MEDICAL DEVICE COMPANY TO PAY $4.41 MILLION TO RESOLVE ALLEGATIONS OF UNLAWFULLY SELLING DEVICES FROM OVERSEAS

FROM:  U.S. JUSTICE DEPARTMENT
Thursday, April 2, 2015
Medtronic to Pay $4.41 Million to Resolve Allegations that it Unlawfully Sold Medical Devices Manufactured Overseas

The Justice Department announced today that Medtronic plc and affiliated Medtronic companies, Medtronic Inc., Medtronic USA Inc., and Medtronic Sofamor Danek USA Inc., have agreed to pay $4.41 million to the United States to resolve allegations that they violated the False Claims Act by making false statements to the U.S. Department of Veterans Affairs (VA) and the U.S. Department of Defense (DoD) regarding the country of origin of certain Medtronic products sold to the United States.

“Today’s settlement demonstrates our commitment to ensure that our service members and our veterans receive medical products that are manufactured in the United States and other countries that trade fairly with us,” said Acting Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.  “The Justice Department will take action to hold medical device companies to the terms of their government contracts.”

“Domestic manufacture is a required component of many military and Veterans Administration contracts,” said U.S. Attorney Andrew M. Luger of the District of Minnesota.  “Congress has mandated that the United States use its purchasing power to buy goods made in the United States or in designated countries.  We take that mandate seriously and will not hesitate to take appropriate legal action to ensure compliance.”

According to the settlement agreement, between 2007 and 2014, Medtronic sold to the VA and DoD products it certified would be made in the United States or other designated countries.  The Trade Agreements Act of 1979 (TAA) generally requires companies selling products to the United States to manufacture them in the United States or in another designated country.  The United States alleged that Medtronic sold to the United States products manufactured in China and Malaysia, which are prohibited countries under the TAA.

The specific Medtronic products at issue included anchoring sleeves sold with cardiac leads and used to secure the leads to patients, certain instruments and devices used in spine surgeries, and a handheld patient assistant used with a wireless cardiac device.  The agreement covers the period from Jan. 1, 2007, to Dec. 31, 2013, and for one device (the handheld patient assistant), the period from Jan. 1, 2014, to Sept. 30, 2014.

The settlement resolves allegations originally brought in a lawsuit filed by three whistleblowers under the qui tam provisions of the False Claims Act, which allow private parties to bring suit on behalf of the government and share in any recovery. The relators will receive a total of $749,700 of the recovered funds.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $23.9 billion through False Claims Act cases, with more than $15.2 billion of that amount recovered in cases involving fraud against federal health care programs.

The case was handled by the U.S. Attorney’s Office of the District of Minnesota with assistance from the Civil Division, DoD, Defense Logistics Agency and Defense Criminal Investigative Service and the VA’s Office of General Counsel.

ED. DEPT. ENDS CONTRACTS WITH 5 PRIVATE COLLECTION AGENCIES FOR ALLEGEDLY PROVIDING BORROWERS INACCURATE INFORMATION

FROM:  U.S. EDUCATION DEPARTMENT
U.S. Department of Education to End Contracts with Several Private Collection Agencies
After finding high incidences of materially inaccurate representations, Department acts to protect consumers

FEBRUARY 27, 2015

Following a review of 22 private collection agencies, the U.S. Department of Education announced today that it will wind down contracts with five private collection agencies that were providing inaccurate information to borrowers. The five companies are: Coast Professional, Enterprise Recovery Systems, National Recoveries, Pioneer Credit Recovery, and West Asset Management.

The Department also announced that it will provide enhanced Fair Debt Collection Practices Act and Unfair, Deceptive, or Abusive Acts or Practices monitoring and guidance for all private collection agencies that work with the Department to ensure that companies are consistently providing borrowers with accurate information regarding their loans.

"Federal Student Aid borrowers are entitled to accurate information as they make critical choices to manage their debt," said Under Secretary Ted Mitchell. "Every company that works for the Department must keep consumers' best interests at the heart of their business practices by giving borrowers clear and accurate guidance. It is our responsibility – and our commitment – to uphold the highest standards of service for America's student borrowers and consumers."

During the past several months, the Department's Federal Student Aid (FSA) office performed a review of all private collection agencies that FSA works with. In these reviews, the Department sought to ensure that its private collection agencies were complying with the terms of the contract, which includes assurances that the agencies would not engage in unfair or deceptive practices and would comply with all applicable Federal and State laws.

