While not true in every case, some cases under the False Claims Act take several years to settle or reach a verdict. While you should not necessarily expect this in your case, legal maneuvering by large corporations on the other side of a False Claims Act case often involve implementing any strategy possible to avoid liability and escape the government’s allegations. In one recent case spanning 16 years, a Florida-based company has escaped paying damages in its FCA case, but is still on the hook for civil penalties despite a finding that the U.S. government did not lose any money as a result of the false claims.
Details of Case Against MWI International
The facts of today’s case involve a contract for the sale and installation of irrigation pumps to various states located in Nigeria. According to the allegations, defendant MWI International was awarded the contract for the work in the 1990’s and sold $82 million worth of equipment to Nigeria. Pursuant to this contract, it also paid excessive commission rates to its Nigerian sales representative responsible for securing the contract. The government contract placed a cap at a 30 percent commission rate, which was far exceeded, according to a whistleblower complaint filed in 1998 by a former employee. More specifically, the Import-Export Bank loaned Nigeria $73.4 million to finance the irrigation systems while the sales agent was reportedly paid $25 million for his role in the deal.
The federal government was unsuccessful in its attempt to advance a criminal case against MWI and opted to intervene in the False Claims Act case filed in 2002. The case dragged on for nearly a decade and was finally brought to trial late last year. According to the government, it was owed the full amount of the loan — $73.4 million. The jury saw differently, however, and decided that the government’s damages were just above $7 million – representing the 58 separate false submissions for payment made pursuant to the unlawful arrangement.
The judge further adjusted the amount to ultimately conclude that MWI actually owed nothing in damages. The court first tripled the jury’s damages amount according to the treble damages provision in the FCA: $22.5 million. It then added the amount of the loan to the amount of interest that had accrued over the past 16 years to conclude that MWI was entitled to a $108 million offset of damages. As a result of the $108 million offset, MWI — who was technically found liable for fraud under the FCA — was found to owe nothing in actual damages to the Bank. To summarize, the court determined that MWI had actually caused financial harm to the Import/Export bank, but the Bank’s financial interests and bottom line were protected by its income from the repayment of the loan by the Nigerian government, which amounted to well over the $22.5 million assessed by the jury. Therefore, the court court not assess damages against MWI for harms that had been repaid and rectified. The District Court judge concluded that “the government has been ‘made completely whole’ because of Nigeria’s repayments….”
Nonetheless, MWI remains responsible for $580,000 in civil penalties.
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