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January 7, 2015 Military Contractor Fraud

Supreme Foodservice Pays $434 Million to Settle False Claims Act Allegations

In another military fraud case, Swiss-based Supreme Foodservice has agreed to pay a total of $434 million to the United States following allegations of fraud under the False Claims Act. The lawsuit was commenced after several employees raised concerns over the ownership structure of Supreme Foodservice, alleging it was using shell companies to “double dip” from lucrative U.S. government contracts for food service to military members serving in Afghanistan. While several whistleblowers have remained anonymous, one involved party will reportedly receive $523,000 for his willingness to come forward. Another whistleblower who was involved on the executive level received over $10 million for exposing the fraud.

Details of fraud scheme involving Supreme Foodservice

The alleged fraud involving Supreme Food occurred under an $8.8 billion contract the company held with the U.S. Defense Logistics Agency. Specifically, Supreme Foodservice was tasked with supplying food and water to U.S. troops stationed in Afghanistan. Allegedly, the company was consistently inflating the price of food up to 60 percent over what it paid to procure the goods, resulting in subsequent false billings for reimbursement from the federal government.

Allegations against Supreme Foodservice reveal that it was exclusively working with a for-profit intermediary known as Jamal Ahli Foods Company (JAFCO). In reality, however, Supreme Foodservice wholly owned JAFCO, and set up the company as a sham in order to turn a greater profit margin. Internal emails revealed that employees of Supreme Foodservice were told never to mention JAFCO for a “variety of reasons.” In another email, executives mentioned the 60 percent profit margin for goods supplied under the contract, and urged employees not to go any higher – so as to not invite scrutiny from the government.

Settlement figures

Supreme Foodservice was required to pay $434 million to settle several components of the fraud case. It refunded the government $48 million for inflated food costs, along with another $38 million for overcharging the government for bottled water. It also paid $232 million in criminal fines, fees, and penalties. The whistleblower portion of the lawsuit settled for $101 million, and the company paid an additional $45 million for misdeeds involving the supply and delivery of fuel to the Kandahar Air Field.

Government’s response

In one of the largest military settlements on record, government officials are understandably pleased to recover this amount on behalf of taxpayers. The U.S. Attorney’s Office said in a statement:

“These companies chose to commit their fraud in connection with a contract to supply food and water to our nation’s fighting men and women serving in Afghanistan….That kind of conduct is repugnant, and we will use every available resource to punish such illegal war profiteering.”

A Supreme Foodservice spokesperson said in a statement:

“We accept full responsibility for and deeply regret our past actions. We have implemented new compliance mechanisms and strengthened our internal processes….We now have some of the most rigorous controls in the industry. We recognize that to re-earn trust, we must always act with integrity.”

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