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Qui Tam / False Claims Act: Government Contracts

The United States government relies on the services of contractors for many aspects of its military and civilian operations. For example, the suppliers that manufacture the many types of equipment for the military are contractors. Likewise, the companies that prepare the food served in the cafeterias of public schools are contractors. The prison system increasingly relies on businesses that have contracts with the government to operate and staff its facilities. The government enters into contracts with these businesses with the understanding that they will be honest in representing the services they have provided when they invoice their government clients for their services.

Why it is Important to Take Action When Government Contractors Behave Fraudulently

Government contractors certainly are not the only entities capable of dishonest business practices. Anyone who is a victim of unethical business practices can file a civil lawsuit and seek damages. Consider the example of a guest who stays in a hotel and provides his credit card information with the understanding that the hotel will use it to pay for the nights he stays and the meals he eats at the hotel. When he receives his credit card statement, he finds that the hotel has charged him for additional nights and for services he did not use, even some services that, as far as he knows, the hotel does not offer. Of course, he should contact the hotel and ask to have the unfair charges refunded. If it refuses to give him a refund, he probably has grounds for a lawsuit.

In the case of false claims involving government contracts, it often takes someone looking as closely at where the money is going as an individual would look at the account statement for his personal credit card. Government contracts operate on a large scale, so it is possible for contractors to overcharge their government clients for services or charge them for non-existent services for a long period of time before anyone notices. Furthermore, the government entities are using taxpayers' money to pay their contractors, so every time a government contractor bills the government for a fraudulent charge, they are doing so at the expense of the American public.

The Role of Whistleblowers

Employees of a company that has been defrauding the government are often the first to find out about the fraudulent activity. These employees may keep quiet about the fraud because they fear losing their jobs if they report it to authorities. The False Claims Act (FCA), also known as the "Lincoln law" because it was enacted during Abraham Lincoln's presidency, protects "relators," also known as whistleblowers, or employees who take action against companies that defraud the government. FCA relators can file lawsuits on behalf of the government against the company allegedly engaging in fraud, and if the court rules against the company, then the relator is entitled to receive a share of the damages. This type of lawsuit is called a qui tam lawsuit. If you become aware that your employer has been defrauding the government, you should consult a lawyer who works with qui tam cases. You should not speak to the media, at least not before the lawsuit has been decided, because this can only hurt your case in court.

Notable FCA Violation Lawsuits Against Government Contractors

Many qui tam lawsuits against government contractors, but not all of them, involve defense contractors.

  • In 2012, a court ruled against a container ship company that had been overcharging for shipments of supplies to American troops in Afghanistan and Iraq. The company agreed to settle the case, and Jerry Brown, the whistleblower, received $3.6 million, approximately 10% of the settlement amount.
  • Delma Pallares was a merchandise manager for a Texas company that supplied groceries for the mess halls of the U.S. Armed Forces in Iraq and Afghanistan. She alerted the government that the company falsified the weights and expiration dates of products. Legal proceedings revealed that the company had bought expired food items and altered their expiration dates. The company paid a $15 million settlement.
  • In 2009, an aircraft manufacturing company paid a $25 million settlement after it was revealed that the company had knowingly sold defective aircraft to the government.
  • The largest settlement ever paid in a qui tam was in 2009. An aerospace defense company paid $325 million after it had sold defective electronic equipment to the government for use in military satellites. Robert Ferro, the whistleblower in the case, received $48.7 million.

To learn more about filing a qui tam suit related to a government contract, call a San Francisco qui tam lawyer from Willoughby Brod, LLP right away at (800) 427-7020.

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