Financial Fraud

A settlement has been reached to resolve False Claims Act allegations against Sandia Corporation who is accused of violating the Byrd Amendment and the False Claims Act with the improper use of federal funds.

The allegations include using federal funds for activities related to lobbying Congress and federal agencies to obtain a renewal of its Management and Operating (M&O) Contract with the Department of Energy’s (DOE’s) National Nuclear Security Administration (NNSA) to operate the Sandia National Laboratories (SNL).  Sandia is headquartered in Albuquerque, New Mexico, and is a wholly-owned subsidiary of Lockheed Martin Corporation (LMC).

Between 1993 and the present, NNSA contracted with Sandia to manage and operate the SNL, a government-owned, contractor-operated laboratory that is part of the NNSA’s nuclear weapons complex, with its main facilities located in Albuquerque and Livermore, California.  Between 2008 and 2012, Sandia allegedly used federal funds to support activities to lobby Congress and other federal officials to receive a non-competitive extension of the M&O Contract in violation of a federal law known as the Byrd Amendment, which prohibits the use of federal funds for lobbying.

A settlement has been reached in a whistleblower class action lawsuit brought against Hencorp Becstone Capital LC  who is accused of making false statements and claims to the Export-Import Bank of the United States (Ex-Im Bank) in order to obtain loan guarantees.

The whistleblowers will receive $608,000 of the settlement. 

The case, filed in February 2013, alleged that Ricardo Maza, a Peruvian-based former Hencorp business agent, created false documentation to obtain Ex-Im Bank guarantees on fictitious transactions on which no products were sold or exported, and that Hencorp acted recklessly by outsourcing key credit review functions to Maza without adequate supervision or oversight.  The government alleged that Maza then diverted the proceeds of the loans to himself and to his friends and business associates in Peru, and that the transactions resulted in losses to the Ex-Im Bank when the loans were not repaid.  In 2012, Mario Mimbella, 64, of Miami, Florida, the purported U.S.-based exporter on three of the fraudulent transactions, pled guilty to making false records for his participation in the scheme and was later sentenced to prison.

A settlement has been reached in a whistleblower class action lawsuit brought against US Investigations Services Inc (USIS) and its parent company, Altegrity, who are accused of failing to perform required quality control reviews in connection withbackground investigations that USIS held with the U.S. Office of Personnel Management (OPM).

According to the settlement details, the companies have agreed to forgo their right to collect payments that they claim were owed by OPM, valued at least at $30 million, in exchange for a release of liability under the False Claims Act.  

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

The case, originally filed in July 2011, alleged that beginning in at least March 2008 and continuing through at least September 2012, USIS deliberately circumvented contractually required quality reviews of completed background investigations in order to increase the company’s revenues and profits.  Specifically, USIS allegedly devised a practice referred to internally as “dumping” or “flushing,” which involved releasing cases to OPM and representing them as complete when, in fact, not all the reports of investigations comprising those cases had received a contractually-required quality review.  The government contended that, relying upon USIS’ false representations, OPM issued payments and contract incentives to USIS that it would not otherwise have issued had OPM been aware that the background investigations had not gone through the quality review process required by the contracts.

A settlement has been reached in a whistleblower class action lawsuit brought against Nelnet Inc and Nelnet Educational Loan Funding Inc, Southwest Student Services Corp, Brazos Higher Education Authority and Brazos Higher Education Service Corp, and Panhandle Plains Higher Education Authority and Panhandle Plains Management and Servicing Corp.  They are accused of  improperly inflating interest rate subsidies from the Department of Education.

The settlement details are as follows: Nelnet Inc. and Nelnet Educational Loan Funding Inc. have paid $47 million to the United States. Southwest Student Services Corp. has paid $5 million. Brazos Higher Education Authority and Brazos Higher Education Service Corp. have paid $4 million. Panhandle Plains Higher Education Authority and Panhandle Plains Management and Servicing Corp. have paid $1.75 million. The whistleblower will receive a total of $16.65 million from these settlements.

The United States did not intervene in this whistleblower case that was filed in September 2007.  The allegations were that several lenders participating in the federal student financial aid programs created billing systems that allowed them to receive improperly inflated interest rate subsidies from the Department of Education.

A settlement has been reached to resolve False Claims Act allegations against Saehan Bank who is accused of misrepresenting or withholding information from the Small Business Administration (SBA).

The settlement resolves allegations that the California-headquartered bank misrepresented or withheld information to induce the SBA to fund a loan under the SBA’s 504 loan program, which offers small businesses long-term, fixed-rate financing to acquire major fixed assets for expansion or modernization.

