Michael Epp, a German citizen and former executive at Supreme Foodservice collected $16 million as a result of blowing the whistle on his former employer. Supreme Foodservice and their affiliated companies pled guilty to criminal charges of major fraud, conspiracy to commit major fraud, and wire fraud, which comes with $288M in criminal penalties. In a separate lawsuit under the False Claims Act, Supreme Foodservice and its affiliated companies agreed to pay $101 million to resolve the whistleblower allegations ($16M of which will go to Mr. Epp) and will also pay $1.1M for Mr. Epp’s legal fees.
Mr. Epp filed a qui tam (whistleblower) suit in federal court in Pennsylvania in 2010 alleging that Supreme violated the False Claims Act by knowingly overcharging on a military contract to supply food and water to U.S. troops in Afghanistan. They overcharged the United States under the contract from 2005 to 2009, mainly through price mark ups by a middleman company they secretly controlled.
Emma Sharma, general counsel of Supreme Group USA, said in a statement posted Monday on the corporate website: “We accept full responsibility for and deeply regret our past actions. We have implemented new compliance mechanisms and strengthened our internal processes. We now have some of the most rigorous controls in the industry. We recognize that to re-earn trust, we must always act with integrity. That’s where our focus is and that’s where our focus will continue to be.”
You can find more details in the DOJ press release from December 8th: http://www.justice.gov/opa/pr/defense-contractor-pleads-guilty-major-fraud-provision-supplies-us-troops-afghanistan
Key take-aways from this case are:
- Companies should have a robust corporate compliance program in place to help prevent and identify potential fraud.
- Companies should have anonymous hotlines or other mechanisms for whistleblowers to report suspected violations internally.
- Companies should have a zero tolerance policy on retaliation for whistleblowers.
- Companies should encourage their employees to come forward within the company (either using their chain of command or anonymously) with confidence that there will be no retaliation and that the company will investigate and voluntarily disclose violations that are discovered.
C2I can help your company set up an internal compliance program, including policies and procedures related to fraud prevention and identification, training, recordkeeping, and setting up effective reporting mechanisms.