The Department of Justice (DOJ) recently announced that it obtained more than $3 billion in False Claims Act (FCA) settlements and judgments in the fiscal year ending Sept. 30, 2019.
Notably, DOJ reports that “matters that involved the health care industry” comprised the largest portion of these FCA recoveries in FY 2019, but that “procurement fraud” recoveries comprised the second largest category of recoveries for DOJ this past year.
Among the more notable “procurement fraud” recoveries that DOJ reports are:
- Five South Korea-based companies agreed to resolve allegations that they engaged in anticompetitive conduct targeting contracts to supply fuel to the U.S. military in South Korea and made false statements to the government in connection with their agreement not to compete. The U.S. Department of Defense (DOD) paid substantially more for fuel supply services in South Korea than it would have absent collusion on the fuel supply contracts. In total, DOJ reports that the five companies paid over $162 million as part of the FCA settlements.
- DOJ entered into a $34.6 million settlement with an aluminum extrusion manufacturer to resolve the company’s civil liability for causing a government contractor to invoice NASA and the DOD for aluminum extrusions that did not comply with contract specifications. DOJ reports that government contractors purchased aluminum extrusions from the company for use on rockets for NASA and missiles provided to DOD. DOJ reports that the company provided those contractors with falsified certifications after altering the results of tensile tests designed to ensure the consistency and reliability of aluminum extrusions. Several of the rockets used by NASA crashed, resulting in the loss of the NASA payloads that they carried. The company also resolved related criminal claims arising from the same conduct.
- DOJ recovered over $27 million from a federal defense contractor in a settlement of FCA allegations related to two battlefield communications contracts with the U.S. Air Force. The settlement resolved allegations that the company billed the Air Force for labor hours purportedly incurred by individuals stationed in the Middle East who had not actually worked the hours claimed.
- In separate settlement agreements with DOJ, one airline company paid $22 million and another airline company paid $5.8 million to resolve allegations that they falsely reported the times they transferred possession of United States mail to foreign postal administrations or other intended recipients under contracts with the U.S. Postal Service (USPS). USPS contracted with the airlines to take possession of receptacles of United States mail at six locations in the U.S. or at various DOD and State Department locations abroad, and then timely deliver that mail to numerous international and domestic destinations.
- A software development company paid $21.57 million to resolve allegations that it caused the government to be overcharged by providing misleading information about its commercial sales practices that was used in General Services Administration (GSA) contract negotiations. The company allegedly provided false information concerning its commercial discounting practices for its products and services to resellers, who then used that false information in negotiations with GSA for government-wide contracts. DOJ reports that the false disclosures “caused GSA to agree to less favorable pricing, and, ultimately, government purchasers to be overcharged.”
In light of the DOJ’s recent FCA report, as well as DOJ’s recent formation of a Procurement Collusion Strike Force, procurement fraud undoubtedly will be an even bigger focus for DOJ in 2020.
If you have any questions about how your company can potentially prevent or resolve procurement fraud-related matters, please do not hesitate to contact Aron Beezley.