Justice Department Sues Gallup for Defrauding Three Federal Agencies

Washington, D.C. In a 57-page civil complaint filed in federal court in Washington, D.C., the U.S. Department of Justice (DOJ) accuses The Gallup Organization of bilking the State Department and U.S. Mint out of millions of dollars by falsifying labor-hour estimates on government contract work between 2007 and 2009. DOJ’s complaint also accuses Gallup of violating the False Claims Act and the Procurement Integrity Act by engaging in prohibited employment discussions with a FEMA executive who oversaw the award of FEMA work to Gallup. Timothy Cannon, the former FEMA Director of Human Capital, is charged as a co-defendant in the DOJ complaint.

The DOJ complaint charges Gallup with submitting 268 false claims to FEMA, the State Department and the U.S. Mint, totaling $12.96 million.

The Department of Justice’s complaint adds considerable detail to a whistleblower “qui tam” lawsuit brought by former Gallup employee Michael Lindley under seal in 2009 and made public in August 2012. The “qui tam” provisions of the federal False Claims Act authorize private citizens to bring suit on behalf of the United States against companies that defraud government agencies.

Through his attorneys at the qui tam law firm Vogel, Slade & Goldstein, LLP and the whistleblower law firm Katz, Marshall & Banks, LLP, Lindley also filed an amended complaint today, detailing how he spent months as Gallup’s Director of Client Services trying to convince the company to stop engaging in pricing fraud and other corrupt practices. When his attempts proved unsuccessful, Lindley allegedly told management that he intended to report Gallup’s misconduct to the Justice Department. The following day, according to the amended complaint, Gallup’s chief counsel fired Lindley and told him, “When you start talking about going to the Department of Justice, we don’t trust you anymore.”

DOJ’s complaint alleges that under both a 2008 contract to assess passport demand for the State Department and a 2007 contract with the U.S. Mint to measure demand for newly minted coins, the agencies relied on cost estimates supplied by Gallup in order to determine contract prices. However, Gallup allegedly maintained a double set of records. The DOJ complaint charges that Gallup created grossly inflated labor estimates which it provided to the State Department and the Mint to drive up prices, while maintaining separate records of the true and much lower estimated costs of their work.

The conflict of interest charges against Gallup and former FEMA employee Timothy Cannon arise from a 2008 FEMA subcontract awarded to Gallup to evaluate the strengths and satisfaction of FEMA’s workforce. The Justice Department’s complaint alleges that at the same time that Cannon was pushing his agency to award work to Gallup, Cannon and Gallup were unlawfully discussing Cannon’s future employment with Gallup. The DOJ complaint cites several internal Gallup emails in which Gallup CEO Jim Clifton and government division manager Warren Wright discuss their intention to hire Cannon if he can persuade FEMA to award Gallup the subcontract. The DOJ complaint quotes Clifton telling Wright in an email dated April 25, 2008, that if Cannon “gets us a big deal at FEMA…i[sic] think we should hire him.”

According to the DOJ complaint, on February 5, 2009, Gallup extended a formal, written partnership offer to Cannon after he helped secure and fund the FEMA contract with Gallup. The DOJ complaint charges that Cannon announced his retirement from FEMA a few days later, and that he falsely certified to FEMA on February 28, 2009 that he had no post-government employment. Gallup allegedly post-dated a second employment offer letter in a manner that supported Cannon’s false certification. Gallup ultimately rescinded its partnership offer to Cannon in late March, but only after Wright allegedly concluded that hiring Cannon could “get in the way of future [FEMA] business,” because Cannon’s government co-workers were “pretty mad” about what had occurred.

Lindley’s attorneys applauded the government’s action in joining his whistleblower lawsuit. “Michael’s experience – as alleged in the complaint — is too typical: an honest employee tries to stop a profit-driven fraud, only to be fired from a promising career,” said whistleblower attorney Janet Goldstein. “But, thankfully, the story didn’t end there. Michael brought the alleged fraud to the attention of the Justice Department, which after its own three-year investigation is pursuing civil claims against Gallup under the False Claims Act.”

With the government’s intervention in his lawsuit, Lindley will help DOJ prosecute the government’s fraud claims while also pursuing his own claims against Gallup for wrongful termination under the False Claims Act’s anti-retaliation provision and under District of Columbia law. David J. Marshall, a partner with Katz, Marshall & Banks, LLP who also represents Lindley, stated, “Corporate employees like Michael Lindley serve a critical function when they try to stop fraud on the taxpayers. Companies need to know that they cannot get away with silencing a whistleblower for opposing fraudulent practices.”

The lawsuit, which was filed in the District of Columbia, is captioned U.S. ex rel. Lindley v. The Gallup Organization, et al. 1:09-cv-01985 (ABJ).

Click here for the DOJ Complaint in Intervention.
Click here for Lindley’s amended complaint.