The Justice Department last week totaled the dollars it has collected in the past two months from major defense contractors accused of defrauding taxpayers and declared that the $55 million is proof that the government "gets what it pays for."
Stuart M. Gerson, the assistant attorney general in charge of civil litigation, predicted that the department's fraud cases will "continue unabated for years to come" regardless of the level of defense spending. If the Pentagon budget shrinks, that may only heighten competition among contractors for the smaller number of defense dollars, he said.
Justice's claim that it has been effectively pursuing fraud in the defense industry won praise from Gordon Adams, director of the Defense Budget Project, a private watchdog group. "There is a lot positive about this," Adams said.
Although Adams said the millions that the Justice Department has recovered are relatively few compared to the Pentagon's budget, he said that the anti-fraud effort has been noteworthy on two fronts. The settlements have come from "big fish," major contractors, and the department has been increasingly systematic about how it has pursued fraud allegations, Adams said.
Among the contractors that have settled recent fraud allegations are Martin Marietta, Ford Aerospace, General Electric, Textron and VSI Corp., a Fairchild Industries subsidiary.
In the past, defense fraud allegations have been leveled at relatively small contractors and the investigations have not always been well executed, Adams said. That began to change about five years ago, he said.
The Bush administration's efforts, such as the long-running "Ill Wind" investigation of defense procurement practices, represent what Adams praised as a serious, "systematic walk up the ladder of acquisition."
Gerson made the same assertion talking to reporters last week. He said the efforts of his staff and those of fraud investigators at the military have become "more sophisticated" in recent years. "We've tried to take some chances and push the envelope a little bit in litigation," he said.
The best example, he said, was the "more than $34 million" that the government collected from 137 Japanese firms accused of rigging bids for work on construction and other services at the U.S. naval base in Yosuka, Japan.
"These settlements represent a first in U.S.-Japanese cooperation and send a clear message that market relationships between the two countries must be based on a rule of law that is free and fair," Gerson said in a statement. The department accused the firms of composing a cartel known as "seiyukai," or "friends of the stars," a reference to the American flag.
The cartel inflated the costs of repairs to U.S. warships and defense work at the base by as much as 25 percent, the department said. In addition to the $35 million settlement, the department has won a Japanese court order freezing $1.6 million in assets of one of the companies.
Gerson also noted that Justice has used the False Claims Act and its four-year-old whistleblower provision against a number of American companies. Under the act, private individuals may sue government contractors on fraud allegations and share in any recoveries with the government.
Using the whistleblower provisions, the department said it has recovered "more than $70 million" since 1986. Individuals shared about $9 million of that under the act.
Gerson pointed out that the dollar value of fraud settlements and judgments involving defense contractors has jumped from $27 million in fiscal 1985 to $225 million in the past fiscal year.