Financial Fraud

A settlement has been reached in a whistleblower class action lawsuit brought against  CH2M Hill Hanford Group Inc (CHG) and its parent company, CH2M Hill Companies Ltd (CH2M Hill). They are accused of engaging in years of widespread time card fraud.

The settlement consists of CH2M Hill paying $16,550,000 to resolve its civil liability under the False Claims Act. In addition, CH2M Hill entered into a Non-Prosecution Agreement with the United States Attorney’s Office for the Eastern District of Washington to resolve its criminal liability. Under the terms of that agreement, CH2M Hill will refund an additional $1.95 million in wrongfully obtained profits, dedicate $500,000 to foster increased accountability at the Hanford Site, and pay for independent monitoring to ensure that CH2M Hill takes adequate corrective actions. To date, eight individuals have pleaded guilty to engaging in the same time card fraud scheme and conspiracy that CH2M Hill has now admitted CHG itself was a conspirator in.The whistleblower did not receive any financial recovery in this settlement due to the fact that they were convicted based on their role in the scheme.

The charges stem from an initial whistleblower lawsuit filed in June 2009.  The United States alleged and CH2M Hill and CHG have agreed that CHG committed federal criminal violations, defrauding the public by engaging in years of widespread time card fraud.

Between 1999 and 2008, CH2M Hill had a Department of Energy contract to manage and clean 177 large underground storage tanks containing mixed radioactive and hazardous waste at the Department of Energy’s Hanford Nuclear Site in southeastern Washington (the Tank Farms Contract). The Hanford Site was used for the production of nuclear weapons during World War II and the Cold War. According to the statement of facts agreed to by the United States and CH2M Hill, CHG hourly employees involved in the cleanup routinely overstated the number of hours they worked, and CHG management condoned the practice and submitted inflated claims to the Department of Energy that included the fraudulently claimed hours.

Specifically, CH2M Hill and the United States agreed that CHG’s hourly workers “consistently refuse[d] to perform any overtime work unless that overtime was offered, or ‘called out,’ in 8 hour blocks.”  As stated in the agreed statement of facts, “[t]he inability of CHG’s upper management to secure the necessary overtime volunteers for various jobs threatened CHG’s ability to complete various projects linked to the Tank Farms Contract performance incentives. This in turn threatened CHG’s ability to earn certain fees, and therefore profits under the Tank Farms Contract.” According to the agreed statement of facts, the inability to obtain performance based incentives would have directly impacted the personal corporate bonuses of certain members of CHG’s upper management. Consequently, “certain members of CHG’s upper management, certain direct supervisors of the hourly workers, and certain other supervisory personnel, accepted the practice of hourly workers only working until the particular overtime job was completed, leaving Hanford, and falsely claiming a full 8 hours even when the job took less than 8 hours,” according to the agreed statement of facts.

Unfortunately, the widespread time card fraud at CHG was not limited to overtime abuse and had occurred for many years, in some instances even pre-dating the Tank Farms Contact, as stated in the agreed statement of facts. Further the agreed statement of facts provides that, “[c]ertain members of CHG’s upper management, certain direct supervisors of hourly employees, and other certain supervisory personnel, did not discipline, formally or informally, CHG hourly workers for routinely engaging in known time card fraud. In fact, certain of CHG’s direct supervisors of hourly workers engaged in patterns designed to avoid the detection of the routine time card fraud by law enforcement and internal auditors.” In this manner, as CH2M Hill agrees, CHG “knowingly, willfully, and with intent to defraud, facilitated CHG’s hourly workers routinely getting paid for hours they did not work and combined, conspired, and agreed with CHG hourly workers to accomplish the same, all at the sole expense of the citizens of the United States.”

A settlement has been reached in a whistleblower class action lawsuit brought against Corning Incorporated who is accused of knowingly presenting false claims to the United States for laboratory research products sold to federal agencies through Corning’s Life Sciences division. 

The whistleblower will receive $904,000 of the government's recovery.

The government's complaint was issued in relation to a contract entered into by Corning in 2005 to sell laboratory research products to federal government entities through the General Services Administration’s (GSA) Multiple Award Schedule (MAS) program. The MAS program provides the government and other General Services Administration authorized purchasers with a streamlined process for procurement of commonly-used commercial goods and services. To be awarded a MAS contract, and thereby gain access to the broad government marketplace and the ease of administration that comes from selling to hundreds of government purchasers under one central contract, contractors must agree to disclose commercial pricing policies and practices, and to abide by the contract terms.

