by Ben Vernia | October 21st, 2014
On October 21, the Department of Justice announced that Leidos Holdings, Inc., the company formerly known as Science Applications International Corp. (SAIC) has agreed to pay $1.5 million to resolve False Claims Act allegations that the company entered into a contract with the Nuclear Regulatory Commission without disclosing an organizational conflict of interest.
The government won a $6.5 million judgment at a first trial, but the D.C. Circuit granted the company a new trial in 2010, rejecting the company’s arguments regarding the standard for liability under an implied certification theory, but agreeing with it that the District Court had provided erroneous jury instructions on corporate knowledge and damages.
According to DOJ’s press release:
The Justice Department announced today that Science Applications International Corporation (SAIC), now known as Leidos Holdings Inc., has agreed to pay $1.5 million to resolve a False Claims Act lawsuit alleging that it knowingly engaged in prohibited conflicts of interest as a contractor for the U.S. Nuclear Regulatory Commission (NRC) between 1992 and 2000. SAIC provides scientific, engineering and other technical services for government and commercial customers and is headquartered in Reston, Virginia.
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Between 1992 and 2000, SAIC held two contracts with the NRC to provide scientific and technical services, including assisting the NRC in its consideration of a rule that could have permitted the release or recycling of certain types and quantities of material with very low levels of radioactivity below regulatory safety limits. The NRC decided in 2005 not to proceed with such a rule. The United States alleged that, under these contracts, SAIC was required to avoid conflicting business relationships that could bias SAIC’s work for the NRC. The United States alleged that SAIC repeatedly and falsely certified that it had no such conflicting business relationships, when SAIC actually engaged in multiple business relationships with entities that had a financial interest in the outcome of the NRC’s rulemaking effort.
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In July 2008, after a five-week jury trial, the jury returned a verdict in favor of the United States that SAIC violated the False Claims Act and breached its contract with the NRC by engaging in undisclosed conflicts of interest. On appeal, in December 2010, the U.S. Court of Appeals for the District of Columbia Circuit affirmed judgment for the United States on the breach of contract claim, but partially reversed the judgment on the False Claims Act claims based on two instructions given to the jury and remanded the case for a new trial on those claims.
