Whistleblower lawsuit by former employee alleging Lockheed Martin defrauded the federal government stays alive

by John Chapman

Anyone who has information that a business or person has knowingly submitted or caused the submission of false or fraudulent claims to any branch of the United States government can potentially help file and pursue a whistleblower lawsuit under the False Claims Act. The whistleblower does not have to have been personally harmed at all. Instead, they need only be aware of the false or fraudulent conduct.

A False Claims Act lawsuit seeks to recover money for the government from the business or person who submitted false or fraudulent claims. If money is recovered—whether from a settlement between the parties or a court judgment—the whisteblower who helped initiate the lawsuit can potentially recover 15 to 30% of the total amount recovered. The whistleblower is rewarded to compensate them and their attorney for the hard work involved in pursuing such lawsuits and also to encourage others to come forward with information about false or fraudulent conduct

As just one example, consider the facts of a recent case decided by the U.S. Court of Appeals for the Ninth Circuit. The United States Air Force held a competitive bid process to determine what company would receive a government contract to provide software and hardware used to support space launch operations at Vandenberg Air Force Base and Cape Kennedy. Lockheed Martin was one of three companies that submitted bids. When Lockheed Martin’s initial bid was rejected as too high, the company submitted a bid for $432.7 million. The Air Forced awarded the contract to Lockheed Martin. As it turns out, the company’s bid was dramatically below its actual costs and charges. Lockheed Martin has actually been paid more than $900 million for its work on the contract since winning the bid.

Whistleblower Nyle Hooper worked for six years for Lockheed as a Senior Research Operations Engineer and later became a Senior Project Engineer assigned to work on this program and contract with the Air Force. At some point, Hooper become concerned that Lockheed Martin had obtained the contract through fraud. In 2002, Hooper was involuntarily terminated by Lockheed after investigating the matter.

Hooper filed a lawsuit under the qui tam provisions of the federal False Claims against Lockheed Martin. Under the FCA, Hooper was able to file suit on behalf of the United States seeking damages from persons who file false claims for government funds.

Hooper’s lawsuit asserts that Lockheed Martin submitted a fraudulently low bid, based on knowing underestimates of its costs, to improve its chances of winning the Air Force contract. The trial court dismissed the lawsuit because it found no evidence that Lockheed Martin had “knowingly” submitted a false bid to the Air Force. The Ninth Circuit Court of Appeals has now reversed that decision and sent the case back to the trial court. The Ninth Circuit ruled that the trial court applied the wrong definition of “knowing” and that fraudulent underbidding (i.e., the bid is not what the defendant actually intends to charge) can be a violation of the False Claims Act.

Hooper demonstrated that Lockheed employees were instructed to lower their bids without regard to actual cost. Mike Allen, an employee with Lockheed, testified that the Air Force did not accept Lockheed’s initial bid because it was too high. Subsequently, Allen “was simply asked [by management] to change the cost” even though the change in cost was not based on any engineering judgment. Allen also testified that, in bidding on another contract, he was told to lower the cost. When Allen told his supervisors, “We can’t. This is the real cost. This is what it’s going to cost, if not more,” he was dismissed from the bidding contract meeting. Allen later learned that Lockheed lowered the cost by almost half and was awarded the contract.

[You can access the full opinion in Hooper v. Lockheed Martin Corp., — F.3d —- (9th Cir. August 2, 2012) here.]

The government has recovered billions as a result of False Claims Act lawsuits, and hundreds of millions have been paid to the private whistleblowers who made the lawsuits possible. If you have questions about how to pursue a claim under the False Claims Act, please let us know. You can reach us by calling our toll-free hotline at 1-877-446-9001, or by filling out our free case evaluation form.

by John Chapman

John Chapman is a licensed attorney with experience in complex commercial litigation (including securities fraud, RICO, shareholder oppression, and derivative actions) and personal injury litigation.