Filing A Qui Tam Case for Acts Committed in Foreign Countries against the United States
- United States
- 08/15/2002
- Frank, Haron, Weiner and Navarro P.L.C.
The United States False Claims Act permits any person to file a lawsuit (called a Qui Tam suit)against a federal contractor to recover damages caused the United States government. The person filing the suit may recover a reward of up to 30% of the recovery.
The lawsuit may be filed by citizens and non-citizens of the United States for activities committed in the United States or abroad.
Recent newspaper reports (See Stern, August 8, 2002) have detailed an alleged conspiracy to defraud the United States in connection with contractors based in Germany. Some of the reported details of this alleged conspiracy are set forth below. The accused companies have not been identified in this article and have not been found responsible. The example merely illustrates the type of case, if the facts reported are true, that might give rise to liability under the False Claims Act.
Moving Charges
Foreign moving companies allegedly swindled the U.S. Army with secret price-fixing agreements.
Damages: about $50 million a year.
Recently, several gentlemen entered the business premises of a moving firm and demanded the surrender of invoice records and accounting statements. The same drama played itself out at other moving companies throughout the country. At the same time, U.S. investigators seized the document files of transportation companies and made copies of computer hard drives.
This large-scale operation was aimed at a cartel, which for years allegedly fixed prices and carved up territory in the lucrative business of transporting the furniture and belongings of American soldiers and civilians. According to preliminary estimates, the damages sustained by the U.S. Army amount to roughly 50 million dollars per year. The Americans are good customers: In 2001, the Military Traffic Management Command in Alexandria, Virginia alone spent approximately $158 million for shipping-related services.
Large U.S. shipping concerns that submitted the most attractive offers in the semi-annual bidding always reaped this bonanza. They in turn delegated the completion of the shipments to subcontractors outside the United States. In Germany they had long found attractive partners, because industry competition here was intense.
At least it was until sometime in 2000. Then, the heads of several large shipping companies met. There, an insider claims, they established a minimum price below which the participants agreed not to submit bids. Later the secret cartel continued to meet, sometimes in Germany, sometimes in the United States, in order to strengthen adherence to their agreements.
Success: Prices climbed, from DM 38 (19.43 euros) per 100 pounds transported in 2000, to 30 euros today, just two years later. One company?s head allegedly wrote after the first meeting: ?Gentlemen, I thank you for meeting in our office and send you the rates agreed upon there with a request for your signature.?
The price cartel was only able to function because the U.S. enterprises were in on the act. They succeeded in charging inflated prices to the Army in Germany. If a competitor wanted to submit a lower bid, it was threatened with a boycott. Allegedly, according to a participant in the cartel, ?If a U.S. shipping firm tried to underbid, we received instructions in Germany not to make any men or trucks available to it. The shipping firm cracked and withdrew its attractive offer to the Army.?
A test run took place in 1999. Every order by the U.S. military was divided up according to firmly agreed-upon prices. In only one year it was possible to push through price increases of 30 percent. Later the price-fixing arrangement was extended to cover all of Germany. Investigators in the German Federal Antitrust Office (Bundeskartellamt) reportedly assume that industry leaders were primarily responsible. On the U.S. side, a transportation giant allegedly undertook to enforce compliance with the [price-fixing] scheme.
Now the cashing in is over. The German Federal Antitrust Office was alerted to the machinations by a tip last April. Shortly thereafter officials of the [U.S.] Defense Criminal Investigation Service (the military criminal police) took action in Germany. Meanwhile, the case is being handled by the Justice Department in Washington. The companies are threatened with fines and penalties of up to three times the damages.
Investigators are now sifting through enormous amounts of paper and computer files, in order to prove the suspected price-fixing arrangements.
The person who suppliedthe “tip” to the authorities—whether an insider or someone else with information—if he started a Qui Tam suit under the False Claims Act—is in a position to achieve a substantial reward.
The law is very complicated but U. S. lawyers, familiar with the False Claims Act, such as our firm, are able to assist foreign “whistleblowers” and/or their lawyers in pursuing these case.
