Illegal Billing and Cost-Shifting

Illegal Billing and Cost-Shifting

Unscrupulous Government contractors use a wide variety of schemes to boost their profits under contracts with the United States. These methods include charging costs that are not authorized under the contract, billing for work and material that were unnecessary or never performed, and shifting costs between contracts in a manner that enriches the contractor and disadvantages the U.S.

“Parties that contract with the government or its agencies must be held to the terms of their contract. The U.S. Attorney’s office remains committed to recovering funds lost when a contractor departs from its contractual obligations.” — Nancy Harr, U.S. Attorney for the Eastern District of Tennessee

Unallowable Costs and Cost-Padding

There are numerous examples of contractors violating the False Claims Act (FCA) by including claims for reimbursement under Government contracts that the Government has not agreed to pay. For example, major communications providers have been prosecuted under the FCA and obliged to repay the Government over allegations that the providers had billed the U.S. for unallowable costs. The providers were required by federal law to upgrade their equipment in order to obtain future contracts, but prohibited from billing the Government for the costs of those upgrades. The Government alleged, however, that the providers had nonetheless illegally billed those upgrade costs to the United States.

Contractors also submit fraudulent claims to the Government when they inflate the actual cost of supplies or services that they incur during performance. This occurred recently, when a technology contractor admitted to reporting inflated labor costs when installing a computer network in a Government facility.


“It is unacceptable for companies that do business with the federal government to inflate their costs.” – Channing D. Phillips, U.S. Attorney for the District of Columbia

At times, the structure of Government contracts may create an incentive for contractors to shift costs among contracts or line items, resulting in the United States paying more than contemplated by the contract or paying for the same goods and services twice. For example, some contracts include both “cost reimbursable” and “cost plus” components. In the former type of contract, a contractor is simply reimbursed the costs it incurs; in the latter, the contractor receives a “bonus,” generally in the form of a percentage of the total costs. This bonus payment is typically designed to cover the “indirect” or “overhead” costs of the contractor in performing under the contract. Manifestly, in this scenario, it is in the interest of a contractor to attempt to shift cost items into the “cost plus” category.  In other scenarios, a contractor may seek reimbursement for a category of cost both as a direct cost, and a second time as part of its “overhead” costs.

Our Attorneys are National Qui Tam Experts and Trial Lawyers.

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Jim Barger and Elliott Walthall are the only private attorneys general in the country ever to be tapped as part of a Department of Justice trial team in a Medicare fraud jury trial.  A noted expert on the False Claims Act (FCA), Jim Barger teaches upper-level courses on the subject as an adjunct professor at the University of Alabama School of Law, ranked among the top 15 law schools in the nation by Business Insider in 2016. Barger has appeared on HuffPost Live, Fox 6 Atlanta, and National Public Radio and his opinions on FCA Medicare enforcement are regularly sought by major newspaper outlets, including The New York Times and The Washington Post.

Both Barger and Walthall have spoken on national panels about Medicare fraud for the American Bar Association, the American Association for Justice, and Taxpayers Against Fraud. In 2015, Barger was a featured symposium speaker on Medicare Fraud and the FCA at the Georgetown Law Center in Washington, DC. In 2016, Georgetown’s American Criminal Law Review published a new research article by Barger on the public-private partnership of the FCA.

“Frohsin Barger & Walthall Wins $150 Million Whistleblower Settlement”

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Frohsin Barger & Walthall investigates and litigates qui tam actions on behalf of whistleblowers in federal and state actions across the country. Our representation includes evaluating, investigating, and filing qui tam actions, as well as assisting prosecutors and investigative agents in pursuing cases and reaching settlements, with a high percentage of our cases resulting in government intervention. We have sealed cases in multiple states across the country and regularly travel to meet with United States Attorney’s offices, State Attorney General Offices, and United States Department of Justice attorneys in Washington, DC.

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Blowing the whistle on corporate fraud takes courage, and the law rewards that courage with certain protections. We understand that one of the most important aspects of representing corporate whistleblowers is guiding and protecting them through the difficult, stressful process of litigation. The False Claims Act (FCA) provides for a whistleblower’s case to be filed under seal and the identity of the whistleblower to be protected during the course of the government’s investigation. Further, federal laws protect against retaliation by mandating the reinstatement of wrongfully fired employees at the same seniority level, as well as an award of double back-pay, interest, and attorneys’ fees. Finally, successful whistleblowers are entitled to up to 30% of any FCA recovery, which Congress has mandated is three times the amount of fraud that is proved through the whistleblower’s allegations, plus substantial civil penalties.