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What to Do if You’re Aware of Fraudulent Defense Contractor Claims

Here’s what to expect if you become a whistleblower for fraudulent defense contractor claims.

Fraudulent Defense Contractor ClaimsEven with the government keeping a close eye on things, there is never a shortage of fraudulent defense contractor claims. While most contractors perform a task honestly and to the best of their ability, some cheat the system. You may find out this information before the government does. If you find yourself in this situation, you may want to report the fraudulent activity. Before you do, make sure you know what to expect once you blow the whistle.

Type of Fraudulent Defense Contractor Claims

The government hires numerous contractors to perform specific duties. Some contracts go to large corporations, like Boeing and Lockheed. The government also contracts smaller businesses for certain tasks, including janitorial services. Contractors supply the country with the tools it needs to operate. This includes everything from airplanes and missiles to office furniture. Reports show that the United States government spends about $500 billion per year on contracts.

While the government thoroughly vets every contractor, it can’t completely stop fraud. Both large and small contractors may commit fraudulent acts, costing taxpayers a hefty sum. Some examples of defense contractor fraud include:

  • Over-billing or cross charging
  • Providing services or products that do not meet agreed upon standards
  • Failure to inform of product defects
  • Product substitution without consent

A government contractor is legally obligated to provide and charge only for the services stated in the contract. Steering away from these terms is illegal and a form of fraud.

How to Report Fraudulent Contractor Activity

If you become aware of contractor fraud, you may feel inclined to report it. After all, taxpayers must fund excess government excess spending. Before you spill the beans, however, you must consider several things.

Fraudulent activity often involves many people or entities. You never know if the person you once trusted is part of the scheme or not. While you may want to inform your boss or coworker of your findings, this may not be wise. Whistleblowers often deal with retaliation after coming forward. It’s best to trust no one until the investigation is complete.

The Department of Defense has a hotline for citizens to report fraud. They will evaluate your claim and look into the matter. But just because you report something doesn’t mean it will get resolved. Investigations often take years to complete. You may find yourself dealing with legal issues for a long time.

Protections Provided to Whistleblowers

You may feel afraid to come forward after learning of fraudulent behavior. While it’s true that being a whistleblower isn’t easy, it’s necessary. Authorities have been able to solve many defense contractor cases because of a whistleblower. Yes, it’s not an easy job. But, knowing you’re helping the government and citizens often makes it worth the risk.

Because the government wants you to come forward with information, it protects whistleblowers. The False Claims Act allows private citizens to sue federal contractors on behalf of the government.

The False Claims Act also protects whistleblowers. It makes it illegal for affected parties to seek retaliation against the relator. This includes harassing, demoting, firing, or threatening the whistleblower. If someone violates the False Claims Act, the victim has the right to take legal action.

The Benefits of Reporting DOJ Contractor Fraud

Being a whistleblower also comes with some benefits. First and foremost, you may help prevent injury or loss of life. Yes, it’s that serious. If a contractor sells the DOJ faulty equipment, it may end up harming the troops. If a product makes it to the general public, civilian casualties may occur as a result.

The government also offers monetary compensation to whistleblowers. If your information leads to a conviction, you will receive a percentage of the settlement. This may equal millions of dollars depending on the complexity of the case.

Never Report Defense Contractor Fraud Alone

Before you decide to come forward with any information, you need to retain a lawyer who has experience with defense contractor fraud. These cases can get very complicated. As soon as the information becomes public, you will become a target. Consider hiring a lawyer before you make your initial report.

A lawyer will make sure you’re aware of your rights as a whistleblower. If you become the victim of retaliation, a lawyer will help you seek recourse. While you may want to speak with journalists or media outlets, you shouldn’t contact anyone before speaking with an attorney. Others may want to take advantage of you, but an attorney will help you make wise decisions.

If you have information about possible DOJ contractor fraud, don’t try to navigate the system alone. You may find yourself in over your head if you don’t have legal representation. Find out more about fraudulent defense contractor claims by contacting Bothwell Law Group online.

Will You Know the Signs of Defense Contractor Fraud If You See Them?

As a government employee, you’re on the lookout for signs of defense contractor fraud. But what exactly does it look like?

Signs of Defense Contractor FraudWill you know the signs of defense contractor fraud if you see them? You care about the American people. You don’t like to see government funds go to waste, and this includes identifying and stopping defense contractor fraud. In your work with defense contractors, you might have questions about different charges to your office, but can you recognize them as fraud?

Learn about the most common signs of defense contractor fraud, and what to do if you think one of your contractors is guilty of fraudulent behavior.

