Thanks to whistleblowers and the False Claims Act, in the past ten years
the federal government has recovered $602 million from contractors accused
of overcharging the Government under Multiple Award Schedule (“MAS”)
contracts. Whistleblowers have received nearly $100 million for helping
the Government recoup what was owed to it.
In recent years, the Government has settled 9 large cases related to MAS
contract fraud. All but one of the cases was filed by a whistleblower,
like the ones I represent as a lawyer, and over my next three blog entries
I am going to catalog the nine lawsuits.
What’s an MAS Contract?
From office supplies to software to landscaping services, the U.S. federal
government is one of the largest consumers of goods and services in the
world. Companies jockey for the chance to sell products and services to
the Government, and in order to get that chance, most have to enter into
an “Multiple Award Schedule” (“MAS”) contract
with the Government. Under an MAS agreement, the Government negotiates
a set price that all government employees will pay for a particular item,
e.g., for a pack of pens or an hour of air conditioner repair.
To be eligible for the MAS contract, the company has to honestly tell the
Government the best price it gives to other customers, and it has to agree
not to charge the Government more than it charges its best customers.
After all, the Government is about to become one of its best customers.
Once the MAS contract is in place, the manufacturer and the price go on
a list. When a department needs more pens, the office manager consults
the list, and orders the pens at a good price already negotiated by the
General Services Administration (“GSA”).
Whistleblowers Help Government Recover Hundreds of Millions of Dollars
* VMware Inc. and Carahsoft Technology Corporation – Software Products
and Services – $75.5 Million (2015)
VMWare paid the Government $75.5 million after being accused of overcharging
the government for software products and “related services.”
The software company was accused of hiding the prices it charged commercial
customers so that it could charge the Government more. Dane Smith, a former
VP at the company, was the whistleblower. At the time the case settled,
the amount that Smith would receive had not been determined. Under the
FCA, a successful whistleblower is entitled to 15% – 25% of the amount
of the settlement, which in Smith’s case would be $11 – $18.9 million.
(The whistleblower is entitled to up to 30% of a settlement where the
Government has not intervened,
i.e., taken over the prosecution of the case.)
* CA Inc. – Software and IT Services – $45 million (2014)
Thanks to a whistleblower, the Government collected $45 million from CA
Inc., a contractor accused of charging the Government more for software
licenses and IT management services than it charged other customers.
The lawsuit was filed by Dani Shemesh, a former employee of CA Software
Israel LTD. Shemesh received $10.195 million for his work in bringing
the lawsuit.
Shemesh said that CA did not fully disclose how it was charging customers
in the commercial marketplace, which meant that the Government did not
have the data it needed when it negotiated the contract prices with CA.
In fact, Shemesh alleged, CA gave discounts to commercial customers that
it did not give to the Government. Furthermore, when CA reduced prices
to the commercial customers, it did not likewise reduce the Government’s
prices, he said.
* Iron Mountain Companies – Storing Documents and Data – $44.5 Million (2014)
In 2014, Iron Mountain Companies faced allegations that it had overcharged
the government for record storage services. Iron Mountain paid the Government
$44.5 million to settle the claims that it had not given the Government
accurate information when it negotiated the MAS contract and had failed
to pass along a price reduction when it negotiated lower prices for other
customers. The whistleblowers also accused the company of charging for
storage that met the requirements set out by the National Archives and
Records Administration, even though the storage did not actually meet
the requirements.
The suit was brought by two whistleblowers, Brent Stanley and Patrick McKillop.
Stanley was a former employee at Iron Mountain; McKillop worked in the
records management industry. While the Government’s press release
did not state the amount paid to the two whistleblowers, under the FCA
it should have been between $6.675 million and $11.325 million.