U.S. Army’s Handheld Mine Detector Manufacturer, L3 Communications’ CyTerra, Pays Nearly $2 Million to Settle Defense Contracting Fraud Investigation

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Whistleblower case filed in 2006 two high-ranking employees returns nearly $2 million to U.S. taxpayers, Attorneys Mark Kleiman and Patricia Sigman Announce

The manufacturer of the U.S. Army’s standard one-soldier-operated dual-sensor anti-personnel and anti-tank mine detector will repay nearly $2 million to U.S. taxpayers to settle qui tam whistleblower-led allegations it illegally defrauded the Army by overcharging for labor, according to qui tam whistleblowers’ attorneys Mark Kleiman, of Venice, California, and Patricia Sigman, of Orlando, Florida.

Waltham, Massachusetts-based defense contractor CyTerra, Inc., (“CyTerra,” http://www.cyterracorp.com/index.htm) an L3 Communications subsidiary, overcharged the U.S. Defense Department for the Model AN/PSS-14 landmine detector, according the federal Settlement Agreement unsealed late yesterday. Federal and state retaliation counts, lodged by the high-ranking company officials who filed their whistleblower Complaint in 2006 are still pending, according to Sigman.

CyTerra settled the qui tam allegations in the 10-count Complaint,”…to avoid the delay, uncertainty, inconvenience and expense of protracted litigation,” according to the Settlement Agreement. Three contract modifications in which the company overbilled the Government are listed in the settlement agreement; orders for additional units in February and May 2005, and Maintenance and Training in August 2005 for false labor and materials billing.

“The lengthy investigation in this case and hefty sum CyTerra has agreed to pay make it clear that companies ripping off taxpayers can expect resistance from courageous employees stepping up to do what’s right,” said Kleiman, a Los Angeles based qui tam attorney.

“Our relators (under the law qui tam whistleblowers are referred to as ‘relators’) are experienced financial managers in the defense industry who blew the whistle on CyTerra practices that overcharged the Government, helping taxpayers to recover nearly $2 million dollars,” said Sigman, a Board certified Labor and Employment lawyer in Central Florida." “Now we look forward to vindicating their employment rights after CyTerra fired them in retaliation for whistleblowing."

“The whistleblowers took tremendous risks by insisting on reporting it to the government right away. Taking on a successful defense contractor required close coordination and cooperation between us and federal prosecutors. This taskforce approach and the whistle blowers’ unrelenting commitment won a real victory for the taxpayers,” Kleiman said.

The U.S. False Claim Act, initially sponsored by President Abraham Lincoln to stop military fraud during the Civil War, allows private citizens with knowledge of fraud to help the Government recover ill- gotten gains and additional civil penalties. The FCA allows the Government to collect up to three times the amount it was defrauded, in addition to civil penalties of $5,500 to $11,000 per false claim. Whistleblowers whose cases settle or are won in court usually receive rewards representing 15 to 25 percent of qui tam recoveries.

In this case the former high-ranking employee whistleblowers will share in a $361,000 reward, representing approximately 19 percent of the settlement, Sigman said.

Attorneys’ fees, which the settling entity is required to pay under the False Claims Act, are yet to be determined.

The federal investigation was conducted by the U.S. Attorney’s Office for the District of Massachusetts, under the direction of Carmen M. Ortiz, U.S. Attorney; Assistant U.S. Attorney George B. Henderson, II; and Department of Justice Trial Attorney Brian McCabe. The broad investigation including an extensive review of CyTerra’s documents, e-mails, accounting data, and a detailed review of CyTerra’s representations to the U.S. Government during the contracting process.

Sigman and Kleiman praised the work of the Government investigation team. “The federal investigators in this case represent the highest calling of public service”. Sigman said. “If it had not been for the Government agents and lawyers who persevered with us we would not be announcing this settlement against CyTerra. It has been an honor to work with the Government team,” Kleiman added.

Case Caption

United States ex rel. Bartczak, et al. v. Cyterra, Inc., et. al., U.S. Dist. Ct. Case No. Civil Action No. 06-CA-10550-NMG (D. Mass.)

Attorney Contacts:

Mark Kleiman, Esq. - 310 306-8094 mkleiman(at)quitam(dot)org
Patricia Sigman, Esq. - 407 332-1200 patricia(at)sigmanlaw(dot)com

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