How to Report Defense Contractor Fraud

Defense contractor fraud is a serious violation. The U.S. government is strapped for cash as it is and set to spend $316 billion on defense contractors in 2011. Any act of fraud against the U.S. military or the U.S. government could be the source of a serious setback affecting not only financial matters, but the lives of soldiers and civilians. 

If you work for a defense contractor engaging in fraud or otherwise have hard evidence or undisputable knowledge regarding defense contractor fraud you may be entitled to a reward for your efforts in helping with national security and saving money for U.S. taxpayers. 

Types of Fraud
Defense contractors can potentially engage in several different types of fraud. In many instances, some of the people aware of the situation do not even know that the acts they witness are fraud. Some of the possible types of fraud include the following:

  • Cross charging – This is a complicated type of fraud that involves defense contractors working simultaneously on two different types of contracts. Under a cost-plus contract, the contractor gets paid for production costs. Contractors charging the production costs of another contract to the cost-plus contract are committing fraud.
  • Failure to comply – When contractors are not meeting budget or schedule requirements, they may cut corners in production, failing to comply with contract specifications.
  • Improper cost allocation – Some unscrupulous contractors shift business expenses from civilian projects to government projects. This allows them to give better deals to market-driven civilians at the expense of the government.
  • Product substitution – When contractors substitute cheaper parts in the equipment being sold to the government, fraud is committed. 
  • Truth in Negotiations Act Violation – In sole-source contracts, contractors are obligated by law to disclose all cost information to the government. If information is altered or withheld, fraud has occurred. 
  • Reporting Fraud

The False Claims Act is a federal law that provides whistleblowers with specific protections and compensation when coming forward with claims of defense contractor fraud. Some of the compensation packages offered to whistleblowers are in the millions of dollars. These rewards are intended to help people come forward and potentially save the government much more than the compensation being offered. 

False Claims Act
The False Claims Act is also known as the Lincoln Law. It provides for civilians to file legal claims against federal contractors. The compensation allowed for civilians coming forward with information about contractor fraud is 15 to 25 percent of the money saved. A few difficulties in coming forward without understanding the law are in understanding if you have a valid claim and in receiving the proper compensation. These difficulties make it helpful to have an experienced lawyer or legal team behind you before reporting.

Qui Tam
A qui tam claim is a legal claim made by a civilian on behalf of the government. This phrase dates back to English common law from the 13th century. Qui tam is Latin and comes from a Latin phrase meaning a legal suit for both the king and yourself. Fraud claims against defense contractors are considered qui tam cases. 

Free consultations are provided for anyone calling a defense contractor hotline. This will start the process of exposing the fraud and getting your compensation from doing so.