Mendenhall Law Group: Federal Court of Appeals decision supports qui tam whistleblowers

Published: May. 18, 2022 at 5:00 AM MDT

CLEVELAND, May 18, 2022 /PRNewswire/ -- In U.S. ex rel. USN4U v. WOLF CREEK FEDERAL SERVICES 6th Circuit Case No. 20-4246, a whistleblower alleged Wolf Creek submitted falsely inflated project estimates to NASA for facilities maintenance projects resulting in the negotiation of fraudulently induced, exorbitant contract prices.

Warner Mendenhall, Principal, Mendenhall Law Group
Warner Mendenhall, Principal, Mendenhall Law Group(PRNewswire)
"We hope to bring accountability to those who contract for the public's business," said Warner Mendenhall

According to the 2017 Complaint filed by the Mendenhall Law Group, when Wolf Creek performed NASA projects, work group leads allegedly instructed certain "participating union employee[s]" to falsely report their labor hours to "justify the inflated [labor] estimate." The software used to track labor hours "has no mechanism to verify whether an employee worked on a work order, or even showed up for work," and work group leads did not have to verify the labor hours reported by their subordinates.

The Sixth Circuit Court of Appeals ruled that:

The amended complaint details four specific allegations of fraud, thus meeting the requirement that the relator provide examples of the fraudulent scheme. When a relator "alleges 'a complex and far-reaching fraudulent scheme,' then that scheme must be pleaded with particularity and the complaint must also 'provide[ ] examples of specific' fraudulent conduct that are 'representative samples' of the scheme." Prather, 892 F.3d at 830

At the pleading stage, it is sufficient that USN4U set forth a factual basis for its allegations by pointing to plausible industry standards and alleging that Wolf Creek's labor estimates were dramatically higher than those standards.

The court noted USN4U alleged additional facts that, from a common-sense perspective, support the assertion that Wolf Creek falsified statements to NASA.

USN4U has a recorded conversation in which Wolf Creek employees allegedly discussed their knowledge of the falsely inflated cost estimates and labor hours. A union carpenter, allegedly stated "[t]he original estimate that they gave me for hours, they told me they needed about 130 hours of overtime. I upped it like I always do to 164 hrs. They put 409 hours of time and a half and double time."

In the same conversation, another union member who allegedly participated in the fraud said: "I came back and we started chewing up what you guys had. It was going away so I got nervous and had no intentions of working 40 hrs when I came back. So then I got crazy and started pumping out estimates. And now it[']s, if I stay at the rate that I am at right now we will never run out. So the key is to just have it flooded. Inundate the customer with the quotes. So that's kind of like darts ya know. It's got to land when money shows up."

"After five years, it is gratifying to achieve a positive ruling that will help whistleblowers get their day in court to protect the taxpayers," said Warner Mendenhall. "We especially appreciate our relator's patience, courage, and persistence. We hope to bring accountability to those who contract for the public's business."

United States of America et al v. Wolf Creek Federal Services, Inc. et al, Case Number: 1:17-cv-00558 goes back to District Court for scheduling and discovery.

Media Contact:
Warner Mendenhall
+1 330-535-9160
warner@warnermendenhall.com

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