Signs of Defense Contractor Fraud

What should you look for when it comes to contractor fraud? There are many signs, but here are some of the most common indicators that something is amiss:

Receiving sub-par materials: 

You know the standards set for the materials you receive from your contractors. If you notice that the materials are consistently not up to par, it’s a possible sign of fraud. This is especially concerning if your contractor bills you for higher quality, more expensive material, and delivers a lower quality, less expensive material. Double-check the original contract to see the agreed upon materials and compare that to what was actually received. If there’s a discrepancy that wasn’t communicated and approved by your office, it’s possible what you’re seeing is fraud in action.

Billing a lot of hours for a small amount of work: 

In the contracts that your office has with its contractors, there should be an estimate for the number of hours that different jobs should take. It’s normal for the estimated hours and the actual hours to differ slightly, as it’s impossible for a contractor to predict precisely how long every job will take. If you notice huge discrepancies such as doubling or tripling of the hours expected, fraud is likely. Fraud can occur even before the final bill. Some contractors grossly overestimate the number of hours a job will take. These cases are harder to prove.

Failing to complete required tests: 

Contractors test materials before giving them to the government. It’s normal for contractors to bill the government for these tests. This can include labor, replacement parts, and materials fees. There are two different types of fraudulent activity when it comes to testing. One is to report unnecessary tests, whether performed or not. The contractors bill the government for more materials, labor, and parts than initially stated. The other type of testing fraud is to skip testing altogether. This can be dangerous, especially when skipping tests on military equipment or hazardous chemicals. There have been many cases of injured or killed military personnel due to improper testing on military equipment. You owe it to the men and women who serve our country to report improper equipment testing procedures and the possibility of contractor testing fraud.

If you spot what you think is defense contractor fraud, be sure to record the information you have to back-up your case. The more detail you record, the more easily the government will be able to investigate your claim. If you feel comfortable, let your supervisor know that you’re suspicious of fraud and that you’re keeping an eye on a particular contractor. Your supervisor may be able to help by providing information. You may want to tread carefully here, especially if your supervisor has a close relationship with any of the contractors or may be a complicit part of the fraudulent activity.

Reporting Defense Contractor Fraud

If you’re suspicious of defense contractor fraud, you may feel overwhelmed and unsure of what to do with the information you’ve gathered. Your first step is to decide how you’d like to report. There are two ways to report defense contractor fraud: through a government hotline, and through qui tam or false claims via a qui tam attorney. Both options have benefits and drawbacks. An attorney can help you decide which type of reporting is most beneficial for your personal situation.

If you’re reporting through a government hotline, you’ll be anonymous. Your complaint will go up a chain of command, and the Department of Defense will investigate the claim. If you file a suit with the False Claims Act, also known as qui tam, the government must investigate the potential fraud. As a whistleblower, qui tam laws entitle you to a part of the funds recouped by the government if the accused is guilty of fraud. Qui tam laws also protect you, your job, and your assets during the process of the trial.

Don’t Report Alone

If you think you’ve spotted signs of defense contractor fraud, don’t wait to act, and don’t act alone. You need lawyers on your side who understand how complicated qui tam laws work. It’s important that you get the money you deserve for doing the right thing and blowing the whistle on fraud. Contact the skilled defense contractor fraud attorneys at Bothwell Law Group today and get the right team on your side.

Who Can Be a Whistleblower When There Is Defense Contractor Fraud?

When there is defense contractor fraud, anyone can be a whistleblower.

defense contractor fraudIn theory, anyone can be a whistleblower when there’s defense contractor fraud. It can be a janitor who overhears a conversation. Or, it could go all the way up to the chairman of the board of directors who decides he or she has had enough with the corruption and theft of taxpayer dollars.

But the real question isn’t who can be a defense contractor whistleblower. The real question is who can be a whistleblower. Additionally, who can collect the reward provided for in the qui tam provisions of the False Claims Act?

Who Are Defense Contractors?

Defense contractors are businesses that provide military products and services, usually to the federal government. Defense contractors include some of the biggest and most profitable businesses in the world. As the name implies, defense contractors enter into contracts with the federal government for any number of things, such as the personal defense of government officials overseas, firearms, tanks, ships, trucks, missiles and nuclear weapons.

Because of the size of these contracts, typically in the millions and often in the billions of dollars, there is ample opportunity for fraud and other improper gains.

What Is a Qui Tam Action?

