The U.S. government has settled False Claims Act allegations against W.W. Grainger Inc., a national hardware distributor with headquarters in Illinois. Grainger consented to pay the government $70 million. The Department of Justice made the following allegations against Grainger:
Grainger contracted to sell supplies and hardware products to various government customers by means of the General Services Administration’s Multiple Award Schedule (MAS) program. Under the program, contractors are required to reveal their commercial pricing practices to allow the government to negotiate the best possible terms. In exchange, contractors are able to sell their products to large government purchasers under a streamlined process. During an audit of Grainger’s MAS contract, the General Services Administration (GSA) discovered that Grainger breached its contractual obligations by failing to give the GSA the required pricing information about discounts Grainger offered to other customers. As a result, the government was paying more for certain items than it should have.
In addition, Grainger had two contracts with the U.S. Postal Service for maintenance and sanitation supplies. Under the terms of those contracts, Grainger was obligated to provide USPS with “most-favored customer” pricing. The USPS was supposed to get the best discount that Grainger gave to its commercial customers. In an investigation by USPS Office of Inspector General (OIG) auditors, it was learned that Grainger did not consistently observe its contractual obligations on pricing, however. As a result, USPS payed higher prices for the supplies than it should have.
Government Contractor Misconduct Includes “Most-Favored Customer” Violations
Government contractors that violate the federal False Claims Act cost U.S. taxpayers millions of dollars. Sometimes contractors cheat the government by delivering products that don’t measure up to quality standards. Other times, companies contract to sell products to the government at the best price given to any other customer, but then wind up billing the government higher prices anyway. No matter the violation, government contractor employees are the ones most likely to learn of the improper activity and notify the government. These company insiders help everyone by keeping government contractors honest.
Employee Insiders Use False Claims Act to Fight Government Contractor Misconduct
Employee insiders are well positioned to discover government contractor misconduct and notify the government when it occurs. Contractor employees may be given financial incentives to cheat the government. Accounting personnel may be instructed to engage in suspicious billing practices.
To encourage whistleblowers to collaborate with the government, the qui tam provisions of the federal False Claims Act allow an informant to file a lawsuit on behalf of the government and keep a share of any money received.
Before coming forward, tipsters should know their rights. The lawyers at Waters & Kraus are prepared to give government collaborators the skilled legal representation they need. Contact us or call our whistleblower attorneys at 800.226.9880 to learn more about our government contractor fraud practice and how we can help employee insiders.