Whistleblowers Recover Millions for Reporting Billing Fraud in Government Contracts

Several recent cases involving companies who were awarded contracts with the federal government show that whistleblowers are often able to obtain significant financial rewards when reporting a company who is overcharging the government for products or services by violating the terms of its contract.

Many federal contracts require companies doing business with the government to make sure the government pays the lowest price the company is charging its other companies for similar services. In one recent case, Hewlett-Packard Co. (HP) paid $32.5 million to resolve allegations under the False Claims Act that it overcharged the United States Postal Service (USPS) for products that it sold the post office under a government contract. Like many government contracts, HP was required to provide the USPS with “most favored customer pricing” and sell its products to the government at prices that were no greater than it offered to its other customers with similar contracts. There was also an allegation in that case that HP made misrepresentations during the negotiation of its contract with the USPS.

Similarly, Iron Mountain, Inc., settled a claim for allegedly overcharging the General Services Administration (GSA) under its contract to provide record storage services for the federal government. In that case, Iron Mountain paid $44.5 million because it allegedly failed to comply with the “Multiple Award Schedule Program” by reducing the price it charged the government to match the lower prices it was charging its other customers. In that case, the whistleblowers who brought the alleged fraud to the government’s attention will receive over $8 million.

McKesson Corporation also agreed to pay $18 million to resolve allegations that it violated its contract with the Centers for Disease Control (CDC) by failing to properly set temperature monitors when it shipped vaccines under a government contract. Even though the vaccines were actually sent to the CDC, McKesson allegedly failed to follow the precise terms of the contract when monitoring these shipments. As a result, any of the bills submitted to the CDC by McKesson could be considered fraudulent.

These recent settlements highlight the importance of complying with the strict specifications of a contract to do business with the federal government. If any business is providing goods or services to the federal government that are in any way inconsistent with the terms of the underlying contract, then any money being paid to the business under that contract may constitute a false claim under the False Claims Act.

An employee or independent contractor who is aware of a company overcharging the government, or failing to comply with the specific terms of a government contract, may be able to bring a whistleblower claim and report the fraud to the government. A successful whistleblower can recover up to 30% of the amount that the government receives from any contractor who is submitting false claims. That amount includes not just the money charged to the government under the contract but fines and penalties that can double or even triple the amount the business has to pay.

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