Big Awards Paid to Whistleblowers Who Report Fraud in Defense Contracts

Three recent settlements illustrate the Department of Justice’s interest in aggressively pursuing claims brought by whistleblowers against defense contractors who fail to abide by the specific terms of their contracts with the government.

In two recent cases, major defense contractors were forced to pay millions of dollars for overbilling the government for work performed by under-qualified employees.

Lockheed Martin Integrated Systems (LMIS, a subsidiary of Lockheed Martin, Inc.) settled a whistleblower claim for $27.5 million to resolve allegations that it violated the terms of its contracts with the government in the Rapid Response contract issued by CECOM by using underqualified employees who were nonetheless billed at the rates of more qualified employees as required under the terms of the contracts.

In a similar case, DRS Technical Services, Inc., paid $13.7 million to settle allegations that it overbilled the government under its Rapid Response contract with CECOM by using employees who lacked the required job qualifications specified by the contract. Because the company used employees who did not have the necessary qualifications, all of the bills submitted for the work performed by those employees could be considered false claims against the government and actionable under the False Claims Act.

In another recent case involving a major defense contractor, the Boeing Company paid $23 million to resolve allegations that it submitted false claims for labor charges on maintenance contracts with the U.S. Air Force. Again, this defense contractor allegedly billed for labor costs in violation of the applicable contract requirements, including billing for time its mechanics spent at meetings that were not directly related to the work covered by the contract. The whistleblowers who brought the Boeing case to the government received $3.9 million as their share of the settlement.

These recent cases show that defense contractors may be routinely overbilling the government. Defense contracts generally have very specific requirements for qualified employees and limits on the type of work for which the contractor can bill the government.

Anyone who is aware of a defense contractor who is billing the government for any work that is not in strict compliance with its contract should consider consulting our firm about the possibility of reporting this potential fraud to the government by filing a qui tam action under the False Claims Act.  A successful whistleblower claim can lead to an award of up to 30% of the amount ultimately recovered by the government. The False Claims Act also protects any employee of a defense contractor who comes forward and reports the fraud to the government.

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