Whistleblowers Expose Fraud

Nineteen million dollars. That’s how much it cost the U.S. government in monetary losses and other costs when a defense department contractor and its prison system subcontractor produced defective combat helmets for the Army and the Marine Corps.

In 2010, the U.S. Department of Defense (DoD) recalled all 129,000 of those helmets, between 2006 and 2009, because of the number of defects found in the helmets and amid fears that soldier and marine lives were at risk (Jahner, 2016). Fortunately, the resulting U.S. Department of Justice (DOJ) investigations did not find evidence that the defective helmets led to any warfighter lives being lost, although they did pose a risk to service member safety.

The DOJ Investigative Summary found that the subcontractor had “endemic manufacturing problems” and that the helmets it produced were “defective and not manufactured in accordance with contract specifications.” The summary report also made clear that the primary contractor “did not provide adequate oversight.”

Jahner’s Army Times article summarized the DOJ’s findings:

  • Prisoners (employed by the subcontractor) used “crude, makeshift tools” to make the helmets.
  • The helmets were made with “degraded or unauthorized ballistic materials” and were found to have deformities.
  • Random quality checks were compromised to ensure helmets passed quality tests.
  • Some rejected helmets were sold to the Defense Department anyway.

The DOJ began investigating the two companies after whistleblowing employees of the subcontractor raised allegations of misconduct and subsequently filed charges under the False Claims Act.

This may be fitting, because the False Claims Act itself has its roots in military whistleblowing. The civil-war era U.S. Congress enacted the Act, also known as “Lincoln’s Law,” in 1863. Congress took the action in response to “alarming reports” (presumably by whistleblowers) of numerous frauds by suppliers and misappropriation of money intended for the war effort. The law allowed for qui tam actions—“anyone could bring action on behalf of the United States against a government contractor who knowingly submitted false claims for payment to the government,” (Helmer, Jr., 2013). In the event of a successful lawsuit, the law allowed for “relators” (whistleblowers) to receive a percentage of the amount recovered.

Fast forward to 2016—military personnel were put at risk, the primary contractor was fined $3 million (and has tarnished its reputation), the prison-located manufacturing facility has been closed and all staff relocated elsewhere, and the government (and therefore the taxpayer) has lost 19 million dollars. The outcomes could have been so much better for everyone, with proper oversight, effective training, and a strong ethical culture.

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Helmer, James B. Jr. “False Claims Act: Incentivizing Integrity for 150 Years for Rogues, Privateers, Parasites and Patriots.” University of Cincinnati Law Review, Vol. 81 no. 4, September 18, 2013. http://scholarship.law.uc.edu/cgi/viewcontent.cgi?article=1153&context=uclr

Jahner, Kyle. “Prison-made Helmet Recall was Much Bigger than Initial Reports Indicated.” Army Times, August 18, 2016. https://www.armytimes.com/articles/prison-made-helmet-recall-was-much-bigger-than-initial-reports-indicated

Office of the Inspector General (OIG). U.S. Department of Justice. Investigative Summary: Findings of Fraud and Other Irregularities Related to the Manufacture and Sale of Combat Helmets, August 2016. https://oig.justice.gov/reports/2016/i1608.pdf