A former food and water supplier to U.S. troops stationed in Afghanistan has been fined $389,000,000 after a whistleblower came forward and turned in the supplier. Supreme Foodservice, the supplier, pleaded guilty to both civil and criminal charges. The settlement was announced in Philadelphia where prosecutors had charged the company with criminal fraud, conspiracy to commit major fraud against the United States and wire fraud.
Of those penalties, $288 million represents fines in the criminal case and the remaining $101 million represents the civil penalties in the whistleblower suit. That civil whistleblower case brought under the federal False Claims Act was against an affiliated business known as Supreme Group BV.
Supreme was awarded an $8.8 billion dollar contract in 2005, a contract that was extended twice. The company was required to supply food and beverages to U.S. troops in Afghanistan. As part of a scheme to defraud the government, Supreme fraudulently raised the price charged for its products. It did this by using a company in the United Arab Emirates that it controlled to mark up prices. By using a phony middleman, Supreme was able to disguise the true costs of their products.
The contract required Supreme to charge the supplier’s price for products. An internal email turned over by a whistleblower indicated that the company was sometimes marking up prices by 57% to 60%. Another email suggests that non-alcoholic beer was marked up by 125%!
When a would be whistleblower threatened to contact the government in 2007, prosecutors say that Supreme negotiated a “separation agreement” and agreed to pay EUR 400,000 provided that person remain quiet. Supreme was able to keep the scheme going another two years until March of 2009 when a former employee turned whistleblower contacted the Defense Supply Center of Philadelphia, a government agency, and reported that Supreme was using a phony middleman to mark up prices.
In announcing the settlement, U.S. Attorney David Memeger said, “These companies chose to commit their fraud in connection with a contract to supply food and water to our Nation’s fighting men and women serving in the desert. That kind of conduct is repugnant, and we will use every available resource to punish such illegal war profiteering.”
A whistleblower is generally entitled to receive up to 20% of the civil penalties received by the government. In this case the court awarded whistleblower Michael Epp $16,460,000 and additional $1,150,000 to Epp’s counsel.
The Supreme case represents one of the largest defense contractor fraud cases in recent years. It may just be the tip of the iceberg, however. In 2011 a congressional study estimated the government has suffered $31 billion in fraud and waste losses.
As this case points out, fraud against the government continues at unprecedented levels. This year the government paid whistleblowers $435,000,000 in whistleblower awards, a record amount. Much of those awards are related to healthcare fraud and cases involving banks and mortgage companies.
The whistleblower lawyers at Mahany & Ertl have successfully filed several, billion dollar claims. We help empower ordinary people to become successful whistleblowers, stop fraud and earn the maximum rewards possible. For more information, contact attorney Brian Mahany at or by telephone at (direct). All inquiries protected by the attorney – client privilege and kept in complete confidence.