Just this week, HEYtex USA, a military fabric supplier based in Pulaski, Virginia, agreed to pay $3 million to resolve allegations that it violated the False Claims Act. In Wednesday’s announcement of the settlement, United States Attorney Chris Kavanaugh cited the actions of a HEYtex employee who came forward as a whistleblower.[1]
The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act against HEYtex. Under the qui tam provisions of the False Claims Act, an individual can file a lawsuit on behalf of the United States and receive a portion of the settlement. In this case, the whistleblower received a share of the $3 million award.[2]
In the settlement, the United States alleged HEYtex caused false claims to be submitted in connection with fabrics manufactured for military and personal equipment.[3] Specifically, an employee of HEYtex USA, who later came forward as a whistleblower, brought information regarding falsified test results to the attention of company management, but was ignored.[4]
The employee alleged that on over 100 separate occasions, HEYtex falsely certified its military-grade fabrics met required performance specifications when, in fact, the fabrics did not meet the specifications.[5]
Many defense contractors are based in Virginia. Between 2000 and 2012, there were nearly 15,000 active defense contractors in Virginia.[6] During this period, the U.S. Department of Defense awarded Virginia defense contractors 159,193 contracts worth over $42.8 billion.[7]
Perhaps unsurprising given the massive dollar amounts, there is significant waste, fraud, and abuse occurring by defense contractors in Virginia. For example, a whistleblower lawsuit resulted in a former CEO of a defense contractor agreeing to pay $20 million for fraudulent procurement of small business contracts.[8] Another whistleblower suit resulted in a government contractor agreeing to pay $2.6 million for submitting falsified payment claims to the department of defense.[9]
The False Claims Act states that a whistleblower can file a lawsuit on behalf of the United States if they have original information about a company making false claims to defraud the government. Qui tam lawsuits filed by whistleblowers have recovered billions of taxpayer dollars from defense contractors who submitted false claims in order to cheat the government.
What to do if you believe a defense contractor has committed fraud?
If you have information that a government contractor has committed fraud, you may be entitled to a reward. Federal false claims cases often result in large multi-million dollar settlements and, in order to encourage people to come forward with information, the government offers whistleblower rewards of up to 25 percent of the amount recovered. There are powerful protections at the state and national level to protect whistleblowers from retaliation.
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[1] Press Release, U.S. Dep’t of Justice, United States Attorney Chris Kavanaugh Announces $3,000,000 Settlement in False Claims Act Case Against HEYtex USA (May 25, 2022). Available at https://www.justice.gov/usao-wdva/pr/united-states-attorney-chris-kavanaugh-announces-3000000-settlement-false-claims-act.
[2] Id.
[3] Guerry, Colleen, New River Valley News DOJ: $3M Settlement Reached in False Claims Act Case Against HEYtex USA in Pulaski, WFXR Fox Roanoke (May 25, 2022). Available at https://www.wfxrtv.com/news/local-news/new-river-valley-local-news/doj-3m-settlement-reached-in-false-claims-act-case-against-heytex-usa-in-pulaski/.
[4] See Note 1.
[5] Pulaski Military Fabric Supplier Agrees to $3 Million Federal Fine, The Roanoke Times (May 25, 2022). Available at https://roanoke.com/news/local/crime-and-courts/pulaski-military-fabric-supplier-agrees-to-3-million-federal-fine/article_3cf2c902-dc35-11ec-af83-27144039a459.html; Settlement Reached in Case Involving Fabrics Made for U.S. Military, CBS 19 Charlottesville (May 26, 2022). Available at https://www.cbs19news.com/story/46582595/settlement-reached-in-case-involving-fabrics-made-for-us-military.
[6] Virginia Defense Sector Profile. Virginia Economic Development Partnership – International Trade. Mar. 24, 2014. Available at http://exportvirginia.org/wp-content/uploads/2012/06/Fast-Facts-Topics-Virginia-Defense.pdf.
[7] Id.
[8] Former CEO of Virginia-Based Defense Contractor Agrees to Pay $20 Million to Settle False Claims Act Allegations. US. Justice Dept. – Office of Public Affairs. Aug. 20, 2019. Available at https://www.justice.gov/opa/pr/former-ceo-virginia-based-defense-contractor-agrees-pay-20-million-settle-false-claims-act.
[9] Government Contractor Pays $2.6M to Settle False Claims Act Suit. US. Justice Dept. – News. Oct. 16, 2017. Available at https://www.justice.gov/usao-edva/pr/government-contractor-pays-26m-settle-false-claims-act-suit.