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October 2017: Victory by Settlement in False Claims Act Case

October 2017

The firm recently obtained a remarkable settlement on behalf of its client, ACADEMI Training Center, LLC (f/k/a/ Blackwater USA), resolving a False Claims Act case that had been ongoing for seven years. The case was originally filed in 2011. It arose out of allegations that ACADEMI submitted invoices to the State Department for payment that contained false and misleading statements about the services that the company provided pursuant to a defense contract with the State Department. That contract required ACADEMI to provide security services to State Department and U.S. Embassy personnel in Kabul, Afghanistan. It contained a number of specific requirements, including a requirement that certain ACADEMI personnel be proficient with five firearms, including two belt-fed machine guns called the M-240 and M-249. To demonstrate their proficiency on the five weapons, ACADEMI was required to conduct initial qualification testing on each of the five weapons, followed by requalification testing on each weapon every quarter. In order to pass the requalification test, ACADEMI personnel had to achieve a certain minimum passing score set by the Contract.

Relators claimed that from April 2007 through August 2011, ACADEMI committed fraud against the State Department by falsifying its shooters’ M-240 and M-249 scores by recording passing scores for individuals who were not properly qualified under the contract and then improperly billing the State Department for these individuals. Specifically, Relators claimed that ACADEMI’s firearms instructors did not score shooters properly on the M-240 and M-249 requalifications because they did not switch out targets between shooters and did not walk up to the targets to inspect the number of holes each shooter achieved on the targets. Instead, Relators claim that ACADEMI’s firearms instructors would simply count the number of misses by spotting dirt splashes and would then subtract that number from the total shots fired in order to determine whether a shooter achieved a passing score. According to Relators, this scoring method—used by only two out of more than two dozen instructors—was so inherently unreliable that the recorded scores could not possibly have been accurate. As a result, Relators claimed that all of ACADEMI’s invoices to the State Department over the life of the contract were false and fraudulent and warranted total disgorgement. However, after aggressively pursuing discovery from the State Department, we were able to develop a number of defenses that positioned ACADEMI for a remarkable pre-trial settlement.

First, we were able to establish an extensive record that showed that the State Department’s monitors were not only on site watching ACADEMI’s requalifications, but that they also never once criticized the way in which ACADEMI or its firearms instructors conducted weapons requalifications. In fact, the documentation obtained in discovery specifically noted that the State Department monitors observed “no anomalies” with the way in which ACADEMI conducted its requalifications. Similarly, deposition testimony from several State Department witnesses further confirmed their satisfaction with ACADEMI’s performance under the contract generally, and its performance of weapons requalifications, specifically.

Beyond government knowledge and tacit approval of the requalification approval process, we also developed a compelling materiality defense; that is, that the State Department’s decision to make payments on the disputed invoices would not have been affected had it known about ACADEMI’s use of the “count-misses” method. In this respect, the State Department official who was responsible for approving ACADEMI’s invoices testified at his deposition that even if ACADEMI were committing fraud in connection with its weapons requalifications (which it was not), the State Department would still have approved its invoices. Our materiality defense was also buttressed by the fact that the State Department continued to make payments to ACADEMI even after learning of Relators allegations; the State Department continued to contract with ACADEMI even after learning of Relators’ allegations; and the State Department never, even to this day, asked ACADEMI for a refund, credit, or otherwise.

Ultimately, these defenses, and pending, potentially case-crippling Daubert motions, facilitated a settlement at less than cost of trial, a far cry from the over $400 million originally sought.