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Catch of the Week — DOJ Settles False Claims Act Case Against Cybersecurity Company

Posted  April 18, 2019

Last week, the Department of Justice announced that Fortinet, Inc., a Silicon Valley-based cybersecurity company, has agreed to pay more than half a million dollars to resolve allegations that it lied about its compliance with the federal Trade Agreements Act (TAA). The allegations were brought to the government’s attention through a False Claims Act lawsuit filed by a whistleblower who worked in Fortinet’s Vancouver office handling supply chain logistics.

Companies that supply products to the federal government must comply with the TAA, which generally prohibits federal agencies from acquiring products made in certain countries—including China, India, Malaysia, Thailand, and Taiwan. When selling to the government, companies must certify that their products comply with the TAA’s prohibition. When companies lie about this certification, their actions amount to government contract fraud. Without information from whistleblowers, such fraud can go undetected.

Allegations against Fortinet

Through distributors, Fortinet supplied federal agencies—including the Department of the Navy—with various IT products, along with security blade servers, VPN firewalls, and wireless routers.  According to the DOJ settlement agreement and the whistleblower’s allegations, Fortinet routinely supplied the government with products made in China and then doctored the products’ labels make them appear TAA compliant.

In announcing the settlement, the government made clear that TAA enforcement is essential to cyber security. A representative from the Department of Defense, which participated in the Fortinet investigation, specifically cited “cyber risk” in declaring that contractors supplying the federal government with “Chinese-made technology will be pursued and held accountable” when they violate the TAA.

Through the settlement, Fortinet has agreed to provide the U.S. Marine Corps with $145,000 in additional equipment and to pay the government $400,000.  In a twist, the company likely paid less to settle the allegations because it informed the government in 2017 that a former DOJ attorney had offered to sell them then-sealed documents related to the lawsuit and investigation.


Tagged in: Catch of the Week, Cybersecurity and Data Breaches, Defense Contract Fraud, FCA Federal, Trade Agreements, Whistleblower Case,