How to Report Defense Contractor Fraud under the False Claims Act

If you’re aware of defense contractor fraud in which the company engages in any scheme to defraud or overbill the federal government like when they: falsify billing, falsify credentials, failure to have truthful negotiations, use inferior products, falsify countries of origin or engage in kickbacks you may have rights under the False Claims Act that could lead to a defense contractor whistleblower award. Due to the magnitude of defense contracts with the federal government, cases involving defense contractors tend to have stratospheric recoveries sometimes ending in tens of millions of dollars of whistleblower awards for the insider who has the integrity to report the matter the right way through a False Claims Act attorney.

Defense contractor fraud is a national concern that poses a significant threat to both national security and the country’s fiscal responsibilities. Identifying and exposing defense contractor fraud often relies on the courage of whistleblowers who are willing to step forward and reveal wrongful acts. Whistleblowers play a pivotal role in safeguarding the interests of the country and ensuring that defense contracts are executed both ethically and lawfully.

To navigate the complexities of defense contractor fraud cases and secure the rights and protections whistleblowers are entitled to, whistleblowers should look to hire a defense contractor fraud whistleblower law firm. Accomplished defense contractor fraud whistleblower lawyers can offer invaluable guidance and support, including navigating the steps of filing a whistleblower claim and ensuring robust protection against any form of retaliation.

What Is Defense Contractor Fraud?

Defense contractor fraud refers to illegal or unethical practices by companies or individuals involved in providing goods and services to the national defense and military sectors. This fraud can take various forms, such as overbilling the government for services not rendered or goods not supplied, substituting specified materials with inferior alternatives, and manipulating contract prices through false negotiations. These deceptive actions by contractors are not only a breach of contract but also jeopardize the quality and reliability of defense operations, ultimately endangering national security and squandering taxpayers’ money.

Common types of defense contractor fraud include:

  • Defense Contractor Overbilling: Charging the government for more hours worked or materials used than was the case, leading to inflated costs.
  • Defense Contractor Charging for Non-Performed Services: Billing for services that were never rendered or goods that were never delivered.
  • Defense Contractor Misrepresenting Costs or Prices: Falsifying cost or pricing information during contract negotiations to secure a higher contract price, in violation of regulations like the Truth in Negotiations Act.
  • Defense Contractor Falsifying Test Results: Providing inaccurate test results to suggest compliance with contract specifications or safety standards when the products do not actually meet those standards.
  • Defense Contractor Defective Pricing: Intentionally underestimating costs in proposals for government contracts to be awarded the contract, with the intention of increasing costs later.
  • Defense Contractor Falsifying Country of Origin: Certain countries are on the prohibited list from certain buy American acts, such as China, but sometimes contractors conceal the origin to reduce their cost significantly, but in turn commit a blatant act contrary to Congressional intent and contract fraud.
  • Defense Contractor Kickbacks: Bribery of foreign officials may implicate the FCPA as well as the FCA – that is it may be a violation of the Foreign Corrupt Practices Act as well as the False Claims Act. Either foreign or domestic also implicates the Anti-Kickback Statute (AKS) and in certain cases if people are injured as a result of the bribery of a hostile entity may expose the company to liability under anti-terrorism statutes.

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Examples of Defense Contractor Fraud

Due to the large amount of national defense orders, defense contractor fraud is notable for the sizable amounts that bad actors are accused of defrauding the government of. Some notable cases include:

United Technologies Corporation (UTC): UTC and its subsidiaries agreed to pay more than $75 million to resolve allegations of making false statements to the U.S. government about the prices of spare parts and engines sold to the U.S. Air Force. This case involved overcharging for items and not disclosing accurate cost or pricing information during negotiations.

KBR, Inc. Case: KBR, Inc., a major engineering and construction company, agreed to pay the U.S. government $579 million to settle charges of receiving kickbacks and inflating prices for military bases in Iraq. This case is one of the largest settlements related to fraud in wartime contracts, highlighting issues of overbilling and corruption.