In its review, the Department found that agents of the companies made materially inaccurate representations to borrowers about the loan rehabilitation program, which is an option that can create benefits to defaulted borrowers after they have made nine on-time payments in a period of 10 months. The five private collection agencies listed above were found to have given inaccurate information at unacceptably high rates about these benefits. In particular, these agencies gave borrowers misleading information about the benefits to the borrowers' credit report and about the waiver of certain collection fees.

The Department will reassign accounts held by these five agencies which are not already in repayment to other agencies. The Department will also increase monitoring to ensure that the students who began rehabilitation under the five private collection agencies will be treated fairly as they complete the rehabilitation process. Lastly, the Department will issue enhanced guidance to all remaining private collection agencies, increase internal training for FSA staff, enhance the private collection agency manual, expand monitoring for these types of issues, and refine its internal escalation practices.

FSA administers and oversees the federal student financial assistance programs, authorized under Title IV of the Higher Education Act of 1965 (HEA). These programs represent the largest source of student aid for postsecondary education in the United States. The Office of the Under Secretary manages policies, programs, and activities related to postsecondary education.

ENERGY COMPANY TO PAY $2.5 MILLION FOR ALLEGED INVOLVEMENT IN FRAUD CONSPIRACY AGAINST UNITED STATES

WEDNESDAY, NOVEMBER 19, 2014
WASHINGTON GAS ENERGY SYSTEMS AGREES TO PAY $2.5 MILLION IN FINES AND PENALTIES FOR CONSPIRING TO OBTAIN FEDERAL CONTRACTS

Scheme Involved Energy-Related Services at Government Buildings

WASHINGTON — Washington Gas Energy Systems (WGESystems) has agreed to pay more than $2.5 million in fines and monetary penalties for conspiring to commit fraud on the United States by illegally obtaining contracts that were meant for small, disadvantaged businesses.

The court agreement was announced today by William J. Baer, Assistant Attorney General of the Antitrust Division; Principal Assistant U.S. Attorney Vincent H. Cohen Jr. of the U.S. Attorney’s Office for the District of Columbia; Robert C. Erickson, Acting Inspector General of the U.S. General Services Administration (GSA); Peggy E. Gustafson, Inspector General for the Small Business Administration (SBA), and Andrew G. McCabe, Assistant Director in Charge of the FBI’s Washington Field Office.

WGESystems, based in Virginia, is a wholly owned subsidiary of WGL Holdings Inc. (WGL).  WGL is the parent company for all of the corporations within the Washington Gas family.  WGESystems plays no direct role in the delivery of natural gas, and it is not a utility.  It is a design-build firm that specializes in providing energy efficiency and sustainability solutions to clients.

A criminal information was filed today in the U.S. District Court for the District of Columbia charging WGESystems with one count of knowingly and willfully conspiring to commit major fraud on the United States.  WGESystems waived the requirement of being charged by way of federal indictment, agreed to the filing of the information, and has accepted responsibility for its criminal conduct and that of its employees.

In addition, as part of a deferred prosecution agreement reached with the U.S. Attorney’s Office for the District of Columbia and the Antitrust Division, WGESystems agreed to pay a fine of $1,560,000 and a monetary penalty of $1,027,261 within five days of the approval of the agreement by the court.

According to court documents filed today, WGESystems conspired with a company that was eligible to receive federal government contracts set aside for small, disadvantaged businesses with the understanding that the business would illegally subcontract all of the work on the projects to WGESystems.  In this way, WGESystems was able to capture a total of eight contracts worth $17,711,405 that should have gone to an eligible company. These contracts, awarded in 2010, were focused on making federal buildings in the Washington, D.C., area more energy efficient.

Under the illegal agreement, the company that was awarded these government contracts was allowed to keep 5.8 percent of the value of the contracts for allowing WGESystems to use the company’s small business status to win these contracts.

“Conspiracies to violate federal procurement laws will not be tolerated,” said Assistant Attorney General Bill Baer for the Antitrust Division.  “Taxpayers deserve to have contracting processes that are fair and competitive, and fully comply with applicable laws and regulations.”

“Time and time again, we have seen government contractors abuse and exploit programs designed to help minority and socially disadvantaged small businesses,” said Principal Assistant U.S. Attorney Cohen.  “This Washington Gas subsidiary obtained millions of dollars in federal contracts by using a small business that had no ability to actually complete the contract as a front company.  Even though the subsidiary lost money on these contracts, it is required to pay $2.5 million in fines and penalties under this agreement.  This resolution should cause other contractors to think twice about playing fast and loose with federal contracting rules.”

