Government Makes Opinion Heard in Contract Fraud Case

In August, POGO blogged about the Department of Justice intervening in a whistleblower lawsuit accusing polling services company The Gallup Organization of defrauding the federal government. The lawsuit, filed in 2009 by former Gallup employee Michael Lindley, claims that the company provided grossly inflated cost estimates on contracts with several federal agencies.

Last week, the Department of Justice filed a complaint in the case that raises several new allegations. The government claims that Gallup overcharged more than $16 million on contracts and subcontracts with the U.S. Mint, the State Department, the Federal Emergency Management Agency (FEMA), and the Office of Personnel Management.

The government blames the alleged overbilling on lax contracting policies and procedures and inadequate oversight at Gallup. According to the complaint:

From the time that Gallup first became involved in government contracting until at least 2009 or 2010, Gallup provided almost no formal training on government procurement or contracting to its government division employees. Instead of requiring its government division employees to attend training sessions on the rules and regulations governing contracts and procurement with the federal government, Gallup left it up to its government division employees to learn on the job.

During the period of time relevant to the complaint, Gallup did not have a consistent manner in which it responded to government requests for proposals. Instead, each partner devised his own way of preparing proposals and accompanying budgets for the government. Additionally, the proposals and budgets were not required to be approved or reviewed beyond the partner submitting the proposal.

In addition to fraudulent billing, the government also alleges that Gallup and a former FEMA official violated ethics rules. According to the complaint, Timothy Cannon, the Director of Human Capital at FEMA from 2007 to 2009, sought employment with Gallup while helping the company win business with his agency. The government alleges Cannon was instrumental in helping the company win a $1 million FEMA contract in 2008 and in getting the agency to increase the value of the contract while, at the same time, secretly negotiating with Gallup for a job. According to the government, Gallup presented Cannon with a six-figure job offer while he was still working at FEMA but withdrew the offer several weeks later when the company began to worry that the questionable ethics of the hiring could jeopardize future business with FEMA.

The government is seeking civil penalties against both Cannon and Gallup under the Procurement Integrity Act (PIA) and federal conflict of interest laws, as well as civil False Claims Act penalties against Gallup. (The government can also pursue criminal penalties under the PIA and conflict-of-interest laws, as it did in the case of former Air Force official Darleen Druyun and former Boeing CFO Michael Sears, both of whom went to prison for negotiating employment for Druyun at Boeing while the Air Force was negotiating a $20 billion lease of Boeing aircraft.)

Lindley filed an amended complaint last week alleging that overbilling and other improprieties occurred on contracts with several other agencies. Lindley is also separately pursuing a whistleblower retaliation claim. He is being represented by the law firms Katz, Marshall & Banks and Vogel, Slade & Goldstein, who issued a joint press release announcing the filing of the government’s complaint.

Gallup is confident that it will prevail. “Gallup believes that the claims filed by the U.S. Department of Justice are wholly without merit,” the company told POGO in August. “We intend to fight these baseless charges vigorously and look forward to resolving the matter in court.”

Image: Gallup headquarters in Washington, DC, by Danni Downing.