From 2010 to 2016, Sarah Feinberg worked as a lead associate for the consulting firm Booz Allen Hamilton, during which time she discovered that the company was overcharging the United States government for its defence and national security contracts.
In July, the government reached a $377 million settlement with the McLean, Virginia-based firm, thanks in large part to the efforts of Feinberg, who became a hero under the whistleblower act and was awarded $70 million for her efforts.
Feinberg tells AWN that she now thinks the government did not go far enough in recovering money from Booz Allen and that federal contractors continue to be incentivized to deceive the government due to the Justice Department’s weakness.
When she raised the alarm, Feinberg was just 31 years old, but she claims that during her time at Booz Allen, she discovered that the company had overbilled the United States government by more than $250 million. Despite her warning, the company allegedly kept overbilling for another five years. She concluded that at least $500 million had been overbilled.
“Them paying this settlement is — really represents an interest-free loan from the government rather than a penalty for the fraud,” she explained. Perhaps [the administration] lacked the resources to fully grasp the situation.
After recovering $377 million from Booz Allen, the Justice Department said it was the largest such settlement in history, and an official from the department explained that the decision to accept the deal was influenced in part by the conviction of the prosecution. The agency promised to maintain its vigilance in future incidents of this nature.
Booz Allen did not respond to Feinberg’s latest charges and stressed that the settlement did not admit fault.
Under the False Claims Act, a law that protects the government from fraud, Feinberg sued the company, alleging that it had overcharged the government for expenses incurred in connection with its commercial and international operations. Six to seven years were spent investigating the company after suspicions of fraud surfaced between 2011 and 2021.
Feinberg, though, stressed that the government’s inertia allowed the company to overcharge the U.S. for years.
Feinberg emphasised that Booz Allen was able to keep working on the project until 2021 because of the Department’s delay.
According to Feinberg, “people without ethics in finance” can easily decide to continue defrauding the government when they can make a risk calculation that tells them they will pay back less than what they take from customers and that they will not be held accountable from the Department of Justice.
Not only that, but she also claimed to have heard in 2015 that Booz Allen had not yet been audited by the Defence Contract Audit Agency for 2012. Because of audits’ lengthy lead times, fraudulent billing could go unnoticed for years.
When asked for comment, no one from the Defence Contract Audit Agency got back to us.
Captain Feinberg of the United States Marine Corps is now working with Booz Allen after seeing service in Iraq. After completing her Master of Business Administration at the University of Pennsylvania’s Wharton School, Feinberg participated in a team analysing the company’s internal financial data. According to her False Claims Act complaint, her staff was entrusted with better tracking and analysis.
After splitting its government work from its global commercial operations, which established its own business and was eventually acquired by the firm of PricewaterhouseCoopers, Booz Allen was in the midst of expanding its commercial and international operations.
Feinberg said in his complaint that Booz Allen was overcharging the government for expenses connected to its multibillion-dollar consulting contracts because the company was losing tens of millions of dollars annually on its commercial and international business. For Booz Allen, that meant billing the federal government for overhead associated with expanding their business with foreign governments and firms, “entities that often maintain at least partially antagonistic relationships with the United States,” as the complaint put it.
According to Feinberg, she informed her coworkers when she saw the company was overcharging the United States government. The complaint alleges that in one meeting, an employee said that the Department of Defence was “too stupid” or “not smart enough” to capture the company and retrieve the funds. According to the complaint, however, the same coworker also indicated that the company had reserves in the event that the overbilling was uncovered.
According to Feinberg, Booz Allen claimed the government wouldn’t try to recoup all of the overpayments because it “would be proud of whatever they recovered.”
Because “they’ve been proven right,” Feinberg is concerned that people will be more likely to commit fraud against the government now that they know they won’t have to repay the whole amount. To paraphrase, “I think it’s a bad precedent for DOJ to be setting.”
Feinberg left her position at Booz Allen in 2016 due to the company’s inaction. On the government’s behalf, she initiated the False Claims Act action a month later. The SEC conducted its own inquiry, but the company claimed in its most recent earnings call that it was already closed.
Justice Department press secretary Peter Carr described it as “one of the largest procurement fraud settlements in history.” This settlement was the largest purely civil procurement fraud recovery in United States history, according to a Justice Department official who requested anonymity to discuss sensitive case details.
The source explained that the settlement was a result of the department weighing the costs of litigation against the potential rewards of a successful outcome. It was also noted that the relator (the government’s word for a whistleblower; Feinberg in this case) had the opportunity to protest to the settlement but chose not to.
When asked about the Department of Justice’s zeal in pursuing fraud claims, Patricia Hartman, a spokeswoman for the U.S. Attorney’s Office in the District of Columbia, pointed to the Booz Allen settlement as evidence of her office’s dedication to bringing criminals to justice.
“This settlement, which is one of the largest procurement fraud settlements in history, demonstrates that the United States will pursue even the largest companies and the most complex matters where taxpayer funds are alleged to have been pilfered,” said Hartman in a statement. “The Justice Department is dedicated to uncovering any and all fraud, waste, and abuse in government programmes, no matter how big or how small, straightforward or complicated.”
Feinberg received around $70 million for her assistance with the inquiry, however a sizable chunk of it will go to pay for her legal representation. According to her, the amount is around $42 million before taxes. She expressed reservations about the overall settlement amount but ultimately consented because she wanted to “reject this kind of behaviour by a company,” rather than increase her payout.
A representative for Booz Allen said in a statement that the company did not admit civil liability as part of the deal, despite the government’s years-long civil inquiry. The company “cooperated fully and has always believed it acted lawfully and responsibly,” the statement stated. The representative added that the company had participated with both processes, and that the government’s criminal probe had closed without action two years ago.
According to Feinberg’s lawsuit, the firm billed the government for “costs expended trying to grow Booz’s business with foreign companies and governments.” According to Feinberg, this also included Booz Allen’s work with the Saudi government.
Public documents reveal that between 2017 and 2018, Booz Allen was paid more than $3 million by the Royal Embassy of Saudi Arabia for advisory services. According to reports, it was also given the responsibility in 2017 of preparing a presentation on the Kingdom’s investments in the United States for then-Saudi deputy Crown Prince Mohammed bin Salman to give at the Trump White House. In 2020, Booz Allen officially became a Kingdom agent after the fact. According to Feinberg, the company’s move to overcharge the federal government effectively subsidised the company’s work for the Kingdom.
Booz Allen said that it stood by its contracts and defended them.
The U.S. government is Booz Allen’s most valuable client, therefore the government has reviewed all of the firm’s past work for foreign countries to make sure it doesn’t conflict with American interests abroad. Any suggestion otherwise is completely incorrect and completely disregards the most strict regulations that the U.S. government has for any of its private sector partners.
