Ithaca Defense Contractor Settles Whistleblower Suit
|U.S. Attorney’s Office June 04, 2013|
United States Attorney Richard S. Hartunian announced today that his office has settled a civil prosecution under the False Claims Act. This case involves allegations that an Ithaca-based defense contractor, Agave BioSystems Inc., and its president, Noe Salazar, submitted false claims to the United States Department of Defense, fraudulently seeking payment for labor expenses when in fact those expenses were not incurred and the claimed labor in fact was not performed. The defendants have paid $300,000 to settle this matter.
This case started as a “whistleblower,” or qui tam, lawsuit filed by a former Agave employee, Rafik Tawadrous. In February 2010, Mr. Tawadrous filed a complaint that alleged that Agave had committed fraud in its performance of government contracts. This complaint was then investigated by agents and auditors from several federal agencies: the Defense Criminal Investigative Service (DCIS), U.S. Army Criminal Investigation Division (Army CID), the Defense Contract Audit Agency (DCAA), and the Federal Bureau of Investigation (FBI). The investigation confirmed material parts of Mr. Tawadrous’ allegations. The United States then entered this lawsuit and filed its own complaint (“complaint in intervention”), reflecting those investigative findings, on April 26, 2013.
The government’s complaint alleges in part the following: Agave is a small company located at 401 East State Street, Ithaca, New York. Agave largely performs scientific research and other work related to government defense contracts. Noe Salazar was the CEO and president of Agave until his death on October 6, 2012. In 2006, the Department of Defense conducted an audit of Agave’s claimed expenses. During that audit, Noe Salazar created two false time cards for one family member, namely, his daughter, that claimed that his daughter had performed work on a government contract when in fact she had not. Noe Salazar submitted the false time cards to the Department of Defense. Also, Agave claimed it had incurred salary expenses for other family members when these family members had not performed work to the extent claimed by Agave. Agave submitted the false and inflated salary expenses to the Department of Defense, which relied upon them in calculating the money that would be paid to Agave, regarding approximately 44 contracts with the U.S. Army, Navy, Air Force, and Defense Threat Reduction Agency.
The government’s complaint alleges misconduct only by Noe Salazar and Agave and does not allege misconduct by any other person, family member, or entity.
This action was filed pursuant to the federal qui tam statute, 31 U.S.C. ß3730, which allows a private person to file a civil action on behalf of the United States alleging that false claims have been submitted to the United States. This is part of the False Claims Act allows the government to file civil prosecutions, typically for defense procurement fraud and health care fraud. After a qui tam complaint is filed, the United States commences an investigation and determines whether to join the lawsuit (“intervene”) or to decline intervention. In this case, as discussed above, the United States commenced an investigation and determined that it would join the lawsuit. Pursuant to court order and federal law, the original complaint in this case remained under seal while the United States conducted its investigation and determined whether to intervene. The person who initially files the lawsuit (“relator”) is entitled to a share of the proceeds. The relator in this case, Rafik Tawadrous, will receive 18 percent of the settlement proceeds ($300,000), or $54,000.
Craig W. Rupert, Special Agent in Charge, U.S. Department of Defense, Defense Criminal Investigative Service, stated that “schemes to intentionally overbill the United States Department of Defense by any company or individual erode public confidence and undermine the mission of our military services. The DCIS and its law enforcement partners will continue to tirelessly pursue and investigate fraud allegations in order to safeguard the American taxpayer and military members.”
Richard S. Hartunian, United States Attorney for the Northern District of New York, stated that “the United States Attorney’s Office is committed to pursuing those who defraud the government under the False Claims Act, especially those who defraud the Department of Defense. When the military is defrauded, less money is available to support and protect our troops abroad. Such fraud is inexcusable.”
This matter is assigned to Assistant U.S. Attorney Charles E. Roberts. News inquiries should be directed to Executive Assistant United States Attorney John Duncan at (315) 448-0672.
The relator, Rafik Tawadrous, is represented by David Koenigsberg, Esq., of New York City, at (212) 223-2100.