whatisfraud

If I charge more from client A than client B, I’m not necessarily subsidizing B with A. My price for doing the same work for the government is higher than the same work for a private party. It literally costs more and has higher risk. This honestly feels like this lady went digging around looking for things that would be arguable under vague accounting standards.

>“I discovered that our commercial and international practices were very unprofitable,” she said. “And in order to keep the company profitable, they were passing those costs onto the U.S. government contracts.”

>At that moment, Feinberg told NBC News, “I realized that this was a very intentional setup. And it wasn’t just that there was the potential to overcharge the government; the rates were built to overcharge the government. If we should have been charging $100 to the government for an hour of work, we were charging $120 for that hour of work, so that that $20 could go to subsidize the international business.”

How is this fraud? In that line of work, it’s common to not charge customers the same price. Each contract is individually negotiated. And work for the US government is not necessarily even comparable to work for another entity. US government contracts are notoriously complex and fraught with red tape and legal risks.

Without knowing more, I’m kind of sympathetic to Booz Allen here. Settlement doesn’t mean admission of guilt. It just means they thought there was a risk of losing + risk of reputational loss + cost of litigation that it was worth paying $377 million to avoid.