The commission of fraud against the U.S. military is, quite literally, the oldest trick in the False Claims Act book. This sort of misconduct gave rise to the implementation of the False Claims Act during the Civil War and continues to present itself as an issue in need of elimination. In today’s case, a recently-settled FCA lawsuit involving the provision of medical supplies to the U.S. Army recently took an interesting turn as the defendant is now blaming its attorneys for giving bad advice in how to proceed under the terms of the agreement.
Details of Case Against Berchtold Corporation
The FCA case mounted against government contractor Berchtold Corp. involves both civil and criminal elements and was originated by a courageous whistleblower who was formerly employed by the company as a government contracts agent. According to reports, Berchtold won a sub-contract from Lockheed Martin for the supply of medical equipment and surgical beds to military hospitals around the world. Under the contract, Berchtold was to offer the government the best price available for these items in order to keep costs low. According to the whistleblower, another agent for Berchtold repeatedly overcharged the government for these items, going so far as to create fake invoices from bogus suppliers to help avoid detection. All in all, it is estimated that Berchtold overcharged taxpayers by as much as $1 million.
The agent implicated in the fraud ultimately pled guilty to several criminal charges stemming from the misconduct. Berchtold eventually settled earlier this March for $3.6 million. The relator earned $874,000 for her role in bringing the defendant to justice. She subsequently filed a wrongful termination and retaliation suit against Berchtold, which is scheduled for later this year.
Berchtold Passes the Buck, Blames Law Firm for Bad Advice
Berchtold lodged a lawsuit against its former law firm, alleging it gave bad advice when counseling the company about how to proceed under the contract with the government. Specifically, Berchtold asserts it inquired as to whether its intended purchase order for the goods would violate any terms of a current contract it held with the U.S. General Services Administration. Presumably, Berchtold inquired as to whether its “best prices” requirement would be fulfilled given its intended price quote for the medical equipment. The law firm allegedly assured Berchtold its price quotes under both contracts were not in conflict and would not give rise to any liability under the “best prices” contract term.
Despite the law firm’s attempt to dismiss the case based on a statute of limitations issue, its motion was denied and Berchtold intends to move forward with its cause of action, which seeks the entire $3.6 million, over $800,000 in commissions and punitive damages from the defendant.
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