Archive

KBR – Defense Contracting Fraud ($108.75 million)

Constantine Cannon represented whistleblowers Geoffrey Howard and Zella Hemphill Anderson in a False Claims Act case against defense contractor KBR Inc. that resulted in the largest settlement to date involving Iraq War fraud.  KBR agreed to pay the government $108.75 million, with the whistleblowers sharing an award of $31.5 million, representing a whistleblower share of 29% of the total recovered.  The whistleblowers alleged that KBR overcharged the U.S. government in connection with procuring supplies and materials to support U.S. troops stationed in Iraq and Afghanistan during the Iraq War. The relevant contract, pursuant to which the government reimbursed KBR for its costs plus profit, required KBR to make efficient use of taxpayer funds by “cross-leveling” before procuring new material, including by checking to see if KBR already had excess of the needed item available in-theater before buying more.  In their complaint, the relators, both of whom worked for KBR during the Iraq War, alleged that KBR’s failures to “cross-level” resulted in hundreds of millions of dollars in excess materials and overcharges to the government.  Press Release; Whistleblower Insider

Wireless Carriers – Government Contracting Fraud ($138.7 million)

Constantine Cannon represented whistleblower OnTheGo Wireless, LLC, in state False Claims Act litigation against the four largest U.S. wireless carriers, AT&T Mobility, Verizon Wireless, Sprint, and T-Mobile, that resulted in the recovery of $138.7 million for the states of California, Nevada, and other jurisdictions, including political subdivisions in those states.  The whistleblower, an industry expert but not an insider at any of the carriers, alleged that the carriers knowingly failed to comply with contractual promises to deliver service “at the lowest cost available,” and provide rate plan “optimization” reports each quarter.  The contracts in questions were cooperative purchasing contracts that allowed different government entities to purchase under the terms and conditions of a master contract negotiated by a lead government agency.  For the carriers, becoming providers under the cooperative purchasing agreements gave them access to a multi-billion dollar market and, eager to have that access, the carriers agreed to provide rate plan optimization, but then, according to the whistleblower, failed to provide it.  The contracts were long-standing and the terms highly specialized.  And, many government agencies agreed to purchase under the contracts based solely on the fact they were put together by the Western States Contracting Alliance (“WSCA”).  This created an opportunity, OnTheGo alleged, that the carriers knowingly exploited to breach their promise to deliver low cost service and rate plan optimization, resulting in hundreds of millions of overcharges to government entities.  Over 30 California political subdivisions intervened in the California action and were also represented by Constantine Cannon; the State of Nevada intervened in the Nevada action. Plaintiffs ultimately recovered $138.7 million, and the whistleblower received a relator share of nearly 40%.  See Press Release and Whistleblower Insider for more.

Unitrans International Inc., Anham FZCO, et al. — Government Contract Fraud ($45 million)

Our attorneys represented Rory Maxwell, John Bush, and Supreme Foodservice GmbH in a qui tam action under the False Claims Act against Unitrans International Inc., a privately held Virginia defense contracting company, and Anham FZCO, an associated Dubai Free Zone company, for making false certifications of compliance with the U.S. sanctions regime against Iran to induce the U.S. Defense Logistics Agency and the U.S. Army to award Anham wartime contracts to provide food and transportation to U.S. troops.  Our whistleblower clients also alleged Anham knowingly and falsely represented construction progress on its Bagram warehouse in related bid proposals to the government.  In December 2019, Unitrans agreed to pay $45 million to resolve criminal and civil allegations related to this alleged misconduct, which includes $27 million to resolve our whistleblower clients’ False Claims Act allegations.  Read more about the case at the Department of Justice website here and in The Washington Post here.

Cisco Systems, Inc. – Government Contract Fraud/Non-Conforming Product ($8.6 million)

Constantine Cannon represented whistleblower James Glenn against Cisco in the first cybersecurity whistleblower case ever successfully resolved under the False Claims Act. Cisco Systems, Inc. agreed to an $8.6 million settlement to resolve allegations it knowingly sold vulnerable video surveillance software to federal, state and local government agencies, exposing government systems to the risk of unauthorized access and the manipulation of vital information. The whistleblower, who worked in Europe for a Cisco partner, had reported critical security vulnerabilities in the software to Cisco, but Cisco had continued to sell the technology to government entities, including the District of Columbia and 15 states, despite the fact that the software failed to comply with FAR procurement standards that require basic cybersecurity controls, including those set forth by the National Institute of Standards and Technology.  Read more: Press Release; Whistleblower Insider

Hyundai Oilbank Co., S-Oil Corporation, et al — Government Contract Fraud/Bid-Rigging ($363 million)

