Probe: IRS contractor won up to $500 million in questionable bids

(CBS News) WASHINGTON -- The Internal Revenue Service got some more unwanted attention Tuesday, but not for targeting political groups. This time, a congressional investigation has revealed a technology contractor won questionable bids worth up to $500 million.

Braulio Castillo began winning hundreds of millions of dollars worth of contracts with the IRS within months of founding his technology company Strong Castle in early 2012.

The House Oversight Committee says Braulio Castillo was given priority by claiming a 27-year-old disability and carefully choosing his company's location.
The House Oversight Committee says Braulio Castillo was given priority by claiming a 27-year-old disability and carefully choosing his company's location.
CBS News

"We've found the kind of wrongdoing that should have caused this contract to be cancelled," said Republican Darrell Issa, who chairs the House Oversight Committee, which investigated Castillo's rapid rise.

They found that just before opening Strong Castle, Castillo filed for a "disability rating" with the Veterans Administration, citing a "foot injury he suffered in 1984" -- 27 years ago -- while playing sports at a military prep school.

That rating enabled Castillo to register Strong Castle as a "service-disabled, veteran-owned small business," eligible for preferential treatment in bidding competitions.

"Understand -- never served a day on active duty, went to a school at taxpayers' expense and had a minor injury that didn't keep him from going on to play college ball," Issa said.

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Castillo, who lives in Virginia, also chose carefully where to locate Strong Castle: "In the heart of Chinatown," says his company website.

It's a formerly blighted area now bursting with shops and restaurants, but Chinatown is still designated a government "hubzone," which meant Castillo's company qualified for even more priority in bidding.

Watch: Rep. Ryan says IRS targeting is "cause for outrage," below.

Yet when investigators visited Strong Castle's offices repeatedly, no one was there. Investigators said it appeared Castillo's wife "manipulated employee timesheets" to make it appear that workers spent more time there.

Castillo denies the allegations, telling CBS News in a statement, "Throughout our work with the IRS, we have never received any improper preferential treatment and have competed fairly for every contract that we have received."

The committee told the IRS about their findings several months ago, but officials there said it would be too disruptive to cancel a contract worth $260 million. Castillo and IRS officials have been called to testify Wednesday.

  • Nancy Cordes On Twitter»

    Nancy Cordes is CBS News' congressional correspondent.

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