A qui tam action is a lawsuit where an individual (whose legal name is “relator” and is usually the whistleblower) brings a lawsuit on behalf of the federal government. The purpose of the qui tam lawsuit is to recover money that an individual or organization illegally took from the federal government through fraud.

But the relator doesn’t bring the lawsuit merely because he or she is a good citizen. Rather, there is the potential for a sizeable reward. Specifically, the relator is eligible for between 15 percent and 30 percent of the federal government’s total recovery. This reward serves as strong motivation to entice would-be whistleblowers to step forward with information. Furthermore, it can motivate them to take the legal action necessary to help the federal government recover the stolen money.

Who Can’t Bring a Qui Tam Action?

As mentioned earlier, anyone can become a whistleblower. There may be legal consequences by revealing secret information or the lack of a reward in some instances. But the reality is that if an individual really wants to reveal a secret, there’s not much anyone can do to stop them.

As for bringing a qui tam action, almost anyone can bring it and serve as the relator, unless:

  • The relator played a role in the fraud. Plus, he or she already has a criminal conviction relating to the involvement in the fraud.
  • Another qui tam action relating to the same fraud already exists.
  • The federal government is already in a civil or administrative proceeding to recover the money stolen from the fraud.
  • The qui tam action relies on information already available to the public.

Who Typically Brings a Qui Tam Action Against Defense Contractors?

Even though anyone can be a whistleblower and almost anyone can be a relator in a qui tam action, the relator must have sufficient knowledge about the fraud. It’s not enough for the relator to just know that the defense contractor’s fraud exists. The relator will need detailed information. This includes which contracts are subject to the fraud, how much fraud took place, and the identity of key people responsible for it.

Additionally, the relator will probably need access to evidence of the fraud, such as e-mails, contracts, invoices, purchase orders or any other types of documents that put into writing the existence of the fraud. E-mails are often strong evidence that fraud exists because it can put the other documents into context and explain how the fraud works.

For example, if a purchase order shows the federal government bought 1,000 missiles for $1,000,000 each, but an invoice shows the federal government paid $1,100,000 for each missile, that doesn’t necessarily prove the defense contractor deliberately overcharged for each missile. But if there is an e-mail where the CEO boasts, “Hahaha, those stupid government suckers! They just overpaid $100,000 for each missile because they already agreed to a lower price, but they forgot about it. I wish we could always get away with overcharging the government!”

It’s Not Usually That Simple

In most situations, no such e-mail will exist. But if it did, it’s easy to see how it puts the purchase order and invoice into context. What might typically happen is that the relator will listen to, or take part in, incriminating conversations. Based on that information, the federal government will know who to investigate and question about the details of a specific contract.

But the government needs someone to point them in the right direction for who and what to investigate. That’s where the whistleblower or relator comes in. Based on the level of knowledge needed, the relator is probably going to be someone up on the chain of command within the company. Or they could be a person who has significant responsibility for the fraudulent contracts.

Have Information about Possible Defense Contractor Fraud?

Click to find out more about defense contractor fraud by contacting Bothwell Law Group online.

What Is the False Claims Act Penalty for Defense Contractors?

Defense contractors thinking about committing fraud against the federal government need to be aware of the False Claims Act penalty.

false claim act penaltiesTo help convince would-be fraudsters not to try defrauding the federal government, the False Claims Act penalty is severe. Steal from the federal government? Get caught? Fraudsters face paying amounts of money that vastly exceed what they originally stole. But is the penalty greater if the False Claims Act violator is a defense contractor? The short answer is no.

Does the False Claims Act Apply to Defense Contractors?

Yes. In fact, the False Claims Act applies to anyone who tries to defraud the federal government. This includes knowingly submitting a false claim to the federal government or causing another to submitting a false claim to the government. Additionally, the False Claims Act will apply to anyone who lies with the purpose of having a false claim paid by the federal government.

Defense contractors are notable because their primary client and source of revenue will almost always be the federal government. Therefore, a variety of government contracts are between the federal government and defense contractors.

Defense contractors aren’t the only group of businesses that commonly fall under the False Claims Act. The healthcare industry is another area of business that finds itself in trouble with the federal government and allegations of fraud.

The reason the healthcare and military industries seem to always have companies in trouble with the False Claims Act is thanks to how much money the federal government spends in those two areas. Each year, the federal government spends trillions of dollars on military and healthcare spending by sending payments to thousands of companies and individuals. It’s no wonder that at least a few defense contractors (and healthcare companies) will find themselves running afoul of the False Claims Act.

What Penalties Are Possible Under the False Claims Act?