Lockheed Martin Case: Lockheed Martin settled for $37.9 million over allegations of submitting false lease cost claims to the U.S. Department of Defense for the use of Titan IV rocket launch facilities. This case involved false claims and overbilling for services.

Contractor Fraud and the False Claims Act

The False Claims Act plays a pivotal role in combating defense contractor fraud by incentivizing private individuals, known as whistleblowers or “relators,” to come forward to provide the government with leads. The False Claims Act allows whistleblowers to file lawsuits on behalf of the government against entities that have defrauded government programs. These actions, known as qui tam lawsuits, are a critical component of the False Claims Act, empowering individuals with insider knowledge to come forward without fear of retaliation.

In recognition of their role in uncovering fraud, whistleblowers are entitled to a percentage of the recovered damages, typically ranging from 15% to 30%, which can amount to substantial sums given the scale of government contracts. When a contractor knowingly submits false claims or makes false records or statements to get a fraudulent claim paid by the government, they are in violation of the False Claims Act. The origin of the False Claims Act is from the Lincoln Law in which at the time of the Civil War contractors were defrauding the federal government for wartime items, thus the origin of the statute was specifically to combat defense contractor fraud.

Procurement Fraud

Procurement Fraud is a broad umbrella term that encompasses defense contractor fraud when used to refer to any illegal or unethical practices procurement process in any sector. Procurement refers to the process by which organizations acquire goods, services, or works from external sources. It involves a range of activities from identifying needs, sourcing and selecting suppliers, negotiating terms and prices, to the purchasing and delivery of goods and services. Procurement fraud can occur at any stage of the procurement lifecycle, from the initial needs assessment and tendering process to the execution and evaluation of contracts.

Common types of procurement fraud include:

  • Bid Rigging: Suppliers collude to raise prices or allocate markets among themselves.
  • Kickbacks: Supplier offers a bribe to influence the awarding of a contract.
  • Conflict of Interest: Individuals involved in the procurement process have undisclosed personal or financial interests in the outcome.
  • False Invoicing: False amounts for goods or services not provided or inflated beyond their delivered value.
  • Substitution of Inferior Goods: Delivering products of a lower quality than specified, without disclosure.

Examples of Procurement Fraud

Notable cases of procurement fraud against the government include:

  • Boeing: Boeing settled for $54 million over allegations that it placed defective gears in CH-47D Chinook helicopters that could have led to helicopter crashes. This case exemplifies issues with substandard product delivery and failure to meet contract specifications.
  • CityTime Project in New York City: The CityTime project, intended to modernize the time keeping and payroll systems for New York City employees, came to light with the project’s costs ballooning from $63 million to over $600 million due to fraud and kickbacks. Several consultants and subcontractors were charged with misappropriating funds through overbilling and kickbacks.
  • U.S. Army Major John Cockerham: Former U.S. Army contracting officer Maj. John Cockerham was charged with accepting more than $9 million in bribes from contractors supplying goods and services to military forces in Kuwait and Iraq.

Defense Contractor Fraud Law Firm

A defense contractor fraud law firm with a strong track record in representing whistleblowers will ensure individuals’ rights are safeguarded and educate you about your rights. Some of the best whistleblower law firms offer a comprehensive suite of services to whistleblowers, including, but not limited to, legal representation throughout the whistleblowing process, filing qui tam lawsuits under the False Claims Act on behalf of the government, and helping deter and address any retaliation for those who come forward.

With a deep understanding of the intricate legal landscape surrounding defense procurement and whistleblower protections, these law firms guide individuals through the complexities of reporting fraud, from the initial consultation to the final stages of litigation. Selecting a reputable defense contractor fraud law firm to approach these complex claims will provide whistleblowers with the best chance of success and the greatest level of protection throughout the litigation process. If you have questions about a potential defense contractor fraud or procurement fraud you should call the defense contractor fraud whistleblower law firm of Brown, LLC at (877) 561-0000 for a free, confidential consultation.