Defense firms in the Washington, D.C. area and throughout the country contract with the government to the tune of billions of dollars a year, providing services and skills ranging from private protection for diplomats to high tech equipment for the military. With such vast amounts of money at stake, facts have been fudged and services misrepresented. At one point, D.C. area defense contractors developed such a bad reputation for overcharging and fraudulently billing the government that they earned themselves the nickname Beltway Bandits. Thankfully, the False Claims Act can be used to shut down fraud across the defense industry.
Several years ago, the Justice Department settled one of the largest lawsuits against a private contractor, ever, over the use of faulty parts in government satellites, recouping $325 million with information from an outside researcher that the contractor knew about the defective parts.
An employee at a private research company conducted research on microelectric parts on satellites that had been sold to the government for use in satellites. His research clearly demonstrated that the parts would fail when operated under high electrical currents – such as when used in satellites. But when a government satellite in orbit using the parts experienced critical failures, the company that had sold them not only didn’t own up to the problem, but charged the government millions to conduct an investigation. The company repeatedly denied that it knew or should have known of the potential problem with the parts.
The researcher filed a whistleblower lawsuit under the False Claims Act. The government’s investigation concluded that the company had failed to properly test parts, and that defective parts were installed in satellite equipment. The investigation further concluded that the company had made misrepresentations about, and concealed material facts regarding, the reliability of the parts.
The case ultimately settled. The company agreed to pay $325 million in damages. For his efforts in bringing forth the information and prosecuting the case for seven years, the researcher received $48.75 million.