Whistleblower suit leads to $12M false claims settlement by SAIC

Monday - 6/17/2013, 4:36pm EDT

Tim McCormack, partner, Phillips & Cohen, on "In Depth with Francis Rose

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SAIC, one of the largest federal contractors, will pay the government $11.75 million as part of a False Claims Act settlement regarding a first-responder training program.

The settlement stems from a lawsuit filed by Richard Priem, a 16-year SAIC employee and Army veteran. Priem alleged the company inflated contract costs by claiming the training program would be staffed by full-time SAIC employees. However, according to the lawsuit, SAIC instead used cheaper part-time employees and pocketed the difference.

The Weapons of Mass Destruction First Responder Program provides training to police, firefighters and other first responders in dealing with emergency situations involving explosives.

Priem, the former project manager for the training program, filed the lawsuit in February 2012, under the False Claims Act, which allows a private citizen to file suit on behalf of the federal government. The Justice Department later joined the case.

DoJ participation sent 'strong signal'

"When the government joins the case, that sends a strong signal to the defendant," said Tim McCormack, a partner at Phillips & Cohen, the law firm that represented Priem, in an interview on In Depth with Francis Rose. (Jared Serbu guest-hosted)

The government's participation also had practical implications. Often, the government and a False Claims Act whistleblower working in tandem can help speed a case along, McCormack said.

"We can do these cases on our own, but when you have the expertise and the resources of the government — with that subpoena power and things like that — that team approach is a lot more effective, frankly, than either side going it alone," he said.

DoJ typically joins about a quarter of lawsuits brought by whistleblowers.

Under the False Claims Act, Priem is eligible to receive between 15 percent and 20 percent of the settlement amount. The Justice Department said it has not yet determined Priem's share.

"The award serves as an incentive, although, frankly, I think a bigger thing that the False Claims Act provides is an avenue," McCormack said. "A lot of times, people who know that their company ... is engaging in fraud don't know how to bring it to the government's attention. A number of times a client or a whistleblower may call a hotline, but they never know what comes of it. The False Claims Act, because it allows a whistleblower to file a case and participate in the investigation, oftentimes gives a whistleblower an opportunity to make sure that they're being heard."

Last year, the Lockheed Martin Corporation, another large contracting company, agreed to pay the government more than $15 million to settle allegations that one of its contractors overcharged the government. Overall, DoJ recovered a record $4.9 billion from false claims suits in fiscal 2012 — with $3.3 billion coming from whistleblower cases.

SAIC is one of the top 10 federal contractors, according to data maintained on USASpending.gov. The company raked in $7.4 billion in prime contracts in fiscal 2012. The company did not immediately return a request for comment.

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