Global defense contractor settles overbilling suit

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ALBUQUERQUE, N.M. (AP) — Global defense contractor Science Applications International Corp. has agreed to pay $11.75 million to settle a federal civil claim alleging it overbilled the government for homeland security training programs under a more than decade-long scheme that was well-known among high-level executives.

U.S. Attorney Ken Gonzalez on Thursday announced settlement of the lawsuit, which alleged systemic fraud in the program SAIC ran for the New Mexico Institute of Mining and Technology. The program trains emergency personnel to respond to terrorist attacks under a Department of Homeland Security grant program created after Sept. 11.

The lawsuit alleged SAIC told federal officials overseeing what grew to be a $23-million-a-year contract that it was using mostly high-paid full-time employees with benefits when it was actually using cheaper part-time workers, enabling SAIC to keep costs low and profits excessive.

“Both the federal government and New Mexico Tech relied on SAIC to provide accurate information about its costs,” said Tim McCormack, an attorney with Phillips & Cohen, who brought the original suit on behalf of whistleblower Richard Priem. “We alleged that SAIC instead inflated its costs so that it could capture roughly one-third of New Mexico Tech’s total appropriation.”

Court records indicate the government gave SAIC more than $217 million to run the program between 1998 and 2011.

Officials with SAIC, based in McLean, Va., declined to comment.

The lawsuit was originally filed under the whistleblower provisions of the False Claims Act by Priem, SAIC’s former project manager for the first responder training program. According the lawsuit, when he discovered the fraud and asked that it stop, he was told that the company “was unwilling to do this because it would reveal that all of the prior submissions were false and SAIC then would be required to refund the overpayments.”

Priem said high-level executives were aware of the program and often fretted about getting caught.

According to documents in the case unsealed on Thursday, New Mexico Tech officials were unaware of the alleged misrepresentations.

Since the federal government joined the whistleblower suit, Priem is entitled to 15 to 25 percent of the settlement, according to the Washington law firm of Phillips & Cohen, which brought the original suit.

Gonzalez said his share has not yet been determined.

“The False Claims Act is a critical tool for weeding out fraud and protecting taxpayers,” Gonzales said in a statement. “The Act provides an incentive for individuals with knowledge of fraud against the government to disclose that information.”

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