Government Contracts Monitor

Sorry, We Don’t Have Any Bananas at the Price We Agreed to Sell Them For

February 18, 2014

In a recent case, FreshPoint, Inc., a large food distribution company that is a wholly owned subsidiary of Sysco Corp., agreed to pay $4.2 million for overbilling the Department of Defense for produce. The case, United States ex rel. Hall v. SYSCO Corp., No. 4:11-CV-57 (M.D. Tenn. filed Dec. 13, 2010), involved a whistleblower complaint filed by former FreshPoint employee Charles Hall, who alleged that FreshPoint added a 30-40% increase in the invoices it sent to the government for produce based on “marketing earned income,” an arbitrary number allegedly created to reflect perceived changes in market prices for the produce.

The complaint alleges that the firm fixed price contract had a specified economic price adjustment pursuant to the FAR that did not permit a unilateral economic price adjustment without approval. Nevertheless, a 30-40% increase was added to the invoices and according to the allegations of the complaint, the President of FreshPoint stated in a meeting that the charge was “just highlighting, everyone does it.”

The settlement for $4.2 million will result in a whistleblower award to Mr. Hall for $798,000. This case is a strong reminder that when you are providing food and other provisions to the government, you must give the government the bargain you agreed upon, and even if you think that “everyone does it,” that doesn’t mean you should as well.

Brian Stolarz is the attorney responsible for the content of this article.