Top 2017 False Claims Act developments for
aerospace, defense, and government
services companies
29 January 2018
This year, Trump appointees took the helm at the Department of Justice (DOJ) and assumed
responsibility for False Claims Act (FCA) enforcement. Although fighting waste, fraud, and abuse
remains a DOJ priority, total FCA recoveries in fiscal year (FY) 2017 (US$3.7bn) fell from the
US$4.7bn recovered in FY 2016. Because annual FCA recoveries can be swayed by one or two
large settlements in any given year – a single, mammoth US$1.2bn recovery from a bank and
mortgage lender in FY 2016 more than accounts for the drop in FY 2017 – it is not yet clear that
the decline in FY 2017 signals a lasting downward trend. It is clear, however, that aerospace,
defense, and government services (ADG) companies continue to be targeted by qui tam relators
and should expect continued FCA scrutiny. In fact, FCA recoveries at the U.S. Department of
Defense (DOD) climbed to US$220m in FY 2017 (up from US$122m in FY 2016, but down from
US$282m in FY 2015).
The big cases in 2017 and implications for 2018
Recoveries from ADG companies this past year included a US$95m settlement with Agility Public
Warehousing Co. KSC (Agility), which also agreed to forgo administrative claims against the
United States that sought US$249m in additional payments. The settlement resolved allegations
that the Kuwaiti company overcharged the government for food supplied to U.S. troops by failing
to disclose and pass through rebates and discounts it obtained from other suppliers, as required
by its contract.
The DOJ also recovered US$16m from defense contractor, ADS Inc., through a settlement that
resolved allegations that ADS and its subsidiaries violated the False Claims Act by submitting
claims for payment under fraudulently obtained small business set-aside contracts. The DOJ
reported that the ADS settlement “ranks as one of the largest recoveries involving alleged fraud in
connection with small business contracting eligibility.” This settlement follows an FY 2016
investigation of an alleged scheme to defraud the Small Business Administration’s (SBA) 8(a)
Business Development Program, which resulted in multiple criminal pleas and fines. Together,
these two settlements suggest that the DOJ is increasingly proactive at combatting small business
contracting fraud. In the ADS settlement announcement, SBA General Counsel Christopher
Pilkerton commented that “identifying and aggressively pursuing instances of civil fraud by
