U.S. Intervenes in False Claims Act Case Against New York Biotech Company

May 6, 2013 —  The Department of Justice has long relied on the federal False Claims Act to fight government contractors’ fraudulent scams against the American taxpayers. Under the False Claims Act’s qui tam provisions, government contractor employees who discover fraudulent schemes against the government are empowered to file suit against the wrongdoers and retain a share of any monies collected. Insider employees are ideally situated to notice when fraud is occurring and to notify the government by filing a False Claims Act lawsuit.

New York Biotech Alleged to Have Defrauded DOD

The United States has decided to intervene in a False Claims Act lawsuit filed in New York against Agave BioSystems, a small biotech company with laboratories in Ithaca, New York. Agave specializes in micro and nanofabrication techniques, working primarily on the miniaturization of lab-scale instrumentation used for diagnostics and analytics. Agave receives the vast majority of its funding from government sources, including the Department of Defense (DOD), the Environmental Protection Agency, the National Institutes of Health, and NASA. Lexology reports that the government must serve Agave with its complaint within 30 days.

The whistleblower who brought the initial lawsuit was Agave’s former administrative office manager. The whistleblower alleged that Agave submitted false claims to DOD for “phantom labor and services which have never been provided, and for phantom expenses which have never actually been incurred in connection with any DOD contract.”

The lawsuit alleges that the government contractor represented to DOD that work performed by Agave would be billed by the hour and be performed by a mechanical engineer, an electrical engineer, and a technician. In reality, the people assigned to the DOD contracts were the wife and daughter of Agave’s owner, along with the live-in boyfriend of the daughter. The wife is a homemaker, the daughter a photographer, and the boyfriend a musician, according to the suit. Although the three were put on the Agave payroll, they did not actually work on the DOD contracts. The case further alleges that the DOD was billed for a down payment on a BMW, improvements to the company owner’s home, restaurant checks, and mobile phone bills.

The whistleblower claims that the fraud amounted to at least $15 million for each “Cost Plus Fixed Fee Contract” with the DOD.

Government Contractor Employees Notify Government of Violations

As in this case, government contractors that submit false claims for reimbursement on government contracts are reported frequently by insider employees who choose to come forward. Before notifying the government, collaborators should learn their rights under the False Claims Act. The experienced lawyers at Waters & Kraus provide whistleblowers with aggressive legal representation in government contractor fraud litigation. Contact us by email or call our qui tam attorneys at 855.784.0268 to discuss our practice representing relators in False Claims Act cases.

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