Diving Into Defense Fraud

September 11, 2001 ushered in a new era of U.S. defense spending, marked by the wars in Iraq and Afghanistan.

Over the last 20 years, the United States has spent more than $6.4 trillion on those wars. We do not know how much of this enormous sum has been lost to fraud. But as of 2011, i.e., 10 years into this era, a non-partisan, legislative commission found that as much as $60 billion (almost 30% of the spending up to that point) had been lost to fraud, waste, or abuse.

In 2010, imagine if Congress had an extra $60 billion to support the 1.43 million active troops through pay raises, increased healthcare for veterans, or support services for military families.

Procurement fraud aimed at the Department of Defense, “poses a serious threat to the DOD’s ability to achieve its objectives and can undermine the safety and operational readiness of the warfighter.” Whistleblowers are the government’s best weapon in the military’s fight against fraud.

Whistleblowers and defense fraud

Whistleblowers are instrumental to uncovering defense contractor fraud, which can hurt US troops and veterans, undermine national security and cheat US taxpayers. Industry insiders with specific information about defense fraud such as fraudulent billing practices and violations of contract requirements are particularly helpful to expose military contractors that are cheating on their government contracts.

Under the False Claims Act, whistleblowers are able to file lawsuits – called qui tam lawsuits – on behalf of the government when government funds are being lost to fraud and deception.

Qui tam whistleblower cases have led to the government recovering over $3.5 billion in defense fraud cases since 1986. Total qui tam recoveries under the False Claims Act have exceeded $46.5 billion plus billions more in related criminal fines and state qui tam cases.

Phillips & Cohen has represented whistleblowers in several qui tam cases against defense contractors.

•  Northrop Grumman paid $325 million to the government to settle a whistleblower lawsuit that alleged the defense contractor had suppressed information about faulty components in military satellites. At the time, it was the largest qui tam settlement ever paid by a defense contractor. Phillips & Cohen’s whistleblower client received a reward of $48 million.
• A Phillips & Cohen whistleblower lawsuit against the Louis Berger Group settled for $69.3 million, which was the largest recovery in a case involving war-zone contractors in Afghanistan and Iraq. The whistleblower was an auditor for Louis Berger who discovered Louis Berger’s practice of billing the government for indirect and overhead costs that were unrelated to its government contracts.

Whistleblowers who file qui tam lawsuits are entitled to protection against job retaliation and a reward. Whistleblower awards range from 15% to 25% of the amount the government recovers as a result of their qui tam lawsuits when the government intervenes in the case.

For a free, confidential review of a potential case involving defense contractor fraud, contact Phillips & Cohen LLP.

 

A version of this article was originally posted as part of the “Fraud by the Numbers” series for the Fraud in America website sponsored by Taxpayers Against Fraud Education Fund, a public interest, non-profit organization dedicated to fighting fraud against the government by working to protect whistleblowers and strengthen whistleblower law. This version has been revised to include additional information about the important role that whistleblowers play in stopping fraud by defense contractors.