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November 11, 2015 Contractor Fraud

US Software Firms Pay $13 Million to Settle Claims of Unlawful Employment of Russians

Entering into a contract with the US Department of Defense naturally necessitates confidentiality, discretion, and, in some cases, top-level security clearances. Accordingly, government contracts generally contain clauses relating to employment practices the contractor must follow in order to protect national security and ensure that all workers on the project are qualified for the job. If a contractor fails to adhere to the requisite employment and labor practices set forth in the contract, it could find itself facing significant liability under the False Claims Act. In the context of government contract, the act applies to each and every instance in which an invoice or reimbursement claim is submitted for work that was performed in violation of the terms of the agreement.

In one recent False Claims Act settlement, two US-based software contractors — NetCracker Technology and Computer Sciences, Corp — have agreed to pay $12.8 million to settle allegations that each allowed foreign nationals and other unqualified individuals to work on various components of the contract, presumably compromising national security in the process.

The whistleblower in the case, a former employee at one of the firms, will receive $2.4 million due to his willingness to come forward.

Details of the allegations against NetCracker Technology and Computer Sciences, Corp.

Both companies entered into contracts with the Department of Defense to help manage its global telecommunications network. According to the lawsuit, for a period spanning from 2008 through 2013, both firms routinely employed Russian software technicians who did not hold any sort of American security clearance as required by the terms of the contract.

The component of the contract in question dealt with the DoD’s Defense Information Systems Agency (DISA) and specifically concerned various classified and unclassified voice networks including the Defense Switched Network and the Defense Red Switch Network. According to the complaint, Computer Sciences, Corp. sub-contracted some of this work to NetCracker, which then “delegated certain tasks to individuals located outside the United States who were not US citizens” and that “code developed outside the United States was then…placed in US Government computer networks.” Moreover, the complaint alleges that code specifically designed by Russian engineers was placed on American networks without any “testing for back doors, time bombs, or other malicious triggers.”

The lawsuit was partially unsealed in October 2015, at which point the government intervened for purposes of participating in the settlement. However, the portions of the pleadings pertaining directly to security matters remain under seal.