DOJ recovered $1.1 billion in contract fraud settlements in 2015

Government contracts and federal procurement accounted for $1.1 billion in fraud settlements and judgments in fiscal year 2015, bringing procurement fraud totals to nearly $4 billion from January 2009 to the end of the fiscal year. 

Justice Dept. sealAll totaled, the Department of Justice obtained more than $3.5 billion in settlements and judgments from civil cases involving fraud and false claims against the government in the fiscal year ending Sept. 30, 2015.  This is the fourth year in a row that the department has exceeded $3.5 billion in cases under the False Claims Act, and brings total recoveries from January 2009 to the end of the fiscal year to $26.4 billion.

Significant cases involving federal contracts include a $146 million settlement with Supreme Group B.V. and several of its subsidiaries for alleged false claims to the Department of Defense (DoD) for food, water, fuel, and transportation of cargo for American soldiers in Afghanistan.  Supreme Group is based in Dubai, United Arab Emirates (UAE).  In addition, Supreme Group affiliates Supreme Foodservice GmbH, a privately held Swiss company, and Supreme Foodservice FZE, a privately-held UAE company, pleaded guilty to related criminal violations and paid more than $288 million in criminal fines.

In two other defense contract settlements, Lockheed Martin Integrated Systems, a subsidiary of aerospace giant Lockheed Martin Inc., paid $27.5 million and DRS Technical Services Inc. paid $13.7 million to resolve allegations that their employees lacked required job qualifications while the companies charged for the higher level, qualified employees required under contracts with U.S. Army Communication and Electronics Command (CECOM).  The CECOM contracts were designed to give the Army rapid access to products and services for operations in Iraq and Afghanistan.

In a pair of cases involving contracts with the General Services Administration, VMware Inc. and Carahsoft Technology Corporation paid the United States $75.5 million and Iron Mountain Companies paid $44.5 million to settle their respective liability under the False Claims Act.  The government alleged that California-based VMware and Virginia-based Carahsoft misrepresented their commercial sales practices, which resulted in overcharging government agencies for their software products and services sold through GSA’s Multiple Award Schedule.  Similarly, Iron Mountain, a records storage company headquartered in Massachusetts, misrepresented its commercial sales practices to GSA and failed to give certain discounts given to its commercial customers, as required to gain access to the vast federal marketplace available to contractors through the Multiple Award Schedule.

The Justice Department also settled allegations that private contractor U.S. Investigations Services Inc. (USIS) violated the False Claims Act in performing a contract with the Office of Personnel Management (OPM) to perform background investigations of federal employees and those applying for federal service.  The government alleged that USIS took shortcuts that compromised its contractually-required quality review and that, had the government known, it would not have paid for the services.  USIS agreed to forego at least $30 million in payments legitimately owed to the company to settle the government’s allegations.

Source: http://www.justice.gov/opa/pr/justice-department-recovers-over-35-billion-false-claims-act-cases-fiscal-year-2015

Tech contractors pay $12 million to settle claims they failed to screen staff

Two technology contractors have agreed to pay the U.S. government over $12 million in total to settle a civil court case alleging they allowed employees to work on a Defense Department contract without security clearance.

Services firms NetCracker Technology and CSC will pay $11.4 million and $1.35 million, respectively, according to a Department of Justice release .

False Claims ActIt reveals that the two were accused of contravening the False Claims Act by using staff who had not gone through required vetting procedures to work on a Defense Information Systems Agency (DISA) contract.

CSC was the prime contractor on the project to provide software to manage the Defense Department telecoms network between 2008 and 2013.

However, during that time, NetCracker is alleged to have knowingly used employees without security clearance, resulting in CSC “recklessly” submitting false claims for payment to DISA, the notice claimed.

A Washington Post report went further, claiming that some of the code written for the project was developed by Russian programmers and subsequently placed onto U.S. government computer networks with no testing for backdoors or other possibly malicious elements.

Keep reading this article at: http://www.infosecurity-magazine.com/news/tech-contractors-pay-12m-claims/ 

Boeing pays $18 million to settle allegations of improperly charging labor costs

The Boeing Company has paid the United States $18 million to settle allegations that the company submitted false claims for labor charges on maintenance contracts with the U.S. Air Force for the C-17 Globemaster aircraft, the Justice Department has announced. 

Justice Dept. sealThe government alleged that Boeing improperly charged labor costs under contracts with the Air Force for the maintenance and repair of C-17 Globemaster aircraft at Boeing’s Long Beach Depot Center in Long Beach, California.  The C-17 Globemaster aircraft, which is both manufactured and maintained by Boeing, is one of the military’s major systems for transporting troops and cargo throughout the world.  The government alleged that the company knowingly charged the United States for time its mechanics spent on extended breaks and lunch hours, and not on maintenance and repair work properly chargeable to the contracts.

