Friday, June 28, 2013

Government Claims Under the False Claims Act

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, to the Sixth Circuit, and then back down to 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:

[1] Delery, Stuart, Acting Assistant Attorney General for the Civil Division. As quoted on Department of Justice release 13-696,

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