SAIC pays $11.75 million to settle P&C whistleblower case

Whistleblower alleged billing fraud in terrorism response training program at New Mexico Tech

Albuquerque, New Mexico, June 13, 2013 - Science Applications International Corp. has agreed to pay the federal government $11.75 million to settle a whistleblower lawsuit that alleged SAIC cheated the government out of millions of dollars under a "first responder" training program.

The "qui tam" (whistleblower) lawsuit, brought by Phillips & Cohen LLP, said SAIC was inflating the costs of the government-funded program it has run for 15 years to train firefighters, police and other first responders to deal with emergency situations involving explosives and incendiaries as part of the government's Weapons of Mass Destruction First Responder Program.

"If SAIC had been honest and charged the government based on its true costs, additional funds would have been available to train more first responders," said Peter W Chatfield, a Washington, DC, attorney with Phillips & Cohen LLP, which is representing the whistleblower. "We continue to see how important first responder training is to deal with terrorist attacks -- most recently in Boston. So it's important to train as many first responders as possible with the government funds that are allocated."

Congress set up the WMD First Responders Program in 1998 in response to the 1995 Oklahoma City bombing. SAIC worked as a subcontractor to New Mexico Institute of Mining and Technology, which has received government funding for the program annually since 1998.

New Mexico Tech has awarded SAIC the contract on a sole-source basis since 1998. This meant SAIC never had to compete on a price basis for the contract, but it was required to provide accurate information about its costs and profits.

The lawsuit alleged that SAIC falsely certified that its costs included payment for full-time employees who received fringe benefits to conduct the training. Instead, the lawsuit said, SAIC used cheaper, part-time employees who received few benefits, enabling SAIC to keep its costs low and collect exorbitant profits.

"Both the federal government and New Mexico Tech relied on SAIC to provide accurate information about its costs," Chatfield said. "We alleged that SAIC instead inflated its costs so that it could capture roughly one-third of New Mexico Tech's total appropriation."

U.S. payments to New Mexico Tech for first-responders training have increased from $1 million in 1998 to $23 million annually in more recent years.

The whistleblower, Richard Priem, worked for SAIC for almost 16 years following 21 years in the U.S. Army in a variety of command and staff positions. He was a SAIC project manager for the WMD First Responder Program and other training programs at New Mexico Tech.

The whistleblower lawsuit was filed in February 2012 in federal district court in Albuquerque, New Mexico, where Priem resides. The lawsuit, which the government joined, was kept "under seal" (as required by the False Claims Act) until today when the government announced the settlement and the lawsuit was made public.

Priem and his attorneys expressed appreciation for the work by the Department of Justice and the U.S. Attorney's Office in Albuquerque.

"I'm impressed with the work that the government attorneys did on this case," Priem said. "DOJ Senior Trial Counsel Don Williamson and Trial Attorney Daniel Hugo Fruchter of the Commercial Litigation Branch were the right men for the job with their expertise in complex government contracts."

The False Claims Act allows private citizens to sue companies that are defrauding the federal government and recover funds on the government's behalf. Whistleblowers are awarded with 15 percent to 25 percent of the recovery when the government joins the case.