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Contractor fraud at N.M. Tech program

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A global defense contractor has agreed to pay $11.75 million to settle a whistle-blower lawsuit that alleged billing fraud for a weapons of mass destruction “first responder” training program run by New Mexico Tech in Socorro.

The lawsuit filed on behalf of whistle-blower Richard Priem alleged that Science Applications International Corp. inflated costs by certifying it hired full-time employees with benefits when, in fact, it hired part-time workers who received few benefits — thus cheating the government out of millions of dollars the company pocketed.

The settlement money will be split between the federal government and Priem. Whistle-blowers are typically awarded with 15 percent to 25 percent of the recovery when the government joins the case, as happened in this case. The percent and amount has yet to be decided.

Priem, an Albuquerque resident, was the defense contractor’s project manager for the program, which Congress created in 1998 in response to the Oklahoma City bombing. New Mexico Tech has run the program since its inception, but contracted with Science Applications International Corp. to provide training personnel.

Court records indicate that SAIC was paid more than $217 million through the program between 1998 and 2011, according to The Associated Press.

The lawsuit was filed in U.S. District court in Albuquerque by the Washington, D.C.-based law firm of Phillips & Cohen LLC. It was kept under seal until the settlement was made public on Thursday.

“If SAIC had been honest and charged the government based on its true costs, additional funds would have been available to train more first responders,” said Peter W. Chatfield, a Washington, D.C., attorney with Phillips & Cohen LLC, in a prepared statement. “We continue to see how important first responder training is to deal with terrorist attacks – most recently in Boston. So it’s important to train as many first responders as possible with the government funds that are allocated.”

New Mexico Tech Vice President for Research and Economic Development Van Romero, who oversees the first responder program, told the Journal that 500,000 firefighters, police and other emergency workers will have been trained through the program by the end of 2013.

“We train between 8,000 and 10,000 people a year from all states across the country and from U.S. territories,” Romero said.

Romero declined to comment on the lawsuit or the settlement, but said New Mexico Tech made a decision earlier this year to no longer use a subcontractor to hire training personnel.

“We will now hire those temporary workers through New Mexico Tech without relying on anybody else,” Romero said. “We’ll do the contracting directly to be in control of everything.”

Federal funding for the program grew from about $1 million annually when it started to about $3 million per year by 2001, and then to about $22 million annually after 9/11, where it remains today, Romero said.

New Mexico Tech had subcontracted SAIC on a sole-source basis since 1998. As a result, SAIC never had to compete on a price basis for the contract, but it was required to provide accurate information about its costs and profits, said Tim McCormack, another Washington., D.C., attorney with Phillips & Cohen.

“Both the federal government and New Mexico Tech relied on SAIC to provide accurate information about its costs,” McCormack said. “We alleged that SAIC instead inflated its costs so that it could capture roughly one-third of New Mexico Tech’s total appropriation.”

The lawsuit was originally filed under the whistle-blower provisions of the False Claims Act, which allows private citizens to sue companies that are defrauding the federal government and recover funds on the government’s behalf.

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