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Whistleblower Gets Millions in False Claims Act Settlement
The American Lawyer
April 15, 2009
As we reported in January, the Department of Justice is on target this year to make up for lackluster collections in False Claims Act settlements in 2008, despite a continued backlog of cases waiting to be reviewed by overworked prosecutors. Just two weeks ago, the government followed its record-breaking $1.4 billion settlement with Eli Lilly with a $325 million settlement with Northrop Grumman, in which the payout to the whistleblower was a very hearty $48.7 million. The whistleblower windfall continued Tuesday, when the government agreed to settle its FCA claims against Network Appliance Inc. for $128 million.
According to Vincent McKnight of the Washington, D.C., plaintiffs firm Ashcraft & Gerel, the settlement is the biggest ever in a FCA case involving the Government Services Administration, the largest of the government's procurement portals. McKnight represents Igor Kapuscinski, a former employee of Network Appliance who discovered in 2006 that his company was offering other customers a better deal on its services than it gave the government. (Network Appliance, now known as NetApp, was represented by Roger Goldman of Latham & Watkins, who didn't return our call for comment.) Kapuscinski will receive $19.2 million --15 percent of the settlement -- for blowing the whistle on his former employer, according to the settlement agreement.
FCA claims involving the General Services Administration tend to be smaller than in other procurement areas -- GSA procurement, after all, is focused on computers, cars and paper clips, not fighter jets -- but McKnight told us cases like his may become more common. In 1997, he said, federal rules stopped requiring price audits after vendors were awarded government contracts. As a result, many of them stopped offering the government favorable prices as required under GSA contract guidelines. McKnight told us his firm is pursuing more GSA cases, though all of them are currently under seal. "Americans deserve fair prices from their government vendors," McKnight said. "The vendors can't turn around and offer their Fortune 500 customers a better deal."
This article first appeared on The Am Law Litigation Daily blog on AmericanLawyer.com.