“Cases like this are important for us to maintain the integrity of the federal contracting process,” said GSA Acting Inspector General Erickson.  “Companies cannot cheat to win federal contracts and expect to get away with their ill-gotten gains.”

“SBA’s 8(a) Business Development Program assists eligible socially and economically disadvantaged individuals in developing and growing their businesses,” said SBA Inspector General Gustafson.  “Large businesses that fraudulently seek to gain access to contracts set aside for small businesses erode the public’s trust in this important program.  I want to thank the U.S. Attorney’s Office and our law enforcement partners for their professionalism and commitment to justice in this investigation.”

“Federal government contracting laws are in place to create a level playing field for small disadvantaged businesses whose work supports our country's diverse financial infrastructure,” said Assistant Director in Charge McCabe.  “The FBI with our law enforcement partners will investigate those companies who fraudulently abuse federal contracting laws with the purpose of increasing their company's bottom line.”

According to the court documents, until 2010, GSA had an area-wide contract with WGESystems.  This contract enabled GSA, without competition, to enter into contracts with WGESystems so that WGESystems could provide energy management services for federal buildings.

However, starting in 2010, the federal government changed its practices.  The American Reinvestment and Recovery Act appropriated funds to make buildings in the District of Columbia and the surrounding area more energy efficient.  These funds were to be awarded through the 8(a) program, which is administered by the SBA and which was created to help small, disadvantaged businesses access the federal procurement market.

To qualify for the 8(a) program, a business must be at least 51 percent-owned and controlled by a U.S. citizen (or citizens) of good character who meet the SBA’s definition of socially and economically disadvantaged.  The firm also must be a small business (as defined by the SBA) and show a reasonable potential for success.  Participants in the 8(a) program are subject to regulatory and contractual limits on subcontracting work from 8(a) set-aside contracts.  The SBA regulations require, among other things, the 8(a) concern to agree that on construction contracts it “will perform at least 15 percent of the cost of the contract with its own employees (not including the costs of materials).”

As a result of this change, WGESystems – which was not certified to participate in the 8(a) program – faced the prospect of losing millions of dollars in revenue.

WGESystems, along with an 8(a) company it used to obtain these contracts, and others, engaged in and executed a scheme to defraud the SBA and GSA by, among other things: concealing that WGESystems, which was not eligible for the aforementioned SBA contracting preferences, exercised impermissible control over the 8(a) company’s bidding for and performance on GSA contracts; and misrepresenting that the 8(a) company was in compliance with SBA regulations pertaining to work on these contracts, including that the company’s employees had performed the required percentage of work on these contracts.  Through these unlawful efforts, WGESystems and the 8(a) company with which it conspired obtained, at least, approximately $17,711,405 in U.S. government contracts related to work at eight different federal buildings.  When these contracts were awarded, the 8(a) company’s registered place of business was the president of the company’s home, and the company had no employees who could provide design-build or contracting services.

WGESystems assisted the 8(a) company with identifying a project manager for the work at the eight buildings who was nominally an employee of the 8(a) company, but who, in actuality, took direction from WGESystems employees.  For much of the relevant period, this project manager was the only employee of the 8(a) company performing work for any of the eight projects.

Under the agreement with WGESystems, the 8(a) company was entitled to 5.8 percent of the $17,711,405 total value of the contracts, which equals $1,027,261.  To date, with all but one of the eight contracts completed or suspended, WGESystems has lost approximately $1,122,581 on the projects.  WGESystems initially anticipated a profit margin that would have equaled about $1,560,000.

Since being informed of this investigation by the Justice Department, WGESystems has taken steps to enhance and optimize its internal controls, policies and procedures.

In light of the company’s remedial actions to date and its willingness to acknowledge responsibility for its actions, the U.S. Attorney’s Office for the District of Columbia and the Antitrust Division will recommend the dismissal of the Information in two years, provided WGESystems fully cooperates with, and abides by, the terms of the deferred prosecution agreement.

This investigation was conducted by the Inspector General’s Offices of the U.S. General Services Administration and the Small Business Administration and the FBI’s Washington Field Office.  The prosecution is being handled by Assistant U.S. Attorney Matt Graves of the Fraud and Public Corruption Section of the U.S. Attorney’s Office for the District of Columbia, and Assistant Chief Craig Y. Lee and Trial Attorney Diana Kane, both of the Antitrust Division’s Washington Criminal I Section.