Before finalizing a 504 loan, the SBA requires certain certifications regarding the borrower’s financial condition and ability to repay the loan. The government alleges that Saehan Bank falsely certified that the borrowers had experienced no adverse change in their financial circumstances since their initial loan application, even though the bank knew that the borrowers were facing serious financial difficulties. Relying on these alleged misrepresentations, the SBA approved the borrowers’ 504 loan. In addition to resolving its counterclaims against Saehan Bank, the United States obtained a default judgment on its cross claims against the borrowers, who never made any payments on the loan.

A settlement has been reached to resolve False Claims Act allegations against Quicksort Inc, Quicksort LA Inc and Quicksort Sacramento Inc.  They are accused of false representing the pre-sort level of mail they submitted to the U.S. Postal Service.

The settlement resolves allegations that the Quicksort companies misrepresented the pre-sort level of mail they submitted to the U.S. Postal Service at various times in 2008, 2009 and 2010.

The U.S. Postal Service offers lower postage rates to mailers who automate and sort their mail by zip code because these steps save the Postal Service time and money. Mailers use the services of businesses such as Quicksort that combine the mail of many customers and pre-sort it in order to qualify for the pre-sort discounts. After processing customers' mail, these pre-sort businesses present the mail to the Postal Service for mailing.

A settlement has been reached in a whistleblower class action lawsuit brought against Hewlett-Packard Co who is accused of defrauding the General Services Administration (GSA) and other federal agencies.

The whitsleblowers' recovery amount was not disclosed.

The allegations made were from a whistleblower case that was originally filed in 2004.  The United States alleged that HP knowingly paid kickbacks, or “influencer fees,” to systems integrator companies in return for recommendations that federal agencies purchase HP’s products.  The settlement also resolves claims that HP’s 2002 contract with the GSA was defectively priced because HP provided incomplete information to GSA contracting officers during contract negotiations. 

A settlement has been reached in a whistleblower class action lawsuit brought against Ciena Capital LLC and a subsidiary, Business Loan Center (BLC).  They are accused of submitting false claims for payment on loans made through the Small Business Administration (SBA).

The settlement for $26.3 million, which includes a credit for $18.1 million previously negotiated by andpaid to the SBA. The whistleblowers will receive $4.3 million as their share of the government’s recovery. 

The original case was filed in 2004.  The United States alleged Ciena and BLC falsely certified that they complied with SBA regulations when they submitted claims for payment on loans they originated, underwrote, and serviced.  Some of these loans defaulted shortly after they were made as a result of Ciena’s and BLC’s disregard of SBA rules, regulations, and underwriting requirements.  Other loans were originated by former BLC Executive Vice President Patrick Harrington, or his office, during his tenure.  Harrington pleaded guilty to conspiracy to defraud the United States and was sentenced to 10 years in prison for his prominent role in the fraudulent loan scheme, which included falsifying loan documents, inflating property appraisals, and using straw purchasers to engage in sham transactions.  This settlement also resolves allegations that the defendants’ parent company, Allied Capital Corporation, is liable for the acts of its subsidiaries.     

A settlement has been reached in a whistleblower class action lawsuit brought against EMC Corporation who is accused of violating both the False Claims Act and the federal Anti-kickback Act.

The whistleblower reward for this settlement was not disclosed.

The original whistleblower case was filed in September 2004. The United States complaint alleged that, by misrepresenting its commercial pricing practices, EMC fraudulently induced the General Services Administration (GSA) to enter into a contract with prices that were higher than they would have been had the information technology company not made false misrepresentations. Specifically, the United States alleged that the Hopkinton, Mass.-based company represented during contract negotiations that, for each government order under the contract, EMC would conduct a price comparison to ensure that the government received the lowest price provided to any of the company’s commercial customers making a comparable purchase. According to the government’s complaint, EMC knew that it was not capable of conducting such a comparison, and so EMC’s representations during the negotiations – as well as its subsequent representations to GSA that it was conducting the comparisons – were false or fraudulent.

The United States also alleged that EMC engaged in an illegal kickback scheme designed to influence the government to purchase the company’s products. EMC maintained agreements whereby it paid consulting companies fees each time the companies recommended that a government agency purchase an EMC product.

A settlement has been reached to resolve False Claims Act allegations against Learning Tree International Inc who is accused of knowingly invoicing federal agencies for training courses that were not provided.

The settlement resolves allegations that Learning Tree knowingly invoiced federal agencies in advance for multi-course training packages before employees of the purchasing agencies had attended the full number of courses available under each. The government further alleged that upon expiration of the training packages, Learning Tree retained federal funds that the company received in connection with unused courses without providing a refund or credit. As a result, Learning Tree received federal funds for training courses that were not, in fact, provided.