The Internal Revenue Service (IRS) scandal heated up Wednesday when Greg Roseman, Washington D.C. Metro Area Contracting Officer and Deputy Director of the IRS, invoked his constitutional Fifth Amendment right against self-incrimination to avoid answering questions in front of the House Committee on Oversight and Government Reform to determine if he fraudulently steered $500 million in IRS computer contracts to a $250,000 a year company fronting for IBM.
Committee Chairman Darrell Issa released a report today detailing an abusive contracting relationship between the IRS and Strong Castle, Inc. The report found a personal relationship between the IRS official and Braulio Castillo, owner of Strong Castle/Signet Computers, which facilitated the company capturing 25% of the IRS’s $2 billion in annual information technology spending over a six month period.
The House report also found that Strong Castle gained an advantage over competitors by fraudulent obtaining designation as a “Historically Underutilized Business Zones“ (HUBZones) with the Small Business Administration. HubZones were enacted as part of President Clinton’s Small Business Reauthorization Act of 1997 to encourage government contracting with economically disadvantaged communities. HUBZone-certified companies receive a 10% “contract preference,” but their principal office must be within the HubZone and at least 35% of employees must reside in the HUBZone.
The Strong Castle website claims the company is a Service-Disabled, Veteran-Owned Small Business (SDVOSB) and winner of the Veteran Affairs Award at 12th Annual Leesburg, Virginia Business Awards. Despite claiming to be in an Economically Underutilized Business Zone, Leesburg, Virginia was rated by Fortune Magazine as the number four Best Small Town to Live in America. In 2011, annual median family income was $128,595, median home price was $279,250 and unemployment was 4.1%. The City offers “plenty of good jobs in defense contracting, consulting, and technology.”
In January 2012, Braulio Castillo purchased Signet Computers, released all the former employees and renamed the company Strong Castle, Inc. Over the next six months, the company won IRS contracts worth about $500 million. Although the $50 million preference as a qualified HubZone gave the company a big competitive advantage, investigators discovered that Contracting Officer Greg Roseman failed to disclose he and Castillo had 350 text messages that included “grossly inappropriate” remarks and “underscore a problematically close relationship,” according to investigators.
The report states that despite IRS senior staff knowing about these conflicts of interest with Strong Castle/Signet Computers, “the IRS has failed to revoke tainted large contract awards or take disciplinary action against IRS employees who acted inappropriately. Throughout the report, numerous examples from texts, emails, and witness testimony show that the IRS contracting officer played an often hands-on role in tilting the table in Strong Castle’s favor in numerous contract competitions.”
The report calls the relationship between Roseman and Castillo “cozy,” since Roseman sent a February 2012 email to Castillo in which he said Bobby McCane, Director of the Office of Information Technology Acquisition at the General Services Administration, where Roseman previously worked, could help Castillo get a contract on GSA’s “Schedule 70,” a catalog of government wide contracts for information technology products and services. In the email, Roseman told Castillo, “I’ve talked to her and she will look into expediting.” Subsequently, McCane awarded a Personal Computer Equipment and Accessories Blanket Purchase Agreement to Strong Castle and IBM Enterprise Software and Services Opportunity.
Under blistering questioning today, Castillo said that Strong Castle won blanket purchase agreements from the IRS, as a front company and almost all the revenue went to IBM. Six weeks ago I reported that the IRS’s Martinsburg Computer Center upgraded its computer mainframes to the IBM zEnterprise™ 196 Systems that were designed for military level applications.
The upgrade gave the IRS the capability to troll through millions of individual internet addresses, establish 32,000 metadata categories and designate 1 million unique “attributes.” This allows the IRS to collect huge volumes of personal information on taxpayers’ digital activities, from eBay auctions to Facebook posts and e-payment transaction records. Dean Silverman, leader of the IBM zEnterprise™ 196 upgrade bragged: “Private industry would be envious if they knew what our models are.”
Greg Roseman and Lois Lerner have the same right to take the Fifth Amendment when subpoenaed by Congress as mafia bosses. But if IBM takes the Fifth Amendment, the company will be banned from doing government business and lose $35 billion in annual revenue. With the IRS scandal now centered on Washington D.C., it is only a matter of time before bureaucrats and crony companies negotiate immunity agreements and then we will learn how far up will this scandal go in our nation’s leadership.
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