Defense Contractor / Military / Government Procurement Qui Tam Cases

Part 3 of the “National Whistleblower Litigation” Video Series

The vast amount of fraud against the United States military in the procurement of the necessities of the Civil War, such as ships, food, and supplies, provided the impetus for the enactment of the original False Claims Act (FCA) in 1863. The Government was concerned not only with the millions of dollars lost, but also with the safety of soldiers. In light of the massive fraud on the United States Military, Congress enacted the FCA to deter and punish wrongdoers and reimburse the Government for its losses.

Since its enactment, actions against defense contractors have dwindled, and healthcare fraud has become the leading source for qui tam actions. In contrast with healthcare recoveries, which totaled $1.7 billion in 2003, recoveries for defense procurement fraud totaled a mere $299 million. However, fraud in the defense arena is still a concern for the government. In light of recent wars overseas, defense contractors surely will fall under the government’s microscope.

False claim actions involving defense contracts usually fall into two categories: 1) those claiming that the defense contractor provided false information regarding product specifications, such as testing records, in violation of a statute, regulation or the contract terms and 2) those alleging that the defense contractor mis-charged the government for the cost of the supplies or services rendered.

In the first category, a defense contractor that has falsified its test records is analogous to the risk of Civil War soldiers being harmed by ammunition filled with sawdust rather than gunpowder. A faulty missile detonator will also lead to the loss of many lives, or a defective helicopter can lead to the loss of lives.

For example, a qui tam whistleblower and the government alleged that a defendant company made false statements regarding the manufacture of helicopters sold to the United States Army. As part of the contracts negotiated between the company and the Army, the company was required to test and guarantee the quality of all the parts.

The suit was commenced after a helicopter crash over the Saudi Arabian desert during Operation Desert Shield. The failure of a defective flight-critical transmission gear caused the crash. The qui tam whistleblower and the government claimed that the company made false statements regarding the quality of the parts used to manufacture the transmission gears. The court found that the entire helicopter was defective due to the defective gear, and the company’s claim for payment of the helicopter was false under the FCA. The court also held that the government could recover the cost of the entire helicopter.

The second category of false claim actions brought against defense contractors involves the falsification of pricing information for equipment or labor. For example, a qui tam whistleblower claimed that the defendant company fraudulently overcharged the government on contracts with the Department of Defense and National Aeronautics and Space Administration. The qui tam whistleblower was the director of financial control for the company’s space unit and reported directly to its general manager. The qui tam whistleblower accused the company of shifting expenses from commercial jobs to government contracts, and falsely classifying other expenses in an effort to avoid reimbursement caps placed on research and development costs of government contracts. The company settled the lawsuit for $111.2 million.

For more information and case citations, please see Androphy “Federal False Claims Act and Qui Tam Litigation,” published by Law Journal Press (2010).

For more information, email quitam@bafirm.com

Notice

This website is designed to provide general information only. This information is not and should not be construed to be legal advice. The transmission of the information found on this website also does not result in the formation of a lawyer-client relationship.

You should be aware that qui tam claims are subject to a Statute of Limitations. The area of limitations periods is complex. There are also first to file rules, public disclosure bars, original source issues, and varying limitations in pursuing retaliation claims. If you wish to pursue your claims, you should promptly seek the opinion of an attorney regarding the merits of your qui tam claim and the applicable statute of limitations.