There are a whole lot of federal regulations that pertain to defense contracting, such as the Federal Acquisitions Regulations, commonly known as the “FAR”. There is also the DFAR, the Defense Federal Acquisitions Regulations, which set out parameters for proper procedures with regard to defense contracting.
In addition, it is illegal and actionable for contractors to commit fraud. That all falls under a possible False Claims Act violation, which would be 31 U.S.C. section 3729-3733 which can be used to hold a contractor liable for submitting or causing the submission of a false claim or conspiring with others to do so for example.
Given that defense contracting is an international issue, the Foreign Corrupt Practices Act might come into play to some extent. We have seen that in respect to some recent scandals, and it seems some other scandals involved that dealt with foreign contracts. There are inferences of using bribery to get business, so that could also raise the question of the Corrupt Practices Act. Generally, of course, it is the False Claims Act that is involved. A knowledgeable attorney who has experience with the False Claims Act and defense contractor fraud could help to explain these laws in-depth.
Types of Defense Fraud Cases
For many defense contractor fraud claims involving the False Claims Act, they often involve rather large contracts even by government standards. You see a lot of cases with respect to double billing for services. I had a case once where the contractor was billing lots of time to his defense contracting jobs, but the people were actually working on private sector projects. They were accused of financing a private-sector project and private sector business by effectively billing time to defense contracting that they had. There are a lot of cases like that because the amount of people involved is large and very difficult to keep track of, so it is easier to pad the bill.
There are also cases involving defective products being sold to the defense industry. Sometimes the defense industry will have very strict specifications with respect to the type of product that’s supposed to be built. It is supposed to be built to certain qualifications to do certain kinds of things. For example, if a contractor is knowingly substituting inferior metal for what is required in an airplane, and that was to make the airplane unsafe to fly, that would be a type of a false claim. Those are the kinds of fraud you see the most often: knowing about defects in the product that’s produced and essentially padding the bill, as in charging for additional time, services, or materials that either are not produced or are not needed.
How Falsifying Records Could Be an Example of Defense Contractor Fraud
You see a lot of those cases with respect to the quality of something that is being built. To take the example of an airplane again, if an airplane engine is supposed to do “X”, or be up to some kind of standard, all that is going to have to be confirmed through inspections. Somebody has to look at the metal and x-ray the metal and sign off on it is being up to specifications. Sometimes those documents get faked, and that can be a difficult case to prove because you have to show that everybody knew that it was not up to specifications. You have to have somebody on the inside who knows they were faking the specifications or faking the inspection of those specifications.
As another example, if you are submitting a time card and you know the time card does not accurately reflect the hours worked, that is considered a false record. A false record violation then leads you to exploring a potential false claim case, looking at what the damages are, and how much the government ended up paying that it should not have paid. There are great defense contractors that do honest and good work for the government, but those are the type of frauds that you do see every once in a while with respect to this industry.
What to Do After Witnessing Defense Contractor Fraud
The first thing someone who wants to file a False Claims Act case regarding defense contractor fraud should do is get counsel. There has been a big push by the people who represent big business to say that individuals should report it internally. Before anyone takes any action, however, they should talk to an attorney about what their rights are.
I recently received a call from a fellow attorney who was distraught because his client acted before talking to an attorney and told the government about a serious fraud, but did not file anything. The government filed a case, so the government is going to collect money, and that the client does not have a way to share in the recovery.
In light of all that, the first thing someone should do is talk to an attorney. They can help them and advise them as to what their rights are under myriad different laws that might protect them if they want to report. Or they may be able to make a report to the government under a whistleblower reward law. Either way, people should not go this alone. The pressure and the stress associated with going through something like this without legal advice is difficult. Most lawyers will talk to someone, at least for some initial advice, without charging much.
Strategies for Whistleblowers
I generally file cases under the Federal False Claims Act. In my experience, people want to bring people to justice, and “justice” has many different definitions.
Under the Federal False Claims Act, you’re suing on behalf of the government, the government is attempting to recover monetary damages and civil fines as a result, and the whistleblower gets a share of what the government recovers. Some people do not define that as “bringing somebody to justice.” Maybe their internal mindset is that the government should be criminally prosecuting people, but that’s up to the federal government, not the whistleblower. As individuals, we facilitate providing the information that the government needs to pursue the action.
The False Claims Act provides for damages and civil fines, and that is about as much justice as an individual person can get. Hopefully, through that process, the government will work on the case and as a result, the defense contractor or the party you are suing will change their practices. Usually, the most upsetting part of it is not the amount of money that is being wasted but the safety or quality issues.
How Long Do Whistleblower Cases Typically Take?
There is no set time, but they do take a while. I’ve had cases be resolved within two to three years, and I have been involved in a case that’s was ongoing for more than ten years.
There are a lot of reasons why these cases can take so long. However, the courts are now getting less tolerant and less willing to grant extensions of time for investigations. On the other hand, there are complicated cases for the government to investigate and the government does not have endless resources to do so. The False Claim Act and defense contractor fraud investigations that they conduct can take quite a while, and that can slow things down.
Even when they are done with their investigation and they have decided whether or not they are going to join the case, you are starting the litigation and that whole process takes a long time. If you file a whistleblower case, you have to understand that you are in it for a least a few years.
Why Are the Courts Granting Less Time for Investigations?
The statutory language is pretty simple. The statutory language says the government has 60 days, and then they can extend the case “under seal,” meaning “in secret,” so that they can conduct their investigation in secret “for good cause.” Generally, the courts will grant those extensions for a year or two. After that, some courts have become reluctant to grant such extensions.
If the United States Department of Justice goes to court, they provide grounds for continuing the investigation and why they need more time. It is rare for them not to get more time, but judges do not like having cases on their dockets that are not being pursued. They want resolution. There is nothing malicious or bad about that. The government only has so many investigators, and some of these cases are really complicated, so it is a natural problem.
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