Recently the United
Technologies Corporation (UTC) made national headlines in the defense industry, but
this was not an article you would take home to show mom! UTC was penalized to
the tune of $473 million for failing to include in a price proposal “historical
discounts” that it was accustomed to receiving from suppliers.
The offense occurred in the
last half of the 1980s when UTC was performing on a contract for F-15 and F-16
aircraft engines. Nearly a decade later in 1999 the Government discovered these
discrepancies and brought a suit against UTC. The case made its way through a Federal District Court Federal District Court
When all was said and done
the District Court awarded the Government $364 million in damages under the
False Claims Act and an additional $109 million in damages under common law
claims. To make matters worse for UTC, the Court will also calculate
prejudgment interest to be levied against UTC that will likely bring the total
north of $500 million.
So what is one to learn from
this? Well, in the words of the Department of Justice (DOJ): “The department
will relentlessly pursue justice against those who knowingly submit false
claims to the government and abuse the public contracting process. It is vital
that companies who do business with the government provide full and accurate
information, and if they do not, they will pay the consequences.”[1]
The DOJ is looking for
violations, and even actions a decade or more past may be brought to light. To
ward off these actions and comply with the law, it is not enough that you tell
the Government everything; you must also review the historical models of your
business and ensure that you are disclosing any discounts that you can expect
to receive. In short, discipline in evaluating price and writing a proposal
will go a long ways when complying with the False Claims Act.
To see a complete list of
recent enforcements please visit the DOJ’s website here: http://www.justice.gov/nsd/docs/export-case-fact-sheet.pdf
[1] Delery, Stuart, Acting
Assistant Attorney General for the Civil Division. As quoted on Department of
Justice release 13-696, http://www.justice.gov/opa/pr/2013/June/13-civ-696.html
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