There are two major types of penalties that defense contractors (or anyone else) could find themselves paying to the federal government. The first one concerns monetary penalties that apply for each fraudulent offense. Within the past few years, this amount rose (adjusted for inflation) to about $10,700 to $21,500 per violation.

The second type is treble damages. This sounds complicated. But the word treble is just legalese for the word “triple.” In other words, treble damages simply three times the actual damages.

Seeing the False Claims Act Penalties Provisions at Work

When these penalties apply to a specific fraud, we can see how they can result in the violator paying far more than the actual amount of money stolen. We will examine two examples to illustrate.

In the first example, let’s say the federal government enters into a contract with a defense contractor to buy a new service pistol for its armed forces.

The important terms of the contract state the federal government will buy 500,000 pistols for $500 each and that each pistol must be able to survive 10,000 shots fired before needing repair or replacement.

In the middle of production, the defense contractor realizes the pistol has a design flaw where it will only survive 5,000 shots fired before needed repair or rebuilding. However, the upper executives at the defense contractor ignore this information and pretend nothing is wrong, then ship the 100,000 pistols to the federal government.

Several years later, after numerous reports of unreliable operation of the pistol, the United States military realizes the pistol cannot last for 10,000 shots before needing repair or rebuilding. The federal government investigates what went wrong. With the help of a whistleblower, the government learns that the pistol could not meet the requirements and the defense contractor knew that but said nothing. What are the potential penalties for the defense contractor?

  • Actual damages = $50 million (100,000 x $500)
  • Treble damages = $150 million ($50 million x 3)
  • Penalties = Between $1.07 billion and $2.17 billion (100,000 x $10,700 or 100,000 x $21,700).

This defense contractor made $50 million but faces over a billion dollars in penalties. That’s because there were penalties imposed for each claim, and there were 100,000 individual claims. But even if there are only a few claims, a defense contractor’s damage can still be high.

In a second example, a defense contractor agrees to design special software for use in the Navy’s new destroyers.

Because there are five destroyers, the federal government will purchase five copies of the software, which cost $10,000 per copy. One of the important provisions in the contract is that the software must be immune from any virus for the first year of operation.

After only six months after installation on the five destroyers, all five of the destroyers suffer computer virus attacks. It turns out that the defense contractor that designed the software knew of security weaknesses in the software and could have easily made fixes, but decided not to and said nothing to the federal government. This defense contractor faces the following potential damages:

  • Actual damages = $50,000
  • Treble damages = $150,000
  • Penalties = Between $53,500 and $108,500 ($10,700 x 5 or $21,700 x 5)

In this example, the defense contractor made $50,000 but will have to pay at least $200,000 in penalties.

Need to Figure Out What False Claims Act Penalties May Apply to Your Case?

Click to find out more about the False Claims Act penalty by contacting Bothwell Law Group online.

What Kind of False Claims Act Damages Are the Most Common?

Violators may be subject to several types of potential False Claims Act damages.

False Claims Act DamagesThose who defraud the government could face several types of False Claims Act damages. Those who violate the False Claims Act must pay these damages. They are rarely subject to a judge eliminating them. These damages aim to not only make the federal government whole, but severely punish illegal behavior. The following is a description of these damages, as well as how they work.

False Claims Act and Damages

The False Claims Act imposes monetary penalties on individuals who defraud the government. Instances of fraudulent behavior usually revolve around either: overcharging the government, mis-charging the government or avoiding having to pay the government.

Overcharging occurs when the violator makes the government pay a higher price than the government should pay. This is one of the most common ways fraud occurs against the government.

Mischarging is the charging for a service or item that they did not actually provide to the government. Mischarging is common in fraud cases involving healthcare services.

Avoiding having to pay the government is like the reverse of overcharging or mis-charging in that the violator tries to get out of a bill they should pay.

Identifying these methods of defrauding the government will help determine what potential damages a violator must pay.

Two Major Types of False Claims Act Damages

The False Claims Act imposes two major types of damages or penalties on a violator. The first are penalties that range from between $5,000 and $10,000, although this amount goes up for inflation and is now closer to $5,500 and $11,000. This penalty will apply to each instance of misconduct. This means if a violator engages in 100 instances of fraud against the government, they don’t face an $11,000 penalty. Instead, they face a far larger penalty of $1.1 million.

The second type of damages under the False Claims Act is treble damages. Treble is a fancy legal word for triple. In other words, treble damages are another way of saying “triple the actual damages.” Treble damages are pretty severe. Many laws only allow for actual damages plus interest or sometimes double damages. Treble damages are usually a sign that Congress or other government entity wants to severely punish a particular behavior. Let’s look at a simple example to explain how this could work.

