Companies pay millions to settle alleged false billings on GSA Schedule and DoD contracts

At year’s end, the Department of Justice (DOJ) announced multi-million dollar false claims settlements with a pair of large contractors in connection with billing practices on GSA Schedule contracts.

  • Iron Mountain Incorporated and Iron Mountain Information Management LLC (collectively Iron Mountain) has paid $44.5 million to resolve allegations under the False Claims Act that Iron Mountain overcharged federal agencies for record storage services , the DOJ announced Dec. 19, 2014.  Iron Mountain is a records storage company headquartered in Boston.
  • Lockheed Martin Integrated Systems (LMIS) agreed on Dec. 22, 2014 to repay the government $27.5 million to settle over-billing charges brought under the False Claims Act on a contract producing products and services for U.S. troops in Iraq and Afghanistan.

Justice Dept. seal“Protecting the federal procurement process from false claims is central to the mission of the Department of Justice,” Acting Assistant Attorney General Joyce Branda said. “We will continue to ensure that when federal monies are used to purchase commercial services the government receives the prices and services to which it is entitled.”

The settlement with Iron Mountain relates to contracts under which the firm provided record storage services to government entities from 2001 to 2014 through GSA’s Multiple Award Schedule (MAS) program.  The MAS program provides the government with a streamlined process for procurement of commonly used commercial goods and services.  The settlement resolves allegations that Iron Mountain failed to meet its contractual obligations to provide GSA with accurate information about its commercial sales practices during contract negotiations, and failed to comply with the price reduction clause of the GSA contracts by not extending lower prices to government customers during its performance of the contracts.  It also resolves an allegation that Iron Mountain charged the United States for storage meeting National Archives and Records Administration requirements when the storage provided did not meet such requirements.

“Contractors that knowingly bill the government in violation of contract terms will face serious consequences,” Branda said of the Lockheed Martin settlement. “The department will ensure that those who do business with the government, and seek taxpayer funds, do so fairly and in accordance with the applicable rules.”

LMIS is a subsidiary of Lockheed Martin Inc., which is headquartered in Bethesda, Maryland.  The alleged labor mischarging occurred on the Rapid Response (CR2) contract and the Strategic Services Sourcing (S3) contract, both issued by the U.S. Army Communication and Electronics Command (CECOM).  CECOM is located at Fort Monmouth, New Jersey, and at the Aberdeen Proving Group in Maryland.  The purpose of the CR2 and S3 contracts is to provide rapid access to products and services to be provided to the Army in Iraq and Afghanistan. Individual task orders then are separately negotiated, based on these contracts, to quickly meet the needs of CECOM.  LMIS allegedly violated the terms of the contracts by using under-qualified employees who were billed to the United States at the rates of more qualified employees.  The overbilling allegedly resulted in greater profit for LMIS.

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Former security contractor CEO agrees to pay $4.5 million to settle civil claims

Keith Hedman, 55, of Arlington, Virginia, the former chief executive officer of a Virginia-based security contracting firm, Protection Strategies, Inc. has agreed to pay $4.5 million to settle civil claims relating to his involvement in a fraudulent scheme to create a front company to obtain contracts through the Small Business Administration’s Section 8(a) program.  The Section 8(a) program allows qualified small businesses to receive sole-source and competitive-bid contracts set aside for minority-owned and disadvantaged small businesses.

Dana J. Boente, U.S. Attorney for the Eastern District of Virginia, made the announcement after the settlement agreement was signed by both parties. “The civil settlement illustrates the importance of not stopping at a criminal resolution when a defendant has pled guilty to fraud against the government,” said U.S. Attorney Boente.

The settlement resolves civil claims against Hedman relating to the criminal plea entered by him in U.S. v. Hedman,1:13cr74. According to court records, in or about 2001 Hedman formed PSI, which was approved to participate in the 8(a) program based on the 8(a) eligibility of its listed president and CEO, an African-American female. When the listed president and CEO left PSI in 2003, Hedman became its sole owner, and the company was no longer 8(a)-eligible.

Keep reading this article at: http://www.alexandrianews.org/former-security-contractor-ceo-agrees-to-pay-4-5-million-to-settle-civil-claims/

 

Arbitration of False Claims Act cases may bind the U.S.

False Claims Act (FCA) qui tam fraud claims must be arbitrated as a result of arbitration agreements signed by relators who have brought FCA Justice Dept. sealfraud claims on the government’s behalf, author Dino L. LaVerghetta of Wilmer Cutler Pickering Hale and Dorr LLP says, following the holding of a little-noticed case.

What’s more, he explains, such binding arbitration should bar the U.S. from later re-litigating issues decided in arbitration.

If so, this is a factor that both defendants and the Justice Department must weigh in assessing the grounds for DOJ to intervene in a qui tam case.

Read this article at: 

http://www.wilmerhale.com/uploadedFiles/Shared_Content/Editorial/Publications/Documents/LaVerghetta-BloombergBNA-Arbitration-of-False-Claims-Act-Cases-2014.PDF

 

False Claims Act filing requirements trump shipping rule, whistleblower case reinstated

A federal appeals court has reinstated a whistleblower lawsuit brought in 2008 against shipping company DHL Express.

Kevin Grupp and Robert Moll alleged DHL improperly billed the federal government for jet fuel surcharges on ground shipments. DHL had won dismissal at the trial court, the federal court in Buffalo, but on Feb. 5 the U.S. Court of Appeals for the Second Circuit reversed that ruling.

Judge Ralph Winter authored the opinion for the Second Circuit. He wrote that a rule that requires challenges to shipping disputes to be brought within 180 days does not apply to False Claims Act cases.

“Application of the 180-day rule would completely nullify the tolling allowance as the Government is often unlikely to become award of fraud immediately following the violation,” Winter wrote.

Keep reading this article at: http://legalnewsline.com/news/federal-government/247130-false-claims-act-filing-requirements-trump-shipping-rule-whistleblower-case-reinstated 

Audit planned in fraud case as Navy reinstates shipper

The Navy has quietly lifted the suspension of a shipping contractor under investigation for possible fraud, allowing the company to compete for new work. In exchange, the company has agreed to pay for an independent audit that could help the Justice Department determine how much it may have overcharged the government.

Records show that the Navy recently decided to reinstate Inchcape Shipping Services, a company based in Dubai in the United Arab Emirates. The move came after a federal judge questioned whether the service had presented enough evidence to justify the suspension.

Contracting experts said it was unusual for the government to turn to an outside auditor in this type of case, and some questioned whether an independent firm could do as thorough a job.

The auditing firm must be approved by the Justice Department, which is conducting a civil fraud inquiry into whether the company systematically overcharged the Navy in providing provisions and sewage-removal services for warships in the Middle East and Africa. Officials said the audit could help spur settlement talks between Inchcape and the Justice Department.

Keep reading this article at: http://www.nytimes.com/2014/02/01/us/navy-contractor.html?_r=0