Procurement Fraud FAQ

What is Procurement Fraud?

Procurement fraud is the unlawful manipulation of a procurement process to acquire contracts, good or services or to obtain an unfair advantage during the procurement process.

What are Examples of Procurement Fraud?

There are many types of procurement fraud schemes. Generally, they will fall into schemes that affect the bidding process, ones that affect the awarding of a contract, or fraud that occurs after being awarded a contract.

Fraud during bidding examples: bid rigging; improper pricing; false need determination favoring a contractor; false statement of work and specifications; false sole source justifications; excluding valid contractors; coordination between bidders; fake bids; changing bid evaluation to favor a contractor; false costs during negotiations; and false emergency contract award of a no competition contract.

Fraud after awarding a contract examples: false invoices; false low prices during bidding replaced after award of contract; hiding costs; charging for unallowed costs; mischarging for material or labor; accounting fraud; defective material used; false volume of material (supplying less than stated); false certification; substituting the product with an inferior product; witness tampering; bribery; and kickbacks of contractors, sub-contractors, vendors or purchaser employees.

What is Product Substitution Fraud?

Product substitution fraud is when a contractor supplies nonconforming material to contract requirements. The product could be used, outdated, not properly manufactured to specifications, or uninspected or untested per contract requirements.

The quality of the product is essential when choosing vendors. After winning the contract, the vendor must provide the level of quality it offered in its bid. Product substitution may include using inferior materials or supplying counterfeit or defective parts to increase profitability to the vendor.

What is a Whistleblower?

A whistleblower is someone who reports fraud, corruption, kickbacks, waste or dangers to safety. A whistleblower may be reporting on a federal contract or bid process, a state contract or bid process, or a private contract or bid process between two private entities or contractors.

The whistleblower may report the fraud to the SEC, IRS, CTFC, or other federal or state agency depending on the fraud being reported.

How Do You Become a Fraud Whistleblower?

In order to become a whistleblower, a person must report wrongdoing involving a federal contract process or contract, a state government contract process or contract, or illegality in a contract between two private companies. Federal law and state law protect whistleblowers, to encourage their ability to report fraud, waste and abuse.

Schneider Wallace Cottrell Konecky works with federal, state and private whistleblowers.

Is There a Reward For Whistleblowers?

There is a reward for whistleblowers from multiple agencies. Depending on where the wrongdoing is reported, the reward can change. The Dodd-Frank Act established rewards for whistleblowers.

What is the False Claims Act?

The False Claims Act is a federal law written regarding the handling and protection of those who report misconduct or fraud against the government. The False Claims Acts covers reporting of misconduct or fraud that costs the government to suffer a financial loss.  This financial loss can be both direct, the government having to spend more money than it should, or can be the loss of value inherent in the quality of a good such as the government receiving an inferior or defective good. The False Claims Act penalties for fraud can be awarded to the whistleblower in portion, 15-30% of the award may go to the whistleblower for their work uncovering and assisting in the investigation of the misconduct.

What States Have False Claim Acts?

Twenty-nine states have passed variations of a False Claim Act:

  • Alaska
  • California
  • Colorado
  • Connecticut
  • Delaware
  • Florida
  • Georgia
  • Hawaii
  • Illinois
  • Indiana
  • Iowa
  • Maryland
  • Massachusetts
  • Michigan
  • Minnesota
  • Montana
  • Nevada
  • New Hampshire
  • New Jersey
  • New Mexico
  • New York
  • North Carolina
  • Oklahoma
  • Rhode Island
  • Tennessee
  • Texas
  • Vermont
  • Virginia
  • Washington

What is the Dodd-Frank Act?

The Dodd-Frank Act is a law that primarily adds regulation to the financial industry, passed in 2010 following the Great Recession in the United States. The Act is named after two sponsors of the legislation: Christopher Dodd and Barney Frank.

The Dodd-Frank Act created the Financial Stability Oversight Council (FSOC), which monitors risks across the financial industry. The Act also adds rules regarding running banks, hedge or equity funds for owner profit, and regulates derivatives.

Regarding whistleblowers, the Dodd Frank Act adds a large award system for reporting of security fraud.  When security fraud is reported, the Doff Frank Act specifies that the SEC can award a large 15-30% proportion of the eventual monetary sanction to the whistleblower for their contributions. The SEC has awarded $676 million since 2012.

The Dodd-Frank Act also establishes confidentiality protection for whistleblowers, so their identify can remain undisclosed.

Do I Quality As a Whistleblower?

If you have knowledge of an unreported misconduct or crime, you can blow the whistle and report the crime. It does not matter if you are an employee of the company or an ex-employee of the company, both can still report the fraud scheme. Knowledge of the fraud can be sufficient, not all whistleblowers will have direct evidence or be witnesses to the scheme, an investigation into the alleged misconduct will search for evidence.

You do not need to be an American citizen to be a whistleblower, nor a resident of a State to report on matters of the State, anyone can report misconduct or fraud against the government.

Sometimes, whistleblowers have knowledge of a fraudulent scheme because they were asked to take part in it or have taken part in it. Being a party to the scheme does not preclude one from becoming a whistleblower, you can still report the misconduct.

Can I Be an Anonymous Whistleblower?

Yes, the Dodd-Frank Act and other whistleblower protection laws at the federal and state level provide for confidential reporting of misconduct. Remaining anonymous can help provide protection for a whistleblower to prevent retaliation.  Many cases of misconduct can be reported anonymously, to see if your potential claim can be reported anonymously, please contact us at 1-800-689-0024 or info@schneiderwallace.com.

Are There Protections Against Retaliation for Whistleblowers?

Yes, there are protections against retaliation for whistleblowers. These protections were put in place because the risk of retaliation against whistleblowers is high, and previously those who have reported fraud, waste, or other misconduct have been fired, demoted, or otherwise treated differently by the reported company.

Whistleblower protection laws exist at the both the federal and state level, to protect whistleblowers against retaliation and add additional penalties to any company that retaliates. These laws are to protect whistleblowers from being fired or otherwise mistreated after reporting misconduct.

What Do I Do To Report Wrongdoing?

An experienced whistleblower attorney can assist you in reporting wrongdoing and using all the available protections for whistleblowers. Contact an attorney to review your whistleblower claim and help determine if you are eligible to be a whistleblower, eligible for a reward, help maintain your confidentiality, and assist in the next steps of proceeding with your whistleblower claim.

Is There a Cost to Hire a Whistleblower Attorney?

Schneider Wallace Cottrell Konecky LLP whistleblower attorneys work on a contingency basis. A contingency fee is a fee that is a percentage of a future recovery or award.  If there is no recovery, there is no fee.

Contingency fees allow someone to hire an attorney and know they will not need to pay them a retainer or by the hour and protects them from worrying about the potential costs of the attorney. The attorneys know that any payment requires them to win an award for their client.

I Have a Whistleblower Claim

Schneider Wallace represents whistleblowers. Schedule a consult with our whistleblower law firm for representation in jurisdictions throughout the United States. We also have offices in in California, Texas, North Carolina and Puerto Rico.

To speak with a lawyer with years of experience handling both government whistleblower and contractor fraud cases, contact us at 1-800-689-0024 or info@schneiderwallace.com.

Inquire About Your Potential Case

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We are a national firm and partner with firms in every state in order to help you in any jurisdiction.

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Charlotte, North Carolina 28210

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