CDW-Government, LLC, has agreed it will pay $5.66 million to settle a whistleblower’s
lawsuit brought under the False Claims Act. According to a
United States Department of Justice press release, the suit alleged that CDW violated its contract with the United States
by concealing the fact that it was buying products that were made in countries
prohibited under the U.S. Trade Agreements Act. Despite the fact that
it had bought the products in countries from which it had agreed it would
not buy, it then resold those products to the United States. The claims were
initially brought by a former sales representative for the company, John
Liotine. Whistleblower Liotine will be paid $1.56 million out of the total
amount of the settlement.
The CDW case is especially important because of what it says about damages.
In some False Claims Act whistleblower cases, the damages are very clear.
For example, if a company promises to provide widgets, but through fraud
never does, the Government never got the benefit of its bargain at all.
In CDW’s case, however, CDW actually was providing supplies to the
Government. But the Government has very specifically said that it only
wanted to buy goods from approved countries – and the Government
was not getting the benefit of that bargain.
When a government contractor ignores a restriction the Government puts
in its contract, ostensibly the Government still gets the goods and services
it requested. But if contractors are allowed to ignore these provisions,
of course, then the Government will be denied the chance to do what every
other contracting party gets to do – bargain for what it really
wants. If the Government cannot enforce these provisions, ultimately the
provisions have no meaning.
On January 12, I wrote a law blog entry entitled
Hardware Distributor Grainger to Pay $70,000,000 for Fraud Against the
Government. That legal blog post talked about a whistleblower’s case against
an Illinois-based hardware distributor. In that case, as in this one,
the relator charged the defendant with violating its government contract
by buying products from countries that were not members of reciprocal
trade agreements with the United States.
The Government now has settled at least two similar False Claims Act suits,
illustrating that it is going to be serious about enforcing the requirements
in its contracts. Indeed, if the Government were to walk away from cases
like these, then it might as well remove any provisions in its contracts
about complying with the Trade Agreements Act or other similar legislation.
The False Claims Act is found at
31 U.S.C. § 3729, et seq., and it allows whistleblowers to inform the Government when they
know someone is trying to defraud the Government. The whistleblower (also
called a ‘relator’) has to follow various procedural requirements
and file a lawsuit informing the Government about the fraud. A relator
who correctly follows the steps is then entitled to between 15% and 25%
of what the Government recovers. If the Government chooses not to intervene
(i.e., take over the case), then the relator is entitled to receive between
25% and 30% of whatever is recovered on the Government’s behalf.
Abraham Lincoln was a proponent of the FCA, which dates back to the Civil
War. Thanks to the law, the Government has recovered billions of dollars
that otherwise would have been lost to fraudsters bent on cheating the
Government and the American taxpayers.