FORMER VIRGINS ISLANDS LEGISLATURE EXECUTIVE DIRECTOR CHARGED WITH BRIBERY, EXTORTION

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, May 8, 2014

Former Executive Director of Virgin Islands Legislature Charged with Bribery and Extortion in Award of Government Contracts

The former e xecutive director of the Legislature of the Virgin Islands was indicted today by a federal grand jury in the Virgin Islands for accepting bribes and engaging in extortion in the award of contracts with the Legislature, announced Acting Assistant Attorney General David A. O’Neil of the Justice Department’s Criminal Division and U.S. Attorney Ronald W. Sharpe for the District of the Virgin Islands.

The indictment charges Louis “Lolo” Willis, 56, of St. Thomas, Virgin Islands, with three counts of federal programs bribery and three counts of extortion under color of official right.

According to the indictment, Willis was the executive director of the Legislature between 2009 and 2012.  One of his responsibilities included oversight of the renovation of the Legislature building, which included awarding and entering into contracts on behalf of the Legislature.   These contracts included contracts for general construction, air-conditioning services and carpentry, which were not publicly bid.  Willis was also responsible for paying the contractors for their work.   As alleged in the indictment, Willis accepted payments, including, among other things, thousands of dollars in cash, from three contractors in exchange for using his official position to secure contracting work for the contractors and to ensure they received payment upon completion.

An indictment is merely an accusation, and a defendant is presumed innocent unless proven guilty in a court of law.

This case was investigated by the FBI’s San Juan Division, the Office of the Virgin Islands Inspector General and the Internal Revenue Service – Criminal Investigation.   The case is being prosecuted by Trial Attorneys Peter Mason and Jennifer Blackwell of the Criminal Division’s Public Integrity Section and First Assistant U.S. Attorney Thomas Anderson of the District of the Virgin Islands.

JUSTICE ANNOUNCES RECOVERY OF $3.8 BILLION FROM FALSE CLAIM ACT CASES IN FISCAL 2013

FROM:  U.S. JUSTICE DEPARTMENT 

Friday, December 20, 2013
Justice Department Recovers $3.8 Billion from False Claims Act Cases in Fiscal Year 2013

Second Largest Annual Recovery in History Whistleblower Lawsuits Soar to 752
The Justice Department secured $3. 8 billion in settlements and judgments from civil cases involving fraud against the government in the fiscal year ending Sept. 30, 2013, Assistant Attorney General for the Civil Division Stuart F. Delery announced today.   This dollar amount, which is the second largest annual recovery of its type in history, brings total recoveries under the False Claims Act since January 2009 to $ 17 billion – nearly half the total recoveries since the Act was amended 27 years ago in 1986.

The Justice Department’s fiscal year 2013 efforts recovered more than $3 billion for the fourth year in a row and are surpassed only by last year’s nearly $5 billion in recoveries.   As in previous years, the largest recoveries related to health care fraud, which reached $2. 6  billion.   Procurement fraud (related primarily to defense contracts) accounted for another $ 890  million – a record in that area.

“It has been another banner year for civil fraud recoveries, but more importantly, it has been a great year for the taxpayer and for the millions of Americans, state agencies and organizations that benefit from government programs and contracts,” said Assistant Attorney General Delery.   “The $3. 8 billion in federal False Claims Act recoveries in fiscal year 2013, plus another $443 million in recoveries for state Medicaid programs, restores scarce taxpayer dollars to federal and state governments.   The government’s success in these cases is also a strong deterrent to others who would misuse public funds, which means government programs designed to keep us safer, healthier and economically more prosperous can do so without the corrosive effects of fraud and false claims.”    

The False Claims Act is the government’s primary civil remedy to redress false claims for government funds and property under government contracts, including national security and defense contracts, as well as under government programs as varied as Medicare, veterans benefits, federally insured loans and mortgages, transportation and research grants, agricultural supports, school lunches and disaster assistance.   In 1986, Congress strengthened the Act by amending it to increase incentives for whistleblowers to file lawsuits on behalf of the government, which has led to more investigations and greater recoveries.

Most false claims actions are filed under the Act’s whistleblower, or qui tam, provisions, which allow private citizens to file lawsuits alleging false claims on behalf of the government.  If the government prevails in the action, the whistleblower, known as a relator, receives up to 30 perc ent of the recovery.   The number of qui tam suits filed in fiscal year 2013 soared to 752 –100 more than the record set the previous fiscal year.   Recoveries in qui tam cases during fiscal year 2013 totaled $2. 9 billion , with whistleblowers recovering $345 million.