An Example of Defense Contractor Fraud

A military contractor overcharges the government $50 for each piece of body armor it manufactures and delivers to military units and federal law enforcement officers. If the government orders 10,000 pieces of body armor, the military contractor overcharged by $500,000. So if the government catches the military contractor, that contractor will have to pay $1.5 million as treble damages, even though the actual damages are only $500,000.

Forcing violators to pay treble damages is very important because it serves as a strong deterrent to potential violators. If the False Claims Act only made the violator pay actual damages, there would be almost no deterrent effect. This is because someone who is thinking about defrauding the government might think the potential penalties are worth the risk. They might think this if they only have to pay up to $11,000 for each fraudulent transaction plus actual damages. We can use another example to show how this is the case.

Military Contractors and False Claims Act Damages

Let’s take another military contractor, but instead of manufacturing and delivering thousands of pieces of body armor, they are only making one nuclear powered aircraft carrier at a cost of $10 billion. In an attempt to defraud the government, the military contractor actually charges the government $10.1 billion. This results in a $100 million overcharge.  The government pays $10.1 billion and doesn’t give it a second thought.

Let’s assume the government eventually discovers the military contractor’s overcharge and successfully prosecutes them under the False Claims Act several years later. Without treble damages, the military contractor would only have to repay the $100 million it overcharged plus $11,000 in penalties.

So in reality, for the opportunity to steal $100 million from the government, the military contractor only lost $11,000. That’s an amazing deal – consider that a $100 million loan over a term of several years would be impossible to find for only $11,000 in interest. The total interest for a $100 million loan over several years would probably be closer to $10 million or more. But with treble damages, the military contractor isn’t $11,000 poorer, but rather, $300,011,000 poorer. This is a huge difference in monetary consequences that should deter most potential fraudsters.

Need More Information About Damages Under the False Claims Act?

Contact our team of skilled False Claims Act damages attorneys at Bothwell Law Group by calling 770.643.1606 today.

Can a Whistleblower Law Firm Help Me in a Defense Contract Fraud Case?

whistleblower law firm

whistleblower law firmMany do not understand the purpose and capabilities of a whistleblower law firm. Not only do whistleblower attorneys have the ability to defend in qui tam cases, but such lawyers can also serve as a fortification in instances where defense contract fraud exists.

About Defense Contract Fraud

Defense contract fraud occurs when a private entity sells faulty goods to the government at ridiculously high marked prices. Selling cheap weaponry for three times its worth to armed forces could fall under defense fraud.  For example, if the seller intentionally invoiced the items at above market price for the sole purpose of making an additional profit.

Rules regarding contracts between government entities and private companies were first put in the books during the Civil War. It was during this time that the uniform store that the armed forces used to clothe its men began using cheap fabric that did not endure the pressures of war. The company charged the government prices that one would pay for quality fabric all while using material that easily ripped. As a result, executives in parliament added a section to the False Claims Act that sought to protect and reward citizens who blew the whistle on companies that operated under such unfair practices.

Determining a Case for Fraud with a Whistleblower Law Firm

Typically a contracted company will attempt to take advantage of its government agency agrements in one of three ways:

  1. The company will cross-charge the agency. Instead of simply invoicing a flat fee for services, a business may charge a standard fee plus hourly wages. Companies that operate this way tell employees to log time after charging the government fees that are meant to cover hourly wages.
  2. The business will substitute products. Such substitutions tend to be at the expense of the government. Instead of using a high-quality material as stipulated in the agreement, the company will cut corners to save money. The government, in essence, suffers due to paying more money for products that will last half the time.
  3. The business will not properly allocate time spent between working for the government and another company. This form of defense contract fraud usually occurs when the project requires a partnership between the government and a corporation. Instead of recording time spent working for the two entities separately, the company in question may invoice the government for all hours worked. Such action leaves the government paying for the entire job even though another company shared in expenses incurred.

The Importance of the Whistleblower in Defense Contract Fraud

Millions of taxpayer dollars go to companies that use devious practices to receive pay from the government. An individual who sounds the alarm on such practices saves the country money.  They also assist in helping funds go to more deserving programs in defense. A whistleblower law firm can help in fighting fraud by connecting citizens with experienced counsel that can conduct thorough research.

Are you aware of defense contract fraud and need to know how to proceed? Learn more about what whistleblower law firms can do for you by contacting Bothwell Law Group today.