The New York based company, Corning Incorporated, recently settled a False Claims Act lawsuit for $5.65 million dollars, according to an official statement by the Department of Justice. The settlement resolves allegations that Corning submitted numerous false claims to federal government agencies in order to receive reimbursement for laboratory research products such as lasers and optic fiber.
Corning develops, manufactures, and sells components that enable high-technology systems for consumer electronics and sells mobile emissions control, telecommunications and life sciences. Corning has several divisions; Display Technologies, Environmental Technologies, Telecommunications, Life Sciences and Specialty Materials. The False Claims Act lawsuit specifically stems from the Life Sciences division. The Life Sciences department of Corning offers a range of innovative, high-quality tools and solutions for research and bioproduction.
According to the allegations, Corning entered into a contract with the United States government in 2005 to sell the federal government agencies laboratory research products via the General Services Administration’s Multiple Award Schedule program.
When a company enters into a contract with the Multiple Award Schedule program, it essentially agrees to a contract with the General Services Administration (GSA). A Multiple Award Schedule program allows companies to sell products directly to government agencies. For the luxury of gaining access to such a vast number of government purchasing options, the company must disclose its own commercial pricing policies and agree to all the contract stipulations.
“Contractors need to be honest and follow through with their promises to the federal government – or pay the consequences,” said Brian D. Miller, Inspector General for the General Services Administration.
Details of the False Claims Act Lawsuit
The original qui tam, or whistleblower, lawsuit in the Corning case was filed by Kevin Jones under False Claims Act protection. Jones revealed first-hand knowledge of the fraud, as he was a former Corning Life Sciences sales representative. According to the information provided by Jones, Corning failed to disclose its commercial pricing policies or practices while under contract with the GSA. In addition, Corning failed to provide accurate discount pricing policy information during the course of the contract’s administration.
According to Jones, Corning did not provide the GSA with current, complete or accurate data about its sales practices, including the commercial customer discounts they provided. Further, Corning did not comply with a price reduction clause of the GSA contract when they failed to accurately disclose discount information. In fact, the discounts Corning provided to commercial consumers were actually greater than the discounts that were revealed to the GSA.
Corning also violated the False Claims Act by refusing to pass the discounts that were given to commercial customers on to their government customers. Due to these fraudulent activities, the U.S. government failed to receive the proper discounts when purchasing laboratory materials and paid much more than commercial consumers when purchasing Corning products.
Settlement and Reaction
Under the False Claims Act provisions, private citizens may bring suit for false claims on behalf of the United States. Whistleblowers, also known as qui tam “relators,” who provide inside information about fraudulent activities are also entitled to receive a portion of any monetary recovery the government receives. The relator in this case will receive a reward of $904,000 for alerting the government as to the fraud.
“This settlement shows that the United States expects all contractors participating in the MAS program to make full and accurate disclosures of their commercial pricing practices to the GSA and to act in good faith when dealing with the United States government,” said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Department of Justice’s Civil Division. “The failure to make full and accurate disclosures material to the government’s contracting processes will not be tolerated.”
“At a time when our political leaders are making tough choices about how to rein in federal spending, government contractors need to understand that they will not get away with overbilling the taxpayer,” said U.S. Attorney for the District of Columbia Ronald C. Machen Jr. “Companies that want to take advantage of federal contracts are obligated to deal openly and fairly with their government customers. When contractors fail to meet their obligations, we will hold them accountable and seek to make the taxpayer whole.”