Two former executives of CyTerra Corporation became whistleblowers and are now slated to receive $361,000 for their efforts in uncovering pricing problems with their former company. CyTerra manufactures portable land mine detectors for the U.S. military. Earlier this month federal prosecutors settled with the company for $1.9 million.
In 2003, the Army contracted with CyTerra to build portable detectors designed to find land mines. Under the Truth in Negotiation Act, the company was required to let the military how much time it took make these devices. While businesses are entitled to make a profit, the government has an obligation to insure that it is not being overcharged. When the military is overcharged, taxpayers wind up footing the bill.
By not providing accurate production data, the government paid too much for CyTerra’s product.
In announcing the settlement, U.S. Attorney Carmen Ortiz said, said “Contractors who negotiate with the government must be scrupulous in their dealings with the government. Government contractors should be on notice that the requirements of the Truth in Negotiations and False Claims Acts will be enforced.”
The case originally came to light after two former company executives came forward and filed a sealed complaint against CyTerra. Defense contractor overbilling often only comes to light when whistleblowers come forward and report the fraud. The federal False Claims Act allows whistleblowers with original source information to earn an award of up to 30% of whatever is collected by the government. Because the government has the right to triple any damage awards, whistleblowers frequently can earn huge amounts just from their information.
In this case, the two whistleblowers had plenty of information. Kevin Bartczak was CyTerra’s former CFO and Keith Aldridge was the company’s former controller and treasurer. If that isn’t enough, Aldrich previously worked as defense contractor auditor.
Shortly after Bartczak was hired in 2005, he noticed the company was claiming twice as much time than necessary to assemble the mine detectors. After bringing the overbilling to light, Bartczak was fired. A similar fate met Aldrich a few months later. After being fired, the two men became whistleblowers and reported the fraud. Under the federal false claims act, the two men are entitled to a percentage of what the government was able to collect. In this case, the men earned approximately 20% of the $1.9 million paid by CyTerra to the government.
The federal false claims act was enacted by Congress during the Civil War. The law is designed to empower ordinary citizens to fight fraud against the government; fraud that costs taxpayers billions each year.
Whistleblowers must be able to demonstrate that they have original knowledge of the fraud and that there is a loss to the government or a federally funded program. The latter provision has enabled whistleblowers to collect hundreds of millions from lenders and banks who were writing bad loans. Because the government took over Fannie Mae and Freddie Mac during the mortgage crisis, federal tax dollars are at stake.
From violations of the Buy America Act to defense contractor fraud (does anyone remember the Pentagon $400 toilet seat scandal?) to healthcare fraud, the false claims act is a power tool to combat fraud. As more and more workers get tired of constant fraud and corruption, we expect to see more whistleblowers come forward.
If you wish to become a whistleblower and have inside, non public information about fraud against the government or involving federally funded programs, give us a call. We represent whistleblowers and help them stop fraud and collect the largest award possible.
Mahany & Ertl – America’s Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Minneapolis, Minnesota; Portland, Maine and San Francisco, California. Services available in many jurisdictions.
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Posted by Brian Mahany, Esq.