The U.S. Department of Justice has announced the settlement of a qui tam, or whistleblower, lawsuit against Centerra Services International, Inc.

To settle the qui tam lawsuit Centerra will pay $7.4 million to resolve allegations that it overcharged the U.S. government for firefighting and fire protection services in Iraq, the Justice Department said. Centerra is a security services company based in Palm Beach Gardens, Fl.

Under its former name Wackenhut Services LLC, the company provided fire protection services at U.S. military bases as a subcontractor for Kellogg Brown & Root, Inc. The Army used KBR as its prime contractor for logistical support during the Iraq war. KBR’s contract fell under the Army’s third generation of contracts in its Logistical Civil Augmentation Program, or LOGCAP III.

According to the qui tam lawsuit, from 2008 to 2010 Wackenhut inflated its labor costs by billing some of its managers’ salaries as direct costs rather than indirect costs. The settlement also addresses allegations that Wackenhut overcharged for labor by double-billing for variable labor costs like holidays, vacation, sick leave, and rest and recuperation.

The Justice Department says Wackenhut submitted its excessive billing to KBR, which then passed the cost on to the government.

Whistle blower Gary W. initiated this qui tam lawsuit in 2010. He will receive over $1.3 million as his share of the recovery. Gary had initially sued both Wackenhut and KBR, but the Justice Department intervened only against Wackenhut.

Although Wackenhut’s successor Centerra has agreed to pay the settlement amount, no determination of liability was made as part of the settlement.

This qui tam lawsuit was filed under case no. 1:10-CV-00504 in the U.S. District Court for the Eastern District of Texas.

Qui Tam Lawsuits Under the False Claims Act

Gary was able to bring this qui tam lawsuit under provisions of the federal False Claims Act. This law allows private parties to bring claims against federal contractors who allegedly defraud the government in the course of performing their contracts. In addition to defense contractor fraud, today Medicare and Medicaid fraud is a frequent subject of many qui tam lawsuits.

Typically, once the whistle blower has evidence of fraud, a qui tam lawsuit is filed under seal while the government gets a chance to investigate. Sometimes once the government feels it has enough evidence to compel a settlement, it may ask the court to lift the seal only partially so the evidence can be used in negotiation.

If the government is then satisfied that the case has enough merit, it may intervene on the claimant’s behalf. Claimants may continue to prosecute their qui tam lawsuits on their own, but the odds of success tend to be better in cases where the government intervenes.

Where the claim is successful, the defendant may have to pay up to three times the amount the government lost, plus penalties for each false claim.

For the whistle blower, the False Claims Act provides a share in the recovery – usually 15 to 25 percent. The act also protects the whistle blower against retaliatory employment action.