Health Care Fraud

The $2. 6 billion in health care fraud recoveries in fiscal year 2013 marks four straight years the department has recovered more than $2 billion in cases involving health care fraud.   This steady, significant and continuing success can be attributed to the high priority the Obama Administration has placed on fighting health care fraud.   In 2009, Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius announced the creation of an interagency task force, the Health Care Fraud Prevention and Enforcement Action Team (HEAT), to increase coordination and optimize criminal and civil enforcement.   This coordination has yielded historic results:   From January 2009 through the end of the 2013 fiscal year, the department used the False Claims Act to recover $12 .1 billion in federal health care dollars.   Most of these recoveries relate to fraud against Medicare and Medicaid.   Additional information on the government’s efforts in this area is available at StopMedicareFraud.gov, a webpage jointly established by the Departments of Justice and Health and Human Services.

Some of the largest recoveries this past fiscal year involved allegations of fraud and false claims in the pharmaceutical and medical device industries.   Of the $2. 6 billion in federal health care fraud recoveries, $1.8 billion were from alleged false claims for drugs and medical devices under federally insured health programs that, in addition to Medicare and Medicaid, include TRICARE, which provides benefits for military personnel and their families, veterans’ health care programs and the Federal Employees Health Benefits Program.   The department recovered an additional $443 million for state Medicaid programs.

Many of these settlements involved allegations that pharmaceutical manufacturers improperly promoted their drugs for uses not approved by the Food and Drug Administration (FDA) – a practice known as “off-label marketing.”   For example, drug manufacturer Abbott Laboratories Inc. paid $1.5 billion to resolve allegations that it illegally promoted the drug Depakote to treat agitation and aggression in elderly dementia patients and schizophrenia when neither of these uses was approved as safe and effective by the FDA.   This landmark $1.5 billion settlement included $575 million in federal civil recoveries, $225 million in state civil recoveries and nearly $700 million in criminal fines and forfeitures.   In another major pharmaceutical case, biotech giant Amgen Inc. paid the government $762 million, including $598.5 million in False Claims Act recoveries, to settle allegations that included its illegal promotion of Aranesp, a drug used to treat anemia, in doses not approved by the FDA and for off-label use to treat non-anemia-related conditions.  For details, see Abbott, Abbott sentencing, and Amgen.

The department also settled allegations relating to the manufacture and distribution of adulterated drugs.   For example, generic drug manufacturer Ranbaxy USA Inc. paid $505 million to settle allegations of false claims to federal and state health care programs for adulterated drugs distributed from its facilities in India.  The settlement included $237 million in federal civil claims, $118 million in state civil claims and $150 million in criminal fines and forfeitures.   For details, see Ranbaxy.  

Adding to its successes under the False Claims Act, the Civil Division’s Consumer Protection Branch, together with U.S. Attorneys across the country, obtained 16 criminal convictions and more than $1. 3 billion in criminal fines, forfeitures and disgorgement under the Federal Food, Drug and Cosmetic Act (FDCA).  The FDCA protects the health and safety of the public by ensuring, among other things, that drugs intended for use in humans are safe and effective for their intended uses and that the labeling of such drugs bears true, complete and accurate information.  

In other areas of health care fraud, the department obtained a $237 million judgment against South Carolina-based Tuomey Healthcare System Inc., after a four-week trial, for violating the Stark Law and the False Claims Act.  The Stark Law prohibits hospitals from submitting claims to Medicare for patients referred to the hospital by physicians who have a prohibited financial relationship with the hospital.   Tuomey’s appeal of the $237 million judgment is pending.  If the judgment is affirmed on appeal, this will be the largest judgment in the history of the Stark Law.   For the court’s opinion, see Tuomey.

The department also recovered $26.3 million in a settlement with Steven J. Wasserman M.D., a dermatologist practicing in Florida, to resolve allegations that he entered into an illegal kickback arrangement with Tampa Pathology Laboratory that resulted in increased claims to Medicare.   Tampa Pathology Laboratory previously paid the government $950,000 for its role in the alleged scheme.   The $26.3 million settlement is one of the largest with an individual in the history of the False Claims Act.   For details, see Wasserman.          

