A defense contractor has agreed to pay $2 million to settle allegations of government fraud raised in a whistleblower lawsuit.

The settlement wraps up an investigation that started with a whistleblower lawsuit filed in a federal court in Houston in 2012.

According to a press release from the U.S. Department of Justice, Bering Straits Technical Services LLC and its parent company Bering Straits Native Corporation have already paid the agreed-upon $2 million to settle allegations that the federal contractor defrauded the government in the course of its contract for maintenance services at an Army facility.

Bering Straits Technical Services is a government contractor based in Anchorage, Alaska. The company had contracted with the U.S. Army Corps of Engineers to provide maintenance services at the Red River Army Depot in Texarkana, pursuant to two contracts that were terminated in February 2013 and August 2014.

In this government fraud lawsuit, the whistleblower alleged that beginning in 2010, Bering Straits Technical Services overcharged the government by submitting falsified reports for preventive maintenance that was never performed.

The complaint also alleged the federal contractor directed its employees to repair equipment that had been taken out of service or that simply no longer existed.

Employees were also directed to claim work hours and materials costs for work that was never performed, according to the whistleblower lawsuit. They were also allegedly coerced into a practice nicknamed “pencil whipping” – that is, to document made-up work hours that did not necessarily have any connection to the actual amount of hours worked.

Though the settlement requires Bering Straits to pay, it does not require the company to admit any liability.

In the press release, U.S. Attorney Kenneth Magidson commented that the settlement should remind government contractors about their accountability to the public. Magidson encouraged persons with knowledge of government fraud to come forward and report it.

Tracking Down Government Fraud

The case against Bering Straits is covered by a law called the False Claims Act. This Act allows private individuals with evidence of government fraud to initiate a legal action on the government’s behalf.

Claims like this have been particularly effective tools for recovering funds lost to fraud in defense contracting and the Medicaid and Medicare programs.

The claim is at first filed under seal while the government investigates the allegations. If the claim has enough merit, the government may intervene, taking the place of the whistleblower as the lead plaintiff.

Penalties under the False Claims Act can be substantial. The defendant may have to pay up to three times the amount defrauded from the government, plus other penalties for each false claim.

The DOJ press release notes that in successful government fraud prosecutions like this, the whistleblower is entitled to a share of the recovered money. The DOJ does not say how much the whistleblower will get in this particular case.

Generally, successful plaintiffs in a False Claims Act claim can expect to recover anywhere from 15 to 25 percent, and sometimes as much as 30 percent, of the amount recovered.