BALTIMORE, MARYLAND, Nov. 5, 2010 -- A whistleblower lawsuit was the basis for the federal government's fraud case against the Louis Berger Group that settled today for $69.3 million -- the largest recovery in a case involving war-zone contractors in Afghanistan and Iraq.
The "qui tam" (whistleblower) lawsuit against Louis Berger was filed in 2006 "under seal" as the False Claims Act requires in qui tam cases, so it wasn't publicly known until today when the court lifted the seal and the record settlement was announced. Louis Berger has agreed to pay $46.5 million to settle the whistleblower case, $4.1 million to settle other contractual disputes and $18.7 million for a criminal fine.
The whistleblower, Harold Salomon, was a senior financial analyst/auditor for Louis Berger in New Jersey. His lawsuit exposed Louis Berger's practice of billing the government for indirect and overhead costs that were unrelated to its government contracts. Louis Berger has some of the biggest U.S. contracts for rebuilding projects in Afghanistan.
"Today I can affirm to those who told me the Louis Berger Group can get away with anything that they were wrong," said Salomon. "To those who said, 'If you cannot beat them, you have to join them,' I say they were wrong, too."
Fraud, waste and abuse by war-zone contractors is estimated to cost U.S. taxpayers billions of dollars. But fraud cases can be difficult to pursue because of the chaos of war, the lack of a paper trail and other factors. A Department of Justice official estimated earlier this week that the U.S. has recovered only $80 million from cases involving U.S. contractors in Iraq and Afghanistan (excluding the Louis Berger settlement).
"Louis Berger manipulated its accounting system and overhead rate to steal millions from the federal government - money that was supposed to be used to rebuild Afghanistan," said Peter W Chatfield, a Washington, DC, attorney with Phillips & Cohen, which represented the whistleblower. "The government never would have uncovered this sophisticated scheme without an insider such as our client, Harold Salomon, who had the knowledge and the integrity to stop the fraud."
Louis Berger's fraud hurt the U.S. war effort, said Tim McCormack, another Washington, DC, attorney with Phillips & Cohen.
"Fraud undermines U.S. efforts in Afghanistan and Iraq," said McCormack. "Money that should have been used to build roads, clinics and schools in Afghanistan to win support of the Afghan people was used instead to build Louis Berger's profits."
Chatfield and McCormack commended the government attorneys and investigators who worked on the case, particularly Michael DiPietro and Tarra Deshields from the U.S. Attorney's Office in Baltimore, Russell Kinner from the Department of Justice and the investigative teams from the U.S. Agency for International Development and the Defense Contract Audit Agency.
"This was a true team effort," Chatfield said. "The government attorneys and investigators invested an incredible amount of time and effort into this case. They worked diligently with Mr. Salomon to unwind this sophisticated, fraudulent scheme."
The False Claims Act allows whistleblowers to sue companies that are defrauding the government and receive a reward if the government recovers any funds as a result. Salomon plans to donate a portion of his reward to the American-Haitian Association for Medical Economic & Educational Support (http://www.ahames.org/), a non-profit group he founded that provides health care and funds various economic development projects in Haiti.
"It is a blessing to have the opportunity to contribute a little to society and at the same time reach out to those in need thru AHAMES," Salomon said.
Phillips & Cohen represents whistleblowers nationwide in False Claims Act cases and in claims involving tax law and securities law violations made under the Internal Revenue Service's and the Securities and Exchange Commission's whistleblower reward programs. It is the nation's most successful law firm representing whistleblowers. For more information about Phillips & Cohen's record, see P&C's Successful Whistleblower Cases.