Procurement Fraud

Fiscal year 2013 was a record year for procurement fraud matters.   The department secured more than $887 million in settlements and judgments based on allegations of false claims and corruption involving government contracts.  Prominent among these successes was the department’s $664 million judgment against Connecticut-based defense contractor United Technologies Corp. (UTC).   A federal court found UTC liable for making false statements to the Air Force in negotiating the price of a contract for fighter jet engines.   In 2004, the department had won a smaller judgment after a three-month trial.  Both sides appealed, but the government’s arguments prevailed, resulting in the case being returned to the trial court to reassess damages.  The $664 million judgment, which UTC has appealed, is the largest judgment in the history of the False Claims Act and, if the appellate court affirms, will be the largest procurement recovery in history.   For details, see UTC.

The department also settled allegations of false claims with two companies in connection with their contracts with the General Services Administration (GSA) to market their products through the Multiple Award Schedule (MAS) program.   To be awarded a MAS contract, and thereby gain access to the broad government marketplace, contractors must provide GSA with complete, accurate and current information about their commercial sales practices, including discounts afforded to their commercial customers.   The government alleged that W.W. Grainger Inc., a national hardware distributor headquartered in Illinois, and Ohio-based RPM International Inc. and its subsidiary, Tremco Inc., a roofing supplies and services firm, failed to disclose discounts given to their commercial customers, which resulted in government customers paying higher prices.  The department recovered $70 million from W.W. Grainger in a settlement that also included allegations relating to a U.S. Postal Services contract and $61 million from RPM International Inc. and Tremco.  For details, see Grainger, RPM/Tremco.

Other Fraud Recoveries

A $45 million settlement with Japan-based Toyo Ink S.C. Holdings Co. Ltd. and its Japanese and United States affiliates (collectively Toyo) demonstrates the breadth of cases the department pursues.  This settlement resolved allegations that Toyo misrepresented the country of origin on documents presented to the Department of Homeland Security’s U.S. Customs and Border Protection to evade antidumping and countervailing duties on imports of the colorant carbazole violet pigment into the United States.   These duties protect U.S. businesses by offsetting unfair foreign pricing and foreign government subsidies.   For details, see Toyo.
   
The False Claims Act also is used to redress grant fraud.   In a significant case involving a grant from the Department of Education, Education Holdings Inc. (formerly The Princeton Review Inc.) paid $10 million to resolve allegations that the company fabricated attendance records for thousands of hours of afterschool tutoring of students that was funded by the federal grant.  For details, see Education Holdings.

Recoveries in Whistleblower Suits

Of the $3. 8 billion the department recovered in fiscal year 2013, $2. 9 billion related to lawsuits filed under the qui tam provisions of the False Claims Act.   During the same period, the department paid out more than $345 million to the courageous individuals who exposed fraud and false claims by filing a qui tam complaint.   (The average share paid to whistleblowers in fiscal year 2013 cannot be determined from these numbers because the awards paid to whistleblowers in one fiscal year do not always coincide with the fiscal year in which the case was resolved, and the fiscal year’s recoveries may include amounts to settle allegations outside the whistleblower’s complaint.)

Whistleblower lawsuits were in the range of three to four hundred per year from 2000 to 2009, when they began their climb from 433 lawsuits in fiscal year 2009 to 752  lawsuits in fiscal year 2013.   Due to the complexity of fraud investigations generally, the outcomes of many of the qui tam cases filed this past fiscal year are not yet known, but the growing number of lawsuits filed since 2009 have led to increased recoveries.   Qui tam recoveries exceeded $2 billion for the first time in fiscal year 2010 and have continued to exceed that amount every year since.   Qui tam recoveries this past fiscal year bring the department’s totals since January 2009 to $13.4 billion.   During the same period, the department paid out $1.98 billion in whistleblower awards.

“These recoveries would not have been possible without the brave contributions made by ordinary men and women who made extraordinary sacrifices to expose fraud and corruption in government programs,” said Assistant Attorney General Delery.   “We are also grateful to Congress and its continued support of strengthening the False Claims Act, including its qui tam provisions, giving the department the tools necessary to pursue false claims.”

In 1986, Senator Charles Grassley and Representative Howard Berman led successful efforts in Congress to amend the False Claims Act to, among other things, encourage whistleblowers to come forward with allegations of fraud.  In 2009, Senator Patrick J. Leahy, along with Senator Grassley and Representative Berman, championed the Fraud Enforcement and Recovery Act of 2009, which made additional improvements to the False Claims Act and other fraud statutes.   And in 2010, the passage of the Affordable Care Act provided additional inducements and protections for whistleblowers and strengthened the provisions of the federal health care Anti-Kickback Statute.

