The Justice Department has announced a $4.2 million settlement from FreshPoint Inc. to resolve allegations that the wholly owned subsidiary of Houston-based Sysco Corp. overcharged the Department of Defense for fresh fruits and vegetables purchased under 15 contracts.
The contracts were awarded to East Coast Fruit Co. and subsequently performed by FreshPoint following FreshPoint’s acquisition of East Coast Fruit Co. in 2007, according to a Nov. 19 news release from the Department of Justice.
The settlement, according to the release, resolves allegations that from Dec. 17, 2007, through Sept. 11, 2009, FreshPoint overcharged the government on hundreds of sales of fresh fruit and vegetables by improperly inflating its prices to the government to reflect FreshPoint’s view of the prevailing market price of the goods at the time of sale.
“While settling with the U.S. Attorney General does not constitute an admission of liability, in the spirit of cooperation and the desire to bring the matter to a conclusion, FreshPoint agreed to settle the matter and move forward,” Sysco said in a statement about the case.
Government officials said the case showed the resolve to prevent deliberate fraud on taxpayers.
“Contractors that do business with the government must do so honestly and fairly or suffer the consequences of their misconduct,” Assistant Attorney General for the Department of Justice’s Civil Division Stuart Delery said in the release.
The government alleged that this practice violated FreshPoint’s contracts with the government that required FreshPoint to provide the produce at cost, plus a pre-established mark-up for profit, and did not allow FreshPoint to make additional price adjustments based upon perceived changes in market prices, according to the release.
The allegations arose from a lawsuit filed in 2010 under the whistleblower provisions of the False Claims Act, according to the release.
That law allows private individuals to sue on behalf of the government and to share in the proceeds of any settlement or judgment, according to the release. The whistleblower in the case, former FreshPoint employee Charles Hall, will receive $798,000, according to the release.
The settlement was the result of a coordinated effort by the Justice Department’s Civil Division, Commercial Litigation Branch; the U.S. Attorney’s Office for the Southern District of Georgia; the Defense Criminal Investigative Service; the Defense Contract Audit Agency and the Defense Logistics Agency Office of General Counsel. The claims settled by this agreement are allegations only, and there has been no determination of liability, the Department of Justice release said in the release.