Whistleblower Complaint Leads to Possible $2 Million Penalty for South Korean Defense Contractor

A lawsuit filed by a whistleblower under the qui tam provisions of the False Claims Act may result in a $2 million payout to the U.S. government by a South Korean company for conspiring to rig bids for Defense Department contracts.

The Department of Justice filed a complaint in civil court on April 8 laying out the charges against the Jier Shin Korea Company and its president Sang Joo Lee. The DOJ simultaneously filed a proposed settlement that, if approved, will result in the defendants paying the $2 million penalty for violating civil antitrust laws in addition to the FCA.

The U.S. military has maintained a significant presence in South Korea since the end of the Korean War, and regularly contracts with South Korean companies for fuel and other supplies. Jier Shin collaborated with several other Korean oil refiners and logistics companies for at least a decade to limit bids in order to raise final contract awards, the complaint alleges, resulting in a loss to the U.S. government of “well over $100 million.”

Jier Shin Korea and Lee cooperated with the investigations and agreed to an antitrust compliance program. They will pay a separate settlement for violating the FCA by making false statements to the government about their actions. The Justice Department has already reached settlements with the other conspirators totaling more than $205 million, according to a DOJ press release.

DOJ said the action represents the sixth FCA settlement stemming from the South Korea bid rigging. The antitrust charges were filed under a section of the Clayton Antitrust Act, the largest settlements under that section in U.S. history, the DOJ said.

The FCA allows private individuals to sue on behalf of the U.S. government under the qui tam provisions. These provisions allow those individuals to collect whistleblower rewards of between 15 to 30 percent of any monetary sanctions collected by the government.

Violators are also liable for treble damages under the FCA, making it one of the most effective anti-fraud laws in the United States. Since 1986, whistleblower cases under the FCA have brought in over $42.5 billion to the U.S. Treasury and more than $6.4 billion has been awarded to whistleblowers for their disclosures.

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