Two Recent False Claims Act Settlements Reveal Rampant Fraud in Defense Contracting

Two recent settlements under the False Claims Act reveal that not much has changed since the FCA got its start during the Civil War. Unethical defense contractors continue to exploit the U.S. defense budget by knowingly and intentionally billing for services, products, and goods that were either never delivered or were delivered at a much-reduced rate. Under the FCA, contractors caught engaging in this practice could face up to triple damages per violation, as well as a permanent prohibition from participation in government contract work.

U.S. ex. rel. Lankford v. MPRI, Inc.

The first of today’s military FCA cases involves a defense contractor supporting the Army in its efforts in Afghanistan. MPRI, Inc., a worldwide provider of military logistic services serving both the United States and foreign governments, is alleged to have over-billed the government for services related to the Army’s efforts to design and build the new Afghan Defense Sector. Under its contract, MPRI, Inc. was to help the Afghani government with developing a national security force comparable to other Western defense agencies, including support for financial management and implementation of core systems.

According to allegations, MPRI submitted several invoices for false labor charges to the Department of Defense between 2007 and 2009. The whistleblower in this case was a former finance officer for MPRI working in Afghanistan and is set to receive $567,000 of the $3.2 million settlement amount.

United States ex rel. Hai Ba Trung v. Vector Planning and Services Inc.

The next defense-related FCA case involves the U.S. Navy and military consulting firm Vector Planning and Services, which is based in Chantilly, Virginia. This case also involves inflated invoices for payment, but pertains to technology services offered to the U.S. Navy involving engineering and IT support.

Under the terms of its contract with the Navy, VPSI was permitted to bill for indirect overhead costs incurred pursuant to its work for the Navy’s operations. According to the complaint, VPSI unlawfully inflated its indirect costs by including several direct costs in the equation for which it had already received payment. VPSI was also alleged to have billed for IT services never performed, which is a clear and obvious violation of the FCA.

The whistleblower’s position with regard to the parties is unclear from the Department of Justice press release; however, he stands to receive $1.28 million for his role in bringing this type of unlawful military fraud to light. VPSI has agreed to settle the matter with the government, without admitting liability, for a sum of $6.5 million. The Naval Criminal Investigative Service was able to investigate and settle this matter with the assistance of the Civil Division of the Justice Department, the Civil and Criminal Divisions of the U.S. Attorney’s Office for the Southern District of California, the Defense Criminal Investigative Service, and the Defense Contract Audit Agency.

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