Assistant Attorney General Delery also expressed his deep appreciation for the dedicated public servants who investigated and pursued these cases.   These individuals include attorneys, investigators, auditors and other agency personnel throughout the Justice Department’s Civil Division, the U.S. Attorneys’ Offices, the Departments of Defense and Health and Human Services, the various Offices of Inspector General and the many other federal and state agencies that contributed to the department’s recoveries this past fiscal year.

“The department’s continued success in recovering fraudulent claims for taxpayer money this past fiscal year is a product of the tremendous skill and dedication of the people who worked on these cases and investigations and continue to work hard to protect against the misuse of taxpayer dollars,” said Delery.

NORTHROP GRUMMAN CORP. PAID $11.4 MILLION TO RESOLVE ALLEGATIONS OF IMPROPER CHARGES ON GOVERNMENT CONTRACTS

FROM:   U.S. JUSTICE DEPARTMENT 
Monday, December 9, 2013
Northrop Grumman Corp. Pays $11.4 Million to Resolve Allegations That It Improperly Charged Costs to Government Contracts

The Justice Department announced today that Northrop Grumman Corp. has paid the United States $11.4 million to settle a government claim for penalties provided under the Federal Acquisition Regulation (FAR)  and False Claims Act allegations stemming from its failure to abide by a 2002 settlement agreement with the Defense Contract Management Agency (DCMA).  The government alleged that Northrop charged to its federal contracts certain costs for deferred compensation awards to key employees, even though it had promised not to do so as part of the earlier 2002 settlement.

“Federal contractors must abide by the obligations they accept when contracting with the government, including compliance with federal regulations restricting the types and amount of costs they can charge to their federal contracts,” said Assistant Attorney General for the Department of Justice’s Civil Division Stuart F. Delery.  “The Department of Justice is committed to enforcing these fundamental obligations using every available tool, including FAR penalties assessed under the contract and, where appropriate, fraud-based counterclaims.”    

Northrop had agreed in its 2002 settlement with DCMA that it would limit the amount of deferred compensation it would include in proposals for subsequent contracts.  The government’s contracting officer found that Northrop had failed to honor this commitment and should be assessed a penalty equal to twice the amount of the unallowable costs claimed.  Northrop challenged the decision in a complaint filed in the U.S. Court of Federal Claims in Washington, D.C.  The Department of Justice responded to the suit with counterclaims alleging that in addition to the FAR penalties, Northrop also had violated the False Claims Act by passing along these unallowable costs to the government in indirect rates applicable to hundreds of 2004 contracts with the government.  The government alleged that as a consequence of Northrop’s knowing misrepresentations, it was induced to pay more than $1.9 million in unallowable costs in thousands of vouchers and invoices.

The settlement was the result of a consolidated effort spearheaded by the Civil Division’s Commercial Litigation Branch in conjunction with the DCMA and the Defense Contract Audit Agency, Western Region Investigative Support Division.  The claims settled by this agreement are allegations only, and there has been no determination of liability.  The case is captioned Northrop Grumman Corporation v. United States, Fed. Cl. No. 07-482C.

FORMER GOVERNMENT EMPLOYEE ADMITS TO TAKING BRIBES FROM CONTRACTORS

FROM: U.S. DEPARTMENT OF JUSTICE

Thursday, February 14, 2013
Georgia Woman Admits to Taking Bribes for the Award of Government Contracts

A former employee at the Marine Corps Logistics Base Albany pleaded guilty today to receiving bribes related to the award of contracts for machine products, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney Michael J. Moore for the Middle District of Georgia.

Michelle Rodriguez, 32, of Albany, Ga., pleaded guilty before U.S. District Judge W. Louis Sands in the Middle District of Georgia to one count of bribery of a public official.

During her guilty plea, Rodriguez, who worked as a supply technician in the Maintenance Center Albany (MCA), admitted to participating in a scheme to award contracts for machine products to companies operated by Thomas J. Cole and Frederick Simon, both of whom pleaded guilty to bribery charges in January 2013.

