Defense contractor Booz Allen Hamilton has agreed to settle a Justice Department lawsuit for $377 million. The lawsuit accused the company of overcharging the U.S. government to offset losses in other areas of its business. This settlement is one of the largest financial settlements for a defense company under the federal False Claims Act. The U.S. Attorney for the District of Columbia, Matthew M. Graves, called it “one of the largest procurement fraud settlements in history.” The settlement marks the end of a six-year investigation into the allegations.
Booz Allen Hamilton had disclosed the federal probe in 2017, stating that investigators were examining the company’s cost accounting and indirect cost charging practices with the U.S. government. The company had anticipated a costly settlement and had warned stockholders about the potential financial impact.
A spokesperson for Booz Allen Hamilton said the company settled for “pragmatic business reasons” to avoid the lengthy and expensive litigation process. The company believed it had acted lawfully and responsibly but chose to settle to avoid a prolonged court battle with its largest client, the U.S. government. The company fully cooperated with the government throughout the investigation.
The settlement does not require Booz Allen Hamilton to admit misconduct. However, former federal prosecutor Jacob T. Elberg noted that the consequences may not be significant enough for deterrence. He also suggested that the resolution of the case could lead to an increase in the company’s stock price if investors see the legal uncertainty surrounding the case as resolved.
The Justice Department opened an investigation in 2016 following complaints from a whistleblower, Sarah Feinberg. She had resigned from the company and alleged that Booz Allen Hamilton was overcharging the government to offset losses related to its work with the private sector and foreign governments. Feinberg claimed that the company knowingly collected fraudulent fees from the U.S. government, amounting to more than $250 million.
Feinberg’s complaint stated that Booz Allen Hamilton lowballed its financial costs for working with corporations and foreign governments and fraudulently billed the U.S. government for excess fees to cover unrelated financial losses. She resigned after her warnings of compliance risks were disregarded by supervisors.
As a whistleblower, Feinberg stands to receive a substantial financial award from the settlement. She hopes that this situation will inspire more people to stand up for justice and expose wrongdoing. She also hopes the settlement encourages more whistleblowers to come forward when their companies refuse to do the right thing.
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