Katz, Marshall & Banks and Vogel, Slade & Goldstein: Navy Contractor Inchcape Shipping Services to Pay $20 Million to Settle Billing Fraud Charges in False Claims Act Lawsuit

WASHINGTON, May 29, 2018 /PRNewswire/ -- The U.S. Department of Justice announced today that Inchcape Shipping Services Holdings Limited and certain of its subsidiaries (collectively, Inchcape) will pay $20 million to settle allegations that it knowingly overbilled the U.S. Navy for services provided to Navy ships from 2005 to 2014 in ports around the world. Inchcape, one of the world's largest providers of marine support services, is headquartered in the United Kingdom and is a subsidiary of the Istithmar World investment firm and the Dubai government-owned Dubai World. 

The whistleblower suit against Inchcape was filed in 2010 under the qui tam provisions of the U.S. False Claims Act by three former senior employees of the company who are represented by the whistleblower law firms Vogel, Slade & Goldstein and Katz, Marshall & Banks.  The former employees are Larry Cosgriff, a retired Naval Reserve Intelligence Officer and Senior Vice President of Inchcape's Government Services Division from 2007 to 2010; Noah Rudolph, a former Special Agent for the Federal Bureau of Investigation and CFO of the Government Services Division from 2008 to 2009; and Andrea Ford, an Inchcape government services manager from 2007 to 2010.

Under the False Claims Act, private citizens may bring suit on behalf of the United States and share in any recovery. In this case, Cosgriff, Rudolph and Ford will receive $4.4 million, 22% of the settlement proceeds.

As a ship husbanding services provider, Inchcape entered into contracts with the Navy to supply goods and services to Navy ships at ports in regions throughout the world, including southwest Asia, Africa, Panama, North America, South America and Mexico.  Inchcape's services typically included arranging for pilots and tugs and other port services, renting vehicles and other onshore items, procuring food and removing sewage for thousands of port calls by Navy ships.

The lawsuit alleged that Cosgriff, Rudolph and Ford resigned from the company after discovering the alleged multi-million dollar overbilling scheme and bringing it to the attention of the company's CEO Claus Hyldager and other senior executives, only to be rebuffed in their effort to stop the fraud and prevent further illegal acts. In July 2009 the three contacted the Federal Bureau of Investigation and provided evidence of the alleged worldwide fraud against the Navy.  Hyldager resigned from Inchcape in 2015.  Inchcape subsequently hired new senior management who were not implicated in the fraud.

Whistleblower lawyer Janet Goldstein credited the success of this case to the tireless efforts of her courageous clients, and the first-rate work of Department of Justice lawyers Brian Hudak and Robert Chandler, who blazed the trail in prosecuting this type of fraud. Goldstein also singled out the qui tam whistleblower provisions of the False Claims Act, without which, Goldstein said, "this case probably would never have seen the light of day."  "It is an unfortunate reality, Goldstein explained, "that sometimes government entities are reluctant to acknowledge that they have been defrauded. Instead of aggressively rooting out fraud and corruption, they sweep reports of improper conduct under the rug. The qui tam provisions upend this paradigm. They empower whistleblowers to file lawsuits that, by law, must be investigated and, upon unsealing, their allegations become part of the public record."

The lawsuit describes a host of methods that Inchcape allegedly used to overcharge Navy ships, from small Coast Guard cutters to the largest aircraft carriers. Among the allegations:

- In the Persian Gulf, during the contract period of 2005 to 2014, Inchcape routinely inflated the prices on multiple vendor invoices by 15-20% or more and pocketed the difference as profit.  In one example, the complaint cites a four-day call by the USS Eisenhower in Jebel Ali in 2009 in which Inchcape's Dubai office booked a gross profit margin of $222,788.

- In Panama, Inchcape submitted false claims for Panama Canal tolls; in one example charging over $14,000 for two Navy ships when the actual bill had been less than $7,000.

- In South Africa, Inchcape marked up vendor invoices for barges, cranes, forklifts, portable toilets, South African tours, hotel bookings and a host of other goods and services.

- In Mexico, during port calls to Cozumel, Mazatlán and Acapulco, Navy ships were routinely charged up to 10 times the true cost of services ranging from ship pilots to long distance telephone airtime.

"Under its husbanding contracts, Inchcape pledged to 'bring the highest level of commitment' to obtaining goods and services for Navy ships at fair prices," said whistleblower counsel Debra Katz.  "The lawsuit alleges that, instead, Inchcape conspired with its subsidiaries and vendors to gouge the Navy wherever and whenever possible." 

The case is captioned US ex rel. Rudolph, Ford & Cosgriff v. Inchcape Shipping Services, et al., No. 1:10-cv-01109 (D.D.C.).

SOURCE Katz, Marshall & Banks; Vogel, Slade & Goldstein