Tuesday, May 30, 2017

Details Revealed on Agility Settlement with US Government

Hefty Penalty Issued for Overcharging
Shipping News Feature
US – KUWAIT – Following up on news last week that Agility had settled its criminal, civil, and administrative cases in the US, the Department of Justice has released more information on the settlement agreement which saw Agility resolve allegations that it overcharged the US when carrying out contracts with the Department of Defense (DOD) to supply food for US troops from 2003 through 2010.

Agility has agreed to pay $95 million to resolve civil fraud claims, to forgo administrative claims against the United States seeking $249 million in additional payments under its military food contracts, and to plead guilty to a criminal misdemeanour offense for theft of government funds. DOD’s Defense Logistics Agency (DLA) will also release a claim of $27.9 million against Agility and lift its suspension of Agility, as the company has been suspended from federal government contracting for the last seven years after being indicted. An administrative agreement entered between DLA and Agility requires oversight of an Agility entity by an independent corporate monitor and the maintenance of an ethics and compliance program with a number of detailed requirements. US Attorney John Horn for the Northern District of Georgia, where the matter was resolved, said:

“[The] global resolution represents a fair and just outcome of criminal, civil, and administrative cases that have been pending since 2009. Agility has admitted to criminal conduct, has given up claims it valued at up to $249 million, and must pay $95 million to the government. The agreements require Agility to take responsibility for its criminal wrongdoing and take affirmative steps to prevent it from engaging in this conduct again, and the government recovers significant funds that were alleged to have been wrongly paid.”

The civil claims and criminal charges resolved last week arise out of allegations originally raised in a civil whistle blower suit against Agility and another Kuwaiti company, The Sultan Center Food Products Company (TSC). Kamal Mustafa Al-Sultan, a former vendor of Agility, filed the lawsuit under the qui tam, or whistle blower, provisions of the False Claims Act (FCA), which permit private individuals to sue on behalf of the government for false claims and to share in any recovery. The Act also allows the government to intervene and take over the action, as it did in this case. Al-Sultan will receive $38.85 million as a result of the civil action he filed, U.S. ex rel. Kamal Mustafa Al-Sultan v. Agility Public Warehousing Co., K.S.C. et al., No 1:05-cv-2968-GET (N.D. Ga.).

In its civil complaint, the United States alleged that Agility and TSC knowingly overcharged the DOD for locally available fresh fruits and vegetables that Agility purchased through TSC, and falsely charged the full amount of TSC’s invoices despite agreeing that Agility would pay 10% less than the amount billed. The United States also alleged that Agility failed to disclose and pass through rebates and discounts it obtained from US-based suppliers, as required by its contracts.

The crime to which Agility has agreed to plead guilty alleges conduct that was part of the pending indictment. Specifically, it alleges that in connection with one of its contracts, Agility concealed consolidation fees that should have been paid by Agility, plus an additional mark-up to the company, in the product price billed to the United States. As a result of Agility’s price manipulation, the United States paid an inflated price for food. The criminal Information to which Agility is pleading guilty charges to is for one inflated invoice in an amount of less than $1,000, although the United States asserts that Agility engaged in this price manipulation whenever it used this consolidator.

Following Agility’s criminal Indictment by a grand jury, on November 16, 2009, DLA suspended Agility from government contracting. This suspension was subsequently extended to Agility’s more than 300 affiliated entities. As a result, Agility and its affiliates have forgone the opportunity to obtain billions of dollars in revenue associated with DOD contracts since 2009. Although Agility’s suspension will be lifted, it will be required to use an independent monitor. Moreover, the agreement requires Agility to maintain an ethics and compliance programme with a number of detailed requirements.

Since 2006, Agility has filed a number of contract claims seeking additional payments of $249 million alleging that DLA owed Agility payments for its performance under a series of military contracts, which DLA contested in protracted litigation. This agreement requires Agility to release all claims against DLA related to the contracts.

The claims resolved by the settlements are allegations only, except to the extent the conduct was admitted as part of the defendant’s guilty plea, and there has been no determination of liability.