The U.S. federal government is the biggest customer in the world, spending
nearly $400 billion every year. Naturally companies are clamoring to get
a piece of such a huge, lucrative market. And with buying power that big,
by rights the Government ought to be getting the best possible price from
the companies standing in line to snatch a piece of the gigantic federal pie.
Unfortunately, spending that big begets sizable fraud, too. But thanks
to whistleblowers and lawsuits filed under the False Claims Act, the federal
government has been able to make a $602 million dent in the fraud in just
the past ten years. As a lawyer, I represent whistleblowers, and I am
in the second of three blogs talking about some of the great successes
the Government has had in fighting Multiple Award Schedule (“MAS”) fraud.
MAS contracts are contracts where the government negotiates in advance
to buy goods and services. When federal employees need to hire a private
entity to plant trees or deliver notepads, they can order from the menu
of items at a price and on terms already negotiated by the General Services
Administration (“GSA”).
* Samsung Electronics – Electronics – $2.3 Million (2014)
Samsung paid the Government $2.3 million when it was accused of fraud in
an MAS contract. A whistleblower, Robert Simmons, filed a False Claims
Act suit alleging that the company was not complying with the Trade Agreements
Act. Under the TAA, the Government specifies that the products it buys
have to come from certain countries. According to Simmons, a former Samsung
employee, Samsung falsely claimed that it was selling the Government products
made in Korea and Mexico, which are TAA-designated countries, when in
reality it was selling products that were manufactured in China, which is not.
Under the FCA, whistleblowers like Simmons are entitled to a relator’s
share of between 15% and 25% of what the Government recovers if the Government
intervenes in the case, and 25% to 30% if it does not. As of the time
DOJ issued its press release about settling the case, the amount Simmons
would receive had not yet been determined. Based on the FCA, he would
have been expected to receive between $345,000 and $575,000.
* Corning Incorporated – Glass and Ceramic Components for Lab Research
– $5.65 Million (2013)
A whistleblower filed a False Claims Act suit that recovered $5.65 million
for the Government, and walked away with $904,000 of his own. Kevin Jones
had worked at Corning Life Sciences as a sales representative. Corning
had an MAS contract to provide glass and ceramic components that would
be used for laboratory research products involving electronics, mobile
emissions controls, telecommunications and life sciences. According to
Jones, Corning failed to give GSA “current, accurate and complete
information about its commercial sales practices, including discounts
offered to other customers.”
The Corning MAS contract also had a price reduction clause, meaning that
if Corning arranged to give commercial customers new discounts, it had
to pass those same savings along to the federal government. The U.S. and
the whistleblower said Corning failed to give the federal government the
same discounted rate it gave to other, non-governmental purchasers.