Justice Department and Military Contractor Settle Overcharging Allegations

Justice Department and Military Contractor Settle Overcharging Allegations

Bingen, Washington-based Insitu, Inc. agreed to pay $25 million to resolve claims that it violated the False Claims Act by inflating costs.

According to documents filed in a Seattle federal court lawsuit, Insitu said it would use entirely new components in drones that it built at seven locations in the Pacific Northwest. Instead, the company used “less-expensive recycled, refurbished, reconditioned, and/or reconfigured parts to perform the contracts.”

“Defense contractors are required to obey strict standards when proposing cost and pricing data for work to be performed on government contracts,” remarked Justice Department Special Agent Bryan D. Denny. “The pursuit and favorable settlement of this civil litigation is yet another example of our agents and law enforcement partners working together to uncover fraudulent activity and protect taxpayers’ dollars entrusted to the DoD.”

The False Claims Act: A Closer Look

Wrongdoing like this is incredibly rare. But it does happen. It is important that contractors know their rights in these situations.

Congress passed the False Claims Act in 1863. President Abraham Lincoln pressed hard for the law, which is also known as the Lincoln Law. Lincoln saw it as an innovative way to curb fraudulent practices, specifically companies selling substandard goods to the Union army. Originally, relators (people who brought qui tam cases) received 50 percent of the funds the wrongdoer paid the government.

Many years later, a World War II era Congress gutted the False Claims Act. In 1943, lawmakers slashed the available whistleblower awards and created procedural hurdles. These changes made it hard for qui tam lawyers to bring cases, and even harder for them to win fair compensation.

In 1986, as part of President Ronald Reagan’s privatization initiatives, Congress revamped the FCA yet again. This version of the law closely resembles the one in place today. Some highlights include:

  • Rewards of up to 30%,
  • Available treble damages,
  • Whistleblower employment protections,
  • Elimination of some procedural hurdles, and
  • A lower standard of proof.

Because of these changes, over 9,000 qui tam actions have saved taxpayers some $55 billion.

Qui Tam Compensation

Whistleblower awards are carefully calculated to encourage people to come forward and also prevent frivolous actions. So, the amount of the award varies depending on several factors, such as:

  • Quality of information provided,
  • Extent of whistlebower’s cooperation in any official investigation, and
  • Health and safety issues, if any, involved.

Frequently, qui tam lawyers join a wrongful termination or other such claim with the qui tam claim. This connection could be a problem, because these cases have some procedural differences. If these variations are not fully accounted for, a judge could throw one or both claims out of court.

Additionally, there are some agency-specific nuances. For example, SEC whistleblowers might not be entitled to job protection. However, the Commodity Futures Trading Commission (CFTC) whistleblower law, which was part of the Dodd-Frank Act, does contain such provisions.

Generally, whistleblower job protection is not limited to termination. It also includes a wide range of retaliatory acts, such as:

  • Demotion,
  • Reassignment,
  • Sidelining,
  • Loss of seniority, and
  • Blackballing former employees.

Compensation in unlawful retaliation matters usually includes lost back pay, a reasonable amount of front pay (lost future pay), and/or reinstatement. Perhaps more importantly, relators receive judicial declarations that what the company did was wrong.

Injury Compensation

Contractors also have the right to injury compensation benefits, largely through the Defense Base Act. The DBA’s wage replacement benefit is often critical to these families. Frequently, the injured victim is the family’s only source of financial support. Even a few days without a paycheck could be financially devastating. It is hard to imagine what a few months could mean.

To give these families the resources they need, and to give victims additional peace of mind as they recover, the DBA provides four categories of wage replacement benefits:

  • Permanent Total Disability: PTD victims are not necessarily bedridden. These individuals simply have such severe injuries that they cannot work again. So, a “disability” is not just a medical term. This word also has educational, vocational, economic, and other implications.
  • Permanent Partial Disability: These victims can normally keep working. But their injuries cause permanent physical problems, such as loss of range of motion in an injured shoulder. In both PTD and PPD cases, these victims usually receive compensation for lost future wages. The amount of compensation usually depends on the nature and extent of the disability.
  • Temporary Partial Disability: Many victims are able to work as they recover and attend physical therapy sessions. However, they must reduce their hours or accept clerical-type work. To ease the financial pain, the DBA pays two-thirds of the difference between the victim’s old and new salaries.
  • Temporary Total Disability: Most injured victims cannot work at all while they recover, at least for a few weeks or months. Once again, to ease the financial pain, the DBA usually pays two-thirds of the victim’s average weekly wage for the duration of the temporary disability.

The Average Weekly Wage is not always easy to determine. Most people switch jobs frequently. And, there is a big difference in salary between a truck driver in Kandahar and a truck driver in Kentucky.

There are prospective wage issues as well. For example, many contractors are hurt during their probationary periods. These victims are entitled to the salary bumps they would have received if they had been able to stay on the job.

For more information about the DBA’s medical benefits, contact Barnett, Lerner, Karsen, Frankel & Castro, P.A.