Virginia-based Science Applications International Corporation (SAIC), which is now known as Leidos Holdings, Inc., has agreed to pay $1.5 million to finally settle False Claims Act allegations originally alleged nearly ten years ago. The case involves allegations of unlawful conflicts of interest with regard to a contract held between SAIC and the U.S. Nuclear Regulatory Commission from 1992 through 2000. This recent settlement comes on the heels of a settlement reached last year between the U.S. government and SAIC involving inflated prices and charges for training services provided to first responders to terrorism attacks.
Background of the Case Against SAIC
The original False Claims Act lawsuit filed against SAIC began in 2005 when the U.S. Department of Justice brought a suit against the corporation with regard to several of its contracts. At the time, SAIC was working with the government not only to provide scientific and technical services to the Nuclear Regulatory Commission, but to help determine the effectiveness of a proposed law that would permit the release or recycle of certain hazardous materials containing low levels of radioactivity. More specifically, SAIC was tasked with helping the NRC determine if the levels of radioactivity present in these materials would present a risk to either human health and/or the environment. Pursuant to the contract with the NRC, SAIC was prohibited from engaging in contemporaneous business arrangements that could be considered a conflict of interest with the government.
The government opted not to proceed with the proposed law. However, it alleged that during the time of the contract, SAIC was maintaining several lucrative business relationships with other companies with a direct financial interest in the outcome of the proposed legislation. During the course of the contract, SAIC insisted it was not engaging in conflicted business relationships – thereby triggering possible False Claims Act liability. In sum, the government alleged that SAIC had a direct financial interest in the outcome of the rulemaking sessions.
Refusing to settle the matter, SAIC forced the case to trial in July, 2008. After five weeks, the jury concluded that SAIC had in fact violated the False Claims Act by engaging in self-interested dealings with other companies during the time it was working with the Nuclear Regulatory Commission. SAIC appealed the verdict to the U.S. Court of Appeals for the District of Columbia, and it was affirmed in part. The appeals judge did, however, remand the case for a new trial on several counts after finding that certain aspects of the jury instructions were in error. In an effort to avoid further litigation on the issue, SAIC has finally agreed to settle the matter for $1.5 million.
In response to the settlement, Acting Assistant Attorney General Joyce R. Banda said in a statement, “Organizational conflicts of interest undermine the integrity of the federal procurement process….Even more importantly, where the conflicts relate to a government program aimed at protecting the public health, work biased by conflicts of interest can put the public’s health at risk. This resolution, reached after a long and difficult litigation, demonstrates that the Justice Department will ensure that contractors who put their financial interests above the good of the American public will be held accountable.”
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If you are considering a False Claims Act lawsuit and have knowledge of possible fraud occurring under a government contract, please contact Berger Montague today.