Sysco subsidiary pays $4.2 million to settle whistleblower suit

by Ben Vernia | November 19th, 2013

On November 19, the Department of Justice announced that FreshPoint, Inc., a subsidiary of the food company Sysco, has agreed to pay $4.2 million to resolve False Claims Act allegations originally brought by a whistleblower. According to DOJ’s press release:

The Justice Department announced today that FreshPoint Inc., a Houston, Texas-based food distribution company and wholly owned subsidiary of Sysco Corp., has agreed to pay $4.2 million to resolve allegations that it overcharged the Department of Defense for fresh fruit and vegetables purchased under 15 separate contracts. The contracts were awarded to East Coast Fruit Company and subsequently performed by FreshPoint following FreshPoint’s acquisition of East Coast Fruit Company in 2007.

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The settlement resolves allegations that from Dec. 17, 2007, through Sept. 11, 2009, FreshPoint overcharged the government on hundreds of sales of fresh fruit and vegetables by improperly inflating its prices to the government to reflect FreshPoint’s view of the prevailing market price of the goods at the time of sale. The government alleged that this practice violated FreshPoint’s contracts with the government that required FreshPoint to provide the produce at cost, plus a pre-established mark-up for profit, and did not allow FreshPoint to make additional price adjustments based upon perceived changes in market prices.

The government announced that the whistleblower, a former FreshPoint employee, will receive $798,000 of the settlement (a 19% relator’s share).

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