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Defense contractor fraud is a serious problem with potential implications for the safety of our armed forces. When defense contractors commit fraud, not only are they hurting the government and taxpayers, but they are putting the lives of military personnel at risk.

In 2006, ArmorSource LLC contracted with the United States Army to design and produce Advanced Combat Helmets (ACHs), made with Kevlar and ballistic protection – for use by combat soldiers. ArmorSource designed the helmets but subcontracted the manufacturing process of the helmets to Federal Prison Industries Inc. (FPI), which operates under the trade name UNICOR.

The United States alleged, in U.S. ex rel. Ponzio, et al. v. Rabintex Industries Ltd., et al., Case No. 1:10-CV-588 (E.D. Tex.), that from 2006 through 2009, the ACH helmets delivered by the company failed to meet the product quality standards set forth in the contract. After several of the helmets failed ballistic tests, the Army began recalling the helmets.  Two former employees of FPI came forward with information regarding the faulty helmets, and filed a False Claims Act lawsuit that was recently resolved by ArmorSource's agreement to pay $3 million.

The Importance of Whistleblowers

The ArmorSource settlement highlights the importance of supplying safe equipment for the U.S. armed forces. It also demonstrates the importance of whistleblowers in alerting authorities and the armed forces when fraud or wrongdoing occurs. Melessa Ponzio and Sharon Clubb, both employees of FPI, were whistleblowers in this case, providing necessary information to authorities about the helmets and the situation.

Under the qui tam provision of the False Claims Act, the two women were able to sue on behalf of a government agency and stand against those trying to defraud government funds. In turn, the two women qualified to receive a portion of the settlement and are expected to be awarded $450,000 for their assistance.

Government Contract Fraud

Unfortunately, the ACH helmet recall and claim is not an isolated case. Defense contractor fraud occurs far more often than one would think. The government spends billions of dollars each year on contracts with private businesses to supply all the needed weapons, equipment and other resources needed. When these contracts are violated due to defense contractor fraud, lives may be at risk. Military personnel may get equipment that fails to meet basic requirements, and in some cases, army contractor fraud leads to a recall, increasing costs for the government. In other cases, defense contractor fraud – even with no recall – leads to overcharging or inflated prices for the government.

Whether a contractor misrepresents prices, overcharges, or fails to meet any provisions of a government contract, a False Claims Act claim may exist. In these situations, it is often whistleblowers who alert the government that something is amiss, and because whistleblowers provide crucial information to stop fraud, they are afforded protections and compensation under the law.

If you are a whistleblower and believe you may have a False Claims Act violation case or any claim of fraud involving government contracts, contact Goldberg Kohn for a confidential consultation.