According to court documents, the MCA is responsible for rebuilding and repairing ground combat and combat support equipment, much of which has been used in military missions in Afghanistan, Iraq and other parts of the world. To accomplish the scheme, Rodriguez would transmit bid solicitations to Simon by fax or email, usually following up with a text message specifying how much the company seeking the contract should bid. Simon, with Cole’s knowledge, would then bid the amount specified by Rodriguez on each order, which was normally higher than fair market value. Rodriguez was paid $75.00 cash per order. Rodriguez admitted during today’s hearing that she awarded Cole and Simon’s companies nearly 1,300 machine product orders, all in exchange for bribes.

Rodriguez also admitted that in 2011, she began routing some orders through a second company, owned by Cole, because the volume of orders MCA placed with the first company was so high. Rodriguez admitted receiving approximately $161,000 in bribes during the nearly two-year scheme. Cole and Simon previously admitted to personally receiving approximately $209,000 and $74,500 in proceeds from the scheme, respectively. Rodriguez, Cole and Simon all conceded that the total loss to the Department of Defense from overcharges associated with the machine product orders placed during the scheme was approximately $907,000.

At sentencing, Rodriguez faces a maximum potential penalty of 15 years in prison and a fine of twice the gross gain or loss from the offense. As part of her plea agreement with the United States, Rodriguez agreed to forfeit the bribe proceeds she received from the scheme, as well as to pay full restitution to the Department of Defense. The plea agreement also required her to resign her position at the MCA. Sentencing is scheduled for April 25, 2013.

GEORGIA MEN PLEAD GUILTY TO BRIBING OFFICIAL

FROM: U.S. DEPARTMENT OF JUSTICE
Thursday, January 10, 2013 Georgia Men Plead Guilty to Bribing Official to Secure Government Contracts
Defendants Admit to Overcharging Defense Department More Than $900,000

WASHINGTON – Two men employed by a machine products vendor in Albany, Ga., have pleaded guilty to bribing a public official working for a military organization at the Marine Corps Logistics Base Albany (MCLB-Albany) to secure contracts for machine products, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney Michael J. Moore for the Middle District of Georgia.

Thomas J. Cole Jr., 43, and Fredrick W. Simon, 55, both of Albany, each pleaded guilty before U.S. District Judge W. Louis Sands in the Middle District of Georgia to one count of bribery of a public official.

During their guilty pleas, Cole, the general manager of an Albany-based machine products vendor, and Simon, an employee responsible for processing sales orders, admitted to participating in a scheme to secure sales order contracts from the Maintenance Center Albany (MCA) at MCLB-Albany by subverting a competitive bid process. The MCA is responsible for rebuilding and repairing ground combat and combat support equipment, much of which has been utilized in military missions in Afghanistan and Iraq, as well as other parts of the world. To accomplish the scheme, Cole and Simon bribed a MCA purchase tech responsible for placing machine product orders. Cole and Simon admitted to participating in the scheme at the purchase tech’s suggestion, after Simon had spoken with the purchase tech about how his company could obtain business from the MCA. Cole and Simon admitted that, at the purchase tech’s request, they paid the purchase tech a bribe of at least $75 for each of the more than 1,000 sales orders MCA placed with their company. According to court documents, the purchase tech would transmit sales bids to Simon and then communicate privately to him exactly how much money the company should bid for each particular order. Cole and Simon admitted that these orders were extremely profitable, often times exceeding the fair market value of the machine products, sometimes by as much as 1,000 percent.

Cole and Simon further admitted that, at the purchase tech’s urging, in 2011 they began routing some orders through a second company, owned by Cole, because the volume of orders MCA placed with the first company was so high. They also admitted that the purchase tech increased the bribe required for orders as the scheme progressed. Cole and Simon admitted to paying the purchase tech approximately $161,000 in bribes during the nearly two-year scheme. Cole admitted to personally receiving approximately $209,000 in proceeds from the scheme; Simon admitted to personally receiving approximately $74,500. Both admitted that the total loss to the Department of Defense from overcharges associated with the machine product orders placed during the scheme was approximately $907,000.

At sentencing, Cole and Simon each face a maximum penalty of 15 years in prison and a fine of not more than twice the pecuniary loss to the government. As part of their plea agreements with the United States, Cole and Simon both agreed to forfeit the proceeds they received from the scheme, as well as to pay full restitution to the Department of Defense. Sentencing has not yet been scheduled.

The case is being prosecuted by Trial Attorneys Richard B. Evans and J.P. Cooney of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney K. Alan Dasher of the Middle District of Georgia. The case is being investigated by the Naval Criminal Investigative Service, with assistance from the Dougherty County District Attorney’s Office Economic Crime Unit and the Defense Criminal Investigative Service.