On December 4, 2019, the United States Department of Justice (“DOJ”) issued a Press release announcing its decision to intervene in a who tam False Claims Act (“FCA”) case against Navistar Defense LLC. the who tam The lawsuit was originally filed by whistleblower Duquoin Burgess, a former Navistar Defense government contracts executive. The complaint alleges that in 2007 Navistar Defense provided 4,000 mine-resistant ambush protected vehicles to the United States Marine Corps for use in Iraq, and in 2009 received a contract to modify the suspension systems of these vehicles to cope with the rockier terrain in Afghanistan.
While negotiating this contract with the Marine Corps, Navistar Defense allegedly “knowingly submitted fraudulent invoices that falsely claimed to show comparable prior commercial sales” at an unreasonably high cost. These bogus invoices, from sales that never occurred, enabled Navistar Defense to grossly overcharge the Marine Corps for suspension modifications of hundreds of millions of dollars according to the complaint.
The DOJ’s decision to intervene in this FCA case, which is seeking more than $1 billion in damages, is momentous because it exponentially increases the chances of the trial succeeding. Under the who tam CFL provisions, a private citizen, like Mr. Burgess, in this case, can file a lawsuit in federal court alleging fraud against the government, which directly or indirectly involves taxpayers’ money. Once deposited, a who tam The FCA complaint remains sealed and out of public view. During this time, the DOJ and all relevant government agencies work closely with the whistleblower, known as the “relative,” to fully understand the allegations and conduct at issue while conducting their own factual and legal investigation.
Once this investigation is complete, the DOJ must then decide whether to “intervene” in the case. Intervention means the government is taking an active and leading role in the FCA litigation. If the government refuses to intervene, the parent can either argue the case on their own or drop the lawsuit under the False Claims Act. In intervention cases, a parent can recover between 15 and 25% of the damages obtained for the government, and in a non-intervention case, parents can recover between 25 and 30%.
The DOJ decides to intervene before the defendants even know about the FCA’s pending complaint against them. This is by far the most crucial act of the whole affair. The correlation between the choice to intervene or not and the outcome of a CAF case is drastic. FCA cases in which the government intervenes are successful in obtaining recovery about 95% of the time, while that number drops dramatically in non-intervened cases. Among the many reasons for the high success rate in interventional cases are:
1) the cases involved benefit from all the resources and expertise of the DOJ, rather than those of a private citizen and his lawyers whose resources most often pale in comparison; and
2) The DOJ only intervenes in cases it deems meritorious and winnable, so the cases that have intervened are usually the cases that would win the most at trial.
With these two factors in play, defendants in an intervening case are much more receptive to settlement discussions prior to any jury decision, as they face the full brunt of the federal government and credible charges of fraud.
In the Navistar Defense case, the DOJ’s choice to intervene should prove crucial in recovering potentially hundreds of millions of dollars in taxpayer dollars, which Navistar Defense allegedly received fraudulently. In the DOJ press release, Assistant Attorney General Jody Hunt said, “The [DOJ] will hold accountable contractors who falsify information and thereby force the military to pay inflated prices. By intervening, the DOJ has dramatically increased the odds of achieving that goal here and ensuring that Navistar Defense is held accountable for its alleged attempt to fraudulently inflate its prices for providing lifesaving equipment to the Marine Corps.
Copyright Kohn, Kohn & Colapinto, LLP 2022. All rights reserved.National Law Review, Volume X, Number 1