February 15, 2013 — Military equipment contracts are lucrative business for government contractors. But overbilling the government to cover the cost of bribes used to obtain the military’s business is a violation of the federal False Claims Act. When contractors do resort to bribery or fraud as a means to get military contracts, they sometimes pay their own employees to keep quiet. Other times potential whistleblowers are silenced with the threat of losing their jobs. Accounting and billing personnel often blow the whistle on such conduct. They are in a unique position to notice when the books don’t add up. When employees find themselves pressured to engage in billing practices they know aren’t right, they may decide instead to inform the government about the ongoing fraud.
Georgia Men Admit to Overbilling Defense Department
Two Georgia men have pleaded guilty to bribing a public official in connection with a military contract procurement fraud scheme. The men also overbilled the Defense Department by $900,000.
According to the Department of Justice, Fredrick W. Simon and Thomas J. Cole Jr., of Albany, Georgia, worked for a machine products vendor that sought to obtain contracts to supply machine products to the Maintenance Center (MCA) at the Marine Corps Logistics Base in Albany. Cole was the general manager of the products vendor and Simon was an employee who processed sales orders.
The MCA rebuilds and repairs military equipment used in ground combat and combat support in missions throughout the world, including Afghanistan and Iraq. Before the government enters into a contract to purchase military supplies, vendors’ bids are required to go through a competitive bidding process. To ensure that their employer submitted the winning bid, Cole and Simon payed bribes to a purchase tech at the Marine base who was responsible for placing orders for machine products — at least $75 for every sales order.
In return, the purchase tech transmitted purchase orders to Simon and told him exactly what the machine products vendor should bid to get the job. Sometimes the Marine Corps paid as much as 1,000 percent over fair market value for the machine products. There were over a thousand sales orders rigged by Cole, Simon, and the purchase tech in this way. The purchase tech pocketed $161,000 in bribes in a two-year period. The government actually paid the cost of the bribes, as part of the inflated, pre-arranged purchase price for the machine products — in all, about $907,000 in overbillings.
Employee Insiders Use False Claims Act to Tackle Military Contractor Misconduct
To reward contractor insiders who are brave enough to collaborate with the U.S. government, the qui tam provisions of the federal False Claims Act allow whistleblowers to file claims on the government’s behalf and share in any proceeds recovered as a result.
Before reporting what they know, tipsters deserve to understand their rights. The lawyers with Waters & Kraus are dedicated to providing government collaborators the legal representation they need. Contact us or call our whistleblower attorneys at 800.226.9880 to get answers to your questions about our military contractor fraud practice and how we can help.