The settlement resolves allegations that, in contract negotiations and over the course of the contract’s administration, Corning knowingly failed to meet its contractual obligations to provide GSA with current, accurate and complete information about its commercial sales practices, including discounts offered to other customers, and that Corning knowingly made false statements to GSA about its sales practices and discounts . The settlement further resolves allegations that Corning knowingly failed to comply with the price reduction clause of its GSA contract by failing to disclose to GSA discounts Corning gave to its commercial customers when they were higher than the discounts that Corning had disclosed to GSA, and by failing to pass those discounts on to government customers. The United States alleged that, because of these improper dealings, it received lower discounts and ultimately paid far more than it should have for Corning products.

A settlement has been reached in a whistleblower class action lawsuit brought against CDW-G, a wholly-owned subsidiary of Illinois-based CDW Corporation.  CDW-G is accused of submitting false claims in connection with a U.S. General Services Administration (GSA) contract.

The whistleblower will receive $1,585,892.56 of the total recovery.

The initial whistleblower lawsuit was filed in January 2005.  The government allegations were that during the period 1999 to 2011, CDW-G improperly charged government purchasers for shipping, sold products to the United States that were manufactured in China and other countries that are prohibited by the Trade Agreements Act, and underreported sales in order to avoid paying GSA its “Industrial Funding Fee,” a fee based on total contract sales that is designed to cover GSA’s costs of contract administration.

A settlement has been reached in a whistleblower class action lawsuit brought against American Commercial Colleges Inc (ACC) who is accused of falsely certifying that it complied with certain eligibility requirements of the federal student aid programs.

According to the settlement, ACC will pay the United States $1 million, plus interest, over five years, and could be obligated to pay an additional $1.5 million under the terms of the agreement. The whistleblower will receive $170,000 of the $1 million fixed portion of the government’s recovery, and could possibly receive an additional $255,000 if ACC becomes obligated to pay the maximum $1.5 million contingent portion of the settlement.

The intial lawsuit was filed July 2010.  The government alleged that hat ACC violated the False Claims Act when it orchestrated certain short-term private student loans that ACC repaid with federal Title IV funds to artificially inflate the amount of private funding ACC counted for purposes of the 90/10 Rule.  The short-term loans at issue in this case were not sought or obtained by students on their own; rather, the United States contends ACC orchestrated the loans for the sole purpose of manipulating its 90/10 Rule calculations.To maintain eligibility to participate in federal student aid programs authorized by Title IV of the Higher Education Act of 1965, for-profit colleges such as ACC must obtain no more than ninety percent of their annual revenues from Title IV student aid programs.  At least ten percent of their revenues must come from other sources, such as payments from students using their own funds or private loans independent of Title IV.  Congress enacted this “90/10 Rule” based on the belief that quality schools should be able to attract at least a portion of their funding from private sources, and not rely solely upon the Federal Government.

A settlement has been reached in a whistleblower class action lawsuit brought against Dayton-based TesTech, Inc. and its owner, Sherif Aziz, and Dayton-based CESO Testing Technology, Inc., CESO International, LLC, and CESO, Inc. (collectively CESO), and their owners, David and Shery Oakes. They are accused of falsely claiming disadvantaged business status on a number of federally-funded transportation projects.

The whistleblower will receive $562,370 of the settlement amount. 

The initial whistleblower case was filed in November 2010.  The government's allegations included that the defendants claimed Disadvantaged Business Enterprise (DBE) status for TesTech, a civil engineering firm, on numerous highway and airport construction projects in Ohio, Indiana, Michigan, and Kentucky.  The United States also alleged that TesTech was owned and controlled by CESO, a non-DBE firm, and its owners, the Oakes, who falsely claimed that TesTech was owned by Aziz and qualified as a minority-owned business in order to take advantage of the DBE program.

A settlement has been reached in a whistleblower class action lawsuit brought against ATI Enterprises Inc who is accused of falsely certifying compliance with federal student aid programs’ eligibility requirements and submitting claims for ineligible students.

There has not been any determination of rewards for the whistleblowers of the 2 cases that initiaed the government's lawsuit.

The government alleged that ATI Enterprises knowingly misrepresented to the Texas Workforce Commission and to the Accrediting Commission of Career Schools and Colleges its job placement statistics to maintain its state licensure and accreditation.  To participate in federal student aid programs, as authorized by Title IV of the Higher Education Act of 1965, as amended (Title IV), schools must enter into a contract with the Secretary of Education called a Program Participation Agreement, in which they agree to a number of terms. For example, if an institution advertises its job placement rates as a means of attracting students to enroll, it must make available to prospective students its most recent and accurate employment statistics to substantiate the truthfulness of its advertisements.  The government alleged that, by misrepresenting its job placement statistics, ATI Enterprises fraudulently maintained its eligibility for federal financial aid under Title IV.