“Defense contractors are required to obey the rules when billing for work performed on government contracts,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Today’s settlement demonstrates that the Justice Department will ensure that government contractors meet their obligations and charge the government appropriately.”

Air Force SealThe allegations resolved by the settlement announced on October 14, 2015 were originally brought by former Boeing employee James Thomas Webb under the qui tam, or whistleblower, provisions of the False Claims Act.  The Act permits private individuals to sue on behalf of the government those who falsely claim federal funds, and to share in the recovery.  Mr. Webb’s share of the settlement has not yet been determined.

The case was handled by the Civil Division’s Commercial Litigation Branch, the Defense Criminal Investigative Service, the Air Force Office of Special Investigations, the Defense Contract Audit Agency and the Defense Contract Management Agency.

The False Claims Act lawsuit is captioned United States ex rel. Webb v. The Boeing Company, CV13-000694 (C.D. Cal.).  The claims resolved by this civil settlement are allegations only as there has been no determination of liability.

Boeing, an aerospace and defense industry giant, is headquartered in Chicago.

Source: http://www.justice.gov/opa/pr/boeing-pays-18-million-settle-false-claims-act-allegations

Mass. AG cracksdown on DBE/MBE misrepresentations in subcontracts

The Massachusetts Attorney General is taking action to ensure that general contractors working on public construction are complying with state requirements to use DBE/MBE subcontractors.

Massachusetts sealIn August 2015, the Attorney General filed suit (Comm of MA v. CTA Construction Co., Inc. et al., Suffolk Superior Court Civ. Action No. 2015-02491) against multiple contractors for allegedly violating the Massachusetts False Claims Act by making misrepresentations over their compliance with requirements for working with Minority Business Enterprises (MBE), Women Business Enterprises (WBE) and/or Disadvantaged Business Enterprises (DBE).

The defendant contractors immediately settled for a combined $1.4 million.

Keep reading this article at: http://www.jdsupra.com/legalnews/attorney-general-crackdown-on-dbe-mbe-58815/

Army contractors to pay $1.45 million to settle bid-rigging allegations

PAE Government Services Inc. (PAE) and RM Asia (HK) Limited (RM Asia) have agreed to pay the United States $1.45 million to resolve allegations that they engaged in a bid-rigging scheme that resulted in false claims for payment under a U.S. Army contract for services in Afghanistan, the Justice Department has announced. 

PAE, headquartered in Arlington, Virginia, provides integrated global mission services.  RM Asia, located in Hong Kong, provides motor vehicle parts and supplies.

Justice Dept. seal“Our national security and those of our allies depend on quality goods and services delivered at a fair price,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Today’s settlement demonstrates our continuing vigilance to ensure that those doing business with the government do not engage in bidrigging or other anticompetitive conduct.”

ArmyIn 2007, the Army awarded PAE a contract to provide vehicle maintenance capabilities and training services for the Afghanistan National Army at multiple sites across Afghanistan.  PAE partnered with RM Asia to supply and warehouse vehicle parts.  The government alleged that former managers of PAE and RM Asia funneled subcontracts paid for by the government to companies owned by the former managers and their relatives by using confidential bid information to ensure that their companies would beat out other, honest competitors.

In a related criminal investigation, the U.S. Attorney’s Office of the Eastern District of Virginia previously obtained guilty pleas from former PAE program manager Keith Johnson; Johnson’s wife, Angela Gregory Johnson; and RM Asia’s former project manager, John Eisner, and deputy project manager, Jerry Kieffer, for their roles in the scheme.

“This resolution, following criminal charges that were also brought against the individuals involved, represents the government’s efforts to use all of the criminal and civil tools available to the government to remedy fraudulent conduct,” said U.S. Attorney Dana J. Boente of the Eastern District of Virginia.

The allegations resolved by this settlement arose from a lawsuit filed by Steven D. Walker, a former employee of PAE, under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and share in the recovery.  Mr. Walker will receive $261,000.

This case was handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the Eastern District of Virginia, the Defense Criminal Investigative Service, the U.S. Department of the Army Criminal Investigation Command-Major Procurement Fraud Unit and the Defense Contract Audit Agency.

The lawsuit is captioned United States ex rel. Walker v. PAE, et al., 1:11CV382-LO/TCB (E.D. Va.).  The claims resolved by the settlement are allegations only; there has been no determination of liability.

Source: http://www.justice.gov/opa/pr/pae-government-services-and-rm-asia-hk-limited-pay-145-million-settle-claims-alleged-bid