SAIC Fraud Case Leaves Whistleblower Unsettled

Readers of this blog and users of our Federal Contractor Misconduct Database are probably familiar with Science Applications International Corporation (SAIC). The engineering and information technology giant has won billions of dollars in contracts over the years. It has also gotten into numerous legal scrapes, most notably a $500 million contract fraud settlement with New York City and the Justice Department in 2012. In 2013, the company split into two separate companies—the former SAIC changed its name to Leidos and spun off a government services firm that retained the SAIC name.

Shortly before the split, the company paid nearly $6 million to settle another contract fraud allegation. That case involved a blanket purchase agreement (BPA) the General Services Administration (GSA) awarded SAIC in 2006. (A BPA is a pre-arranged order used by agencies for acquiring goods and services that are needed on a recurring basis.) Under the BPA, which had a ceiling value of more than $200 million, SAIC provided engineering and consulting services at MacDill and Nellis Air Force Bases and other government installations. The government alleged that SAIC tricked the GSA into awarding the BPA through the machinations of retired Air Force Lieutenant Colonel Steven Stallings, who posed as an official of a fictitious government agency. The company then allegedly billed the government millions of dollars for work that was never performed.

Red flags were first raised at Nellis, where Lt. Col. Tim Ferner observed something amiss with the SAIC contract. "We were basically paying these guys to sit around at computers and play games," he later recalled to the Las Vegas Review-Journal. When he blew the whistle to supervisors in 2009, they ignored him. Ferner explained in a television interview that his boss told him, "We are both close to retirement, and if [you] let the thing go we could both get jobs as contractors and we’d be set for life."

Ferner was not deterred. He filed a False Claims Act lawsuit against the company in 2010. In July 2013, SAIC settled the lawsuit for $5.75 million. Ferner received $977,500 as his whistleblower’s share.

But Ferner remains disappointed with the outcome. He thinks the government let SAIC off too easily. SAIC could have been held accountable for at least $42 million in fraudulent charges (the amount spent on the BPA at Nellis), but it was allowed to settle for a fraction of that and no admission of wrongdoing. The government settling with a corporate wrongdoer for pennies on the dollar is depressingly common, even with repeat offenders like SAIC. For example, the Nuclear Regulatory Commission sued the company for concealing a conflict of interest when it contracted to provide consulting services to the agency. Last October, SAIC paid the government $1.5 million to resolve the case, even though a court had found the company liable for nearly $6.5 million in damages.

Ferner is also upset that most of principals involved in the scheme escaped punishment. Stallings paid the government $105,000 and was debarred from federal contracting for three years, later reduced to 18 months. As for the brass at Nellis who turned a blind eye, two generals at the base were promoted and the officer who advised Ferner to "let the thing go" was allowed to retire and, as expected, took a job with large federal contractor Booz Allen Hamilton. Ferner also thinks the officers were let off the hook for the questionable ways they funded SAIC’s contracts, possibly in violation of the Antideficiency Act.

"The lack of leadership amongst the senior officers at Nellis Air Force Base while I was stationed there was absolutely mind-numbing," Ferner recently told the Project On Government Oversight.

"If a young airman mistakenly gets caught drunk driving he/she is drummed out of the military dishonorably, yet generals and colonels who intentionally engage in very derelict and questionable behavior are promoted and allowed to retire with full pensions," Ferner said.

Ferner takes pains to remind the public of the big picture: "People should care about what happened because these same officers are the ones entrusted with the lives of their sons, daughters, and loved ones," he told POGO. "If they can’t manage funds in an honest, competent, and professional manner, how can we expect them to ensure the safety, security, and well-being of the troops in their charge?"

The Ferner case was only a temporary setback for SAIC. The company was allowed to continue doing business with the federal government, with which it has long maintained close ties via the revolving door. In fact, just weeks after the settlement, President Obama nominated SAIC senior executive Deborah Lee James as Secretary of the Air Force. She replaced Michael Donley, who was a senior vice president at a SAIC subsidiary from 1996 to 2005. The company’s current leadership includes former National Counterterrorism Center Director Michael Leiter, and its board members include former Air Force Chief of Staff John Jumper and former Deputy Secretary of Defense John Hamre.

Investigative reporters Donald Barlett and James Steele’s March 2007 profile of SAIC remains the definitive exposé of this company and the influence it wields in Washington. Eight years and one corporate split later, SAIC may no longer be "the largest government contractor you’ve never heard of," as Barlett and Steele dubbed it, but its power in the nation's capital has never been stronger.

Would that it were so with respect to the government’s resolve in punishing misdeeds committed by its highest officials and largest contractors.