Government Procurement Fraud

July 16, 2019

A government contractor has agreed to pay $11 million to settle False Claims allegations of directly and indirectly supplying improperly tested electrical connectors to the U.S. military.  According to Ralph Tatgenhorst, a former regional quality manager for ITT Cannon, the company repeatedly failed to test six different models of connectors even after the government learned of the failure, and even after the company promised it would conduct remedial testing.  For coming forward with a successful qui tam case, Tatgenhorst will receive a relator’s share of $2 million.  DOJ; USAO CDCA

June 28, 2019

Following his conviction for illegally obtaining $11 million in contracts intended for service-disabled veteran-owned small businesses, a government contractor and his company have been ordered to pay $3.2 million, with $400,000 to be paid by the contractor, Andrew Otero, and $1.8 million to be paid by his company, A&D General Contracting.  Otero has also been sentenced to 1.5 years in prison.  USAO SDCA

June 28, 2019

Raytheon Company has resolved False Claims Act-based allegations by agreeing to pay $1 million.  The equipment supplier was contracted by the County of Los Angeles, California to provide interoperable dispatch consoles to its sheriff and fire departments.  However, Raytheon allegedly misrepresented its ability to provide the products in order to induce the county to enter into a federally funded contract.  USAO NV

June 26, 2019

Arizona-based commercial debt collection company BARR Credit Services has agreed to pay $55,793 and start a compliance program to resolve its liability under the False Claims Act.  According to the government’s complaint, Barr Credit submitted false claims on behalf of a telemarketing firm called Scholars in Print, which allegedly sends unsolicited textbooks to schools and libraries and then invoices the unwilling recipients.  Barr Credit attempted to collect on these unpaid invoices from the Federal Bureau of Prisons despite knowing the debts were invalid.  USAO EDPA

June 20, 2019

Two defense supply companies and their owners have agreed to a $159,390 consent judgment for improperly substituting parts intended for DOD contracts.  Liberty Air Parts, Inc., US Supply Corporation, and their operators, George and Ellen Onorato, allegedly agreed to supply brand new parts bolts, knobs, rings, and rivets, but instead substituted them with surplus parts left over from other government project.  They concealed the substitution by allegedly falsifying records and statements, in violation of the False Claims Act, and used the ability to quote prices lower than their competitors to their advantage in the contract bidding process.  As part of the consent judgment, the defendants are now prohibited from contracting with the federal government.  USAO EDPA

June 20, 2019

Pennsylvania-based Support of Microcomputers Associates (SOMA) has agreed to a $300,000 judgment for violating the False Claims Act and Trade Agreements Act.  The Trade Agreements Act prohibits the sale of computer supplies manufactured in certain countries to some federal agencies, such as the Department of Defense.  However, according to a former SOMA executive’s lawsuit, the company allegedly sold federal agencies computer supplies made in China, Vietnam, and other non-compliant countries.  USAO EDPA

June 14, 2019

IBM and its subsidiary, Cúram Software, will pay $14.8 million for allegedly making material misrepresentations to the State of Maryland during a contract award process for the state’s health insurance exchange website.  Cúram, which was acquired by IBM at the end of 2011, had applied for the award in 2012 and subsequently became a subcontractor on the project, which was partially funded by federal grants.  However, during the application process, and with IBM’s knowledge, Cúram allegedly misrepresented the development status and existing functionality of its software, as well as its software’s ability to integrate with other software.  The resulting issues caused the State of Maryland to terminate the contract and replace Cúram’s software.  DOJ; USAO MD