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Food supplier to US military settles whistleblower case for $95 million

Agility Public Warehousing, a food vendor to the US military, can once again bid on contracts with the government after agreeing to pay $95 million to resolve a whistleblower lawsuit.

A Kuwaiti contractor that supplied food for US military forces in Iraq, Iran and Jordan will pay $95 million to resolve a whistleblower lawsuit under the False Claims Act and plead guilty to misdemeanor theft of government funds.

The government alleged that between 2003 and 2011, Agility Public Warehousing Co. KSC evaded fees and improperly marked up prices on fruits and vegetables under the $8.5 billion contract, resulting in inflated costs to the government.

Agility’s settlement marks one of the largest paid by a military contractor in a False Claims Act case. A case brought by a whistleblower represented by Phillips & Cohen against Northrop Grumman resulted in a $325 million settlement, which is the largest settlement of a whistleblower case by a military contractor.

An important aspect of this case is that Agility was suspended from bidding on and receiving further contracts with the US government after the company’s indictment in 2009. Companies are rarely suspended or barred from contracting with the government because of fraud allegations.

As part of the civil settlement, the Defense Logistics Agency reinstated Agility’s contracting privileges and dismissed its $27.9 million counterclaim against the company, while Agility agreed to release $249 million in administrative claims against the agency. Agility also agreed to oversight of its ethics and compliance program by an independent corporate monitor.

A former vendor of Agility brought the fraud to the government’s attention in 2005 by filing a “qui tam” (whistleblower) lawsuit in federal district court in Atlanta, Georgia. The whistleblower will receive $38.85 million for his contribution in the case. Whistleblowers are awarded a percentage of the amount recovered in a False Claims Act case, ranging from 15 to 30 percent, depending on whether the government intervenes in the case and the contributions of the whistleblower and counsel to the end result.

Here, the share also includes a portion of funds recovered as part of an “alternate remedy.” An alternate remedy occurs when the government recovers money from the fraud through proceedings other than the whistleblower’s civil False Claims Act suit, like, for example, administrative fines. When this occurs, the False Claims Act authorizes a share of the alternate remedy for the whistleblower as well.

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