Monday, March 13, 2017

Oh My, Whistleblower Gets $10 Million from a $45 Million False Claims Settlement

A Government contractor has agreed to pay $45 million to resolve allegations under the False Claims Act (FCA) that it misled the government concerning discounts given to its commercial customers.

You can read the Justice Department press release here.

This case involves a GSA's Multiple Award Schedule (MAS) contract. As most readers know and at least intuitively understand, negotiated prices under MAS contracts must give the Government most favored customer status at the time of award and throughout the life of the contract. MAS contracts contain provisions that require contractors to adjust their prices whenever prices to commercial customers for comparable items or services are improved.

In this case, CA Inc. did not fully and accurately disclose its discounting practices to GSA contracting officers. Specifically, CA provided false information about the discounts it gave commercial customers for its software licenses and maintenance services at the time contracts were negotiated in 2002, 2007, and 2009. CA also violated the price reduction clause by not providing Government customers with additional discounts when commercial discounts improved.

The False Claims Act (FCA) provides liability for any person who knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval, knowingly makes or uses a false record or statement material to a false or fraudulent claim or knowingly makes a false record or statement material to an obligation to pay or transmit money to the Government, or knowingly conceals an obligation to pay.

This was a very complicated case involving false statements during contract renewal, false statements during contract performance and failure to comply with the price reduction monitoring clause. For example, CA requested modifications to the contract multiple times during the contract period and expressly represented to the Government that its commercial discounting and pricing policies were the same as had been described in CA's original proposal. However, it turned out that these representations were knowingly inaccurate and incomplete. While CA represented its CEU  (commercial end user) customers received average discounts of 50 percent, the whistleblower and ensuring investigation found that average CEU discounts were 64 percent.

The allegations against CA were first made in a whistleblower lawsuit filed under the False Claims Act by a former employee. Under the False Claims Act, private individuals can sue on behalf of the Government and share in any recovery. The False Claims Act also allows the Government to intervene and take over the action, as it did in this case. The whistleblower's share of the settlement is $10.1956 million (of which the whistleblowers attorneys will receive a portion).

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