A team of our whistleblower attorneys led the representation of an anonymous whistleblower who provided extensive assistance to the U.S. government in its criminal and civil cases against several Korean oil and transportation companies, for their roles in a conspiracy to artificially inflate prices on fuel contracts for U.S. military bases in South Korea. Ultimately, five different entities paid a total of $363 million in the largest False Claims Act antitrust recovery as well as the largest False Claims Act settlement involving bid-rigging to date. In November 2018, SK Energy Co. Ltd., GS Caltex Corporation, and Hanjin Transportation Co. Ltd. collectively agreed to pay $154 million, to resolve civil claims, and an additional $82 million in criminal fines for their involvement in the conspiracy the whistleblower exposed. And in March 2019, the Department of Justice announced that two additional companies, Hyundai Oilbank Co. Ltd and S-Oil Corporation, would pay $75 million in criminal fines and $52 million to resolve these same False Claims Act and antitrust violations. The whistleblower received an award of nearly $37 million, representing 23% of the False Claims Act payments. Read more here, here, and here.

Roof Systems of Maine – Government Contracting Fraud/Noncompliance with contract requirements ($439,500).

Two of our whistleblower attorneys led the representation of Brian Emery, an experienced roofer and former subcontractor to Roof Systems of Maine. Mr. Emery brought a qui tam action under the False Claims Act against Roof Systems of Maine alleging the company defrauded the government by violating contract requirements and industry standards in roofing and siding work done on behalf of the Departments of the Army and Navy, and the National Guard Bureau. According to the complaint, Roof Systems systematically used inferior products and improper installation techniques at three building sites along the Maine coast. The government joined the case, and in 2016, Roof Systems paid $439,500 to settle the case. Mr. Emery received a whistleblower award of $79,110. See Morning Sentinel for more.

Office Depot — Government Contracting Fraud/Best Pricing ($68.5 million).

One of our whistleblower attorneys led the representation of David Sherwin, a former business manager at Office Depot. Mr. Sherwin brought a qui tam action under the False Claims Act against Office Depot alleging the company overcharged over one thousand California public agencies, including schools, for office supplies. According to the complaint, Office Depot promised its public agency customers Office Depot’s “best” pricing when in fact it charged them millions of dollars more than they would have paid under other, more favorable Office Depot contracts. In addition to representing Mr. Sherwin, one of our attorneys also represented numerous public agencies that joined the case. Office Depot ultimately settled the case for $68.5 million, and Mr. Sherwin’s estate received a whistleblower award of $23 million. See LA Daily News for more.

JM Eagle — Government Contracting Fraud/Noncompliance with Industry Standards ($22.5 million).

Two of our whistleblower attorneys led the representation of whistleblower John Hendrix, a former engineer at JM Eagle, as well as dozens of public agencies, in a two-month jury trial in Los Angeles against JM Eagle, the largest PVC pipe maker in the world. The jury returned a 50-page verdict finding that, over a ten-year period, JM Eagle had falsely represented its compliance with industry standards related to long term strength and durability of its PVC pipe. The pipe is buried deep underground in hundreds of municipalities around the nation. The damages phase of the case has not yet been held. However, a co-defendant in the case, Formosa Plastics, paid $22.5 million to settle its own potential liability, and Mr. Hendrix received a whistleblower reward from that settlement. See NY Times and Corporate Crime Reporter for more.

Tyco — Government Contracting Fraud/Noncompliance with Industry Standards ($60 million).

One of our whistleblower attorneys led the representation of Nora Armenta and dozens of California municipalities in a qui tam action under the False Claims Act against Tyco International, Mueller Co., and the James Jones Company, alleging they sold waterworks parts to municipal water systems that were made with 40% more lead than allowed by industry standards. According to her complaint, Ms. Armenta repeatedly warned her superiors that the parts were for drinking water, but was ignored. The defendants settled the case, but only after 13 years of litigation, including three successful appeals that reversed unfavorable trial rulings. The defrauded municipalities received $60 million, and Ms. Armenta received a whistleblower reward of $15 million.

LA Dep’t. of Water & Power — Government Contract Fraud/Utility Overcharges ($224 million).

Four of our whistleblower attorneys led the representation of whistleblower Sam Barakat, as well as the County of Los Angeles, the Los Angeles Unified School District, and other government agencies in a whistleblower action against the Los Angeles Department of Water and Power. The plaintiffs alleged that the DWP had overcharged these schools and other public agencies for electric power over a ten-year period of time. The case involved a ground-breaking legal theory that had never been tested in court. It also involved dissecting elaborate cost accounting to demonstrate government customers had been overcharged relative to the true cost of service. Following a two-month trial, a verdict was returned against the DWP for $224 million. See LA Times, UT San Diego, and National Law Journal for more.