By Carol L. O’Riordan
The Justice Department announced on Dec. 19, 2011, that it recovered $422 million in fiscal year 2011 in procurement fraud cases. The total amount recovered for procurement fraud in the last three fiscal years exceeds $1.5 billion, a record for any three-year period.
It’s clear that procurement and contract fraud are remaining high in the department’s enforcement priorities, and that the government is using many types of enforcement tools to combat this type of fraud.
Among these tools, for example, is the monitoring of cases filed under the False Claims Act (FCA). For example, on Sept. 29, 2011, the department announced a $22.6 million settlement of a claim against Science Applications International Corporation (SAIC), Applied Enterprise Solutions (AES), the chief executive officer of AES, and two former government employees in a case that was originated by a whistleblower under the FCA. This interesting case is typical of the kinds of cases that Justice will pursue.
A whistleblower named David Magee, a former employee of the Naval Oceanographic Major Shared Resource Center (NAVO MSRC) in Hancock County, Miss., filed an FCA suit against SAIC, AES, and Lockheed after SAIC had gained a contract to provide services to the General Services Administration in support of the NAVO MSRC. Lockheed Martin and AES were subcontractors for the project.
Magee alleged that once the contract solicitation had been publicized, two government employees conspired with Lockheed Martin, SAIC, and AES to ensure that SAIC and the other companies got the work. According to the whistleblower, the government employees shared non-public information with the SAIC team that was not provided to other bidders, thus biasing the procurement in favor of SAIC and its team.
The government joined in the FCA suit and gained a settlement first against Lockheed for $2 million, and then against the others.
Under the FCA, a private party can file an action on behalf of the United States and receive a portion of the recovery. This is a powerful incentive to whistle-blowing. Any company, of whatever size, that does business with the government needs to be aware of the Justice Department’s enforcement priorities and of its tools to ensure fair government contracting; and needs to ensure it has best practices and protocols in place that will mitigate the impact of an investigation.