the Postal Service also became the largest government victim in a price-fixing scam in the international air cargo industry. The scheme to fix the rates and surcharges the air cargo carriers charged their customers was uncovered by a Justice Department Task Force that included the OIG for the Postal Service. The investigation centered on allegations that dozens of air cargo carriers were artificially increasing profits through a price fixing scheme. The conspiracy by the air cargo carriers also involved, not only base cargo rates charged per kilogram, but also surcharges related to fuel, security, war risk, and U.S. Customs fees.

As a result of the investigation, Nippon Cargo Airlines pled guilty to violations of the Sherman Anti-Trust Act and were fined $45 million. The Postal Service received this $4.5 million check in September 2009 as a result of the multi-agency investigation. Our new MFID was part of this investigation and is looking into additional allegations involving other air cargo carriers.