Yesterday hunters and their loved ones flocked to big sporting gear stores hoping to find Black Friday deals on rifles and gun accessories. An Ann Arbor, Michigan manufacturer of gun sights isn’t celebrating, however. This year Black Friday has a different meaning for EOTech, a company that manufacturers custom weapon sights for the military and federal law enforcement officers. On Monday EOTech settled a False Claims Act suit for $25.6 million.
EOTech is a division of L-3 Communications, a well known defense and law enforcement contractor. Prosecutors say that custom designed holographic gun sights made by EOTech were defective. Worse, the company hid that fact for years.
Federal False Claims Act
The False Claims Act is a fraud statute. Dating back to the U.S. Civil War, the law allows private individuals to file lawsuits on behalf of the government against companies and individuals that defraud the government and taxpayers. Whistleblowers who file these suits can receive awards of up to 30% of whatever the government collects.
The law allows both triple damages and penalties of up to $11,000 per each false claim submitted to the government. Each weapon site invoice submitted by EOTech is a separate claim.
The government’s investigation revealed that temperature variations and humidity could cause the site made by EOTech s to drift. In a combat situation, that defect could be fatal.
Simply having a defective product does rise to the level of fraud. Detractors of the False Claims Act, such as the U.S. Chamber, claim that any mistake can cost an otherwise honest contractor millions of dollars. Not true.
The case against EOTech became a False Claims Act case because the company knew of the defects for years yet never disclosed the problems to the government despite a legal obligation to do so. For years, Special Forces, Homeland Security and the FBI relied on these sights in life or death combat situations yet the company never told them their product was defective.
In settling the case the company did not admit to any wrongdoing and said it was cooperating fully with the government.
The case was prosecuted in the Southern District of New York, a district known for its tough stance on government fraud.
To become a whistleblower under the False Claims Act, one must possess original source, inside information about fraud involving government funds or programs. Generally only the first to step forward is rewarded meaning time is of the essence.
To claim an award, one must first retain a lawyer and file a sealed lawsuit in federal court. The case remains under wraps and secret while being investigated by the government. Ultimately the government must decide whether it wishes to take over the case or let the whistleblower and his or her counsel prosecute the case in the government’s name.
Thinking about becoming a whistleblower? Call us. We have helped recoup billions of dollars for taxpayers and have collected over $100 million for our clients.
MahanyLaw – America’s False Claims Act Whistleblower Lawyers