The government further alleged that ATI employees engaged in fraudulent practices to induce students to enroll and maintain their enrollment in the schools.  This falsely increased the schools’ enrollment numbers, and consequently, the amount of federal dollars they received at the expense of taxpayers and students, who incurred long-term debt.

A settlement has been reached in a whistleblower class action lawsuit brought against RPM International Inc and its subsidiary, Tremco Inc. They are accused of filing false claims in connection with two multiple award schedule (MAS) contracts with the General Services Administration (GSA) for roofing supplies and services.

The whistleblower will receive more than $10.9 million of the recovery in the government's case.

The whistleblower filed this action in July 2010.  The federal lawsuit against RPM and Tremco alleged that, from January 2002 to March 2011, Tremco knowingly violated its contractual obligations to provide GSA with current, accurate and complete information about its commercial sales practices, to report changes in discounts to comparable commercial customers and to pass those discounts on to government customers. As a result, the government allegedly paid more than it should have for Tremco’s services and products. In addition, Tremco allegedly improperly marketed generic products as a superior line of the same product and used a defective adhesive formula in its roofing systems.

A settlement has been reached in a whistleblower class action lawsuit brought against General Electric Hitachi Nuclear Energy Americas LLC (GE Hitachi) who is accused of making false statements and claims to the Department of Energy and the Nuclear Regulatory Commission (NRC) concerning an advanced nuclear reactor design.

The whistleblower's portion of the recovery has not been determined.

The initial whistleblower case was filed in January 2012.  The government claims GE Hitachi made false statements to the NRC and Department of Energy about a component of the advanced nuclear Economic Simplified Boiling-Water Reactor (ESBWR) known as the steam dryer.  A steam dryer removes liquid water droplets from steam produced by the nuclear reaction that generates electricity in boiling-water type reactors.  The NRC requires that applicants for nuclear reactor design certification, such as GE Hitachi, demonstrate that vibrations caused by the steam dryer will not result in damage to a nuclear plant.  The government alleged that GE Hitachi concealed known flaws in its steam dryer analysis and falsely represented that it had properly analyzed the steam dryer in accordance with applicable standards and had verified the accuracy of its modeling using reliable data.     

Between 2007 and 2012, GE Hitachi received funding from the Department of Energy to cover up to half of the cost of developing, engineering and obtaining design certification for the advanced nuclear ESBWR.  The NRC, which regulates the civilian use of nuclear power in the U.S., is responsible for determining whether to approve GE Hitachi’s application for the reactor design certification.  The NRC is still reviewing the application and has not reached a final decision on the certification.

A settlement has been reached in a whistleblower class action lawsuit brought against Samsung Electronics America Inc who is accused of causing the submission of false claims for products sold on General Service Administration (GSA) Multiple Award Schedule (MAS) contracts in violation of the Trade Agreements Act of 1979 (TAA).

The whistleblower's share of the recovery has not been determined.

MAS contracts are contracts awarded by GSA to multiple companies supplying comparable products and services. Once GSA negotiates and awards the contract, any federal agency may purchase under it. Like many other federal procurement contracts, GSA MAS contracts require the vendor to certify that all products it offers for sale comply with the TAA. The TAA generally requires the United States to purchase products made in the United States, or another designated country with which the United States has a trade agreement.

Samsung has authorized resellers who hold GSA MAS contracts. Samsung certifies to the authorized resellers that Samsung will provide TAA compliant products and the resellers in turn list those products on the resellers’ GSA MAS contracts.

The original whistleblower case was filed in October of 2011 and allges that, from January 2005 through August 2013, Samsung caused resellers of its products to sell items on their GSA MAS contracts in violation of the TAA by knowingly providing inaccurate information to the resellers regarding the country of origin of the goods. The United States alleges that Samsung represented to the resellers, who in turn represented to federal agencies, that the specified products were made in TAA designated countries, generally Korea or Mexico, when the specified products were in fact manufactured in China, which is not a TAA designated country.

A settlement has been reached in a whistleblower class action lawsuit brought against Houston-based diagnostic centers.  The first, One Step Diagnostic, is accused of entering into sham consulting and medical director agreements with physicians who referred patients to One Step Diagnostic Centers. The second center is Complete Imaging Solutions LLC (doing business as Houston Diagnostics, Deerbrook Diagnostics & Imaging Center LLC, Elite Diagnostic Inc., Galleria MRI & Diagnostic LLC, Spring Imaging Center Inc. and West Houston MRI & Diagnostics LLC) and they are accused of engaging in improper financial relationships with referring physicians and improperly billed Medicare using the provider number of a physician who had not authorized them to do so and had not been involved in the provision of the services being billed.

The settlements arose from a lawsuit filed by three whistleblowers whose shares of the recovery have not been disclosed.  However, the settlements were finalized without an admission of liability and without commencement of litigation.