The Gallup Organization will make changes to its corporate compliance and ethics programs in order to avoid criminal prosecution and continue doing business with the federal government.
Gallup also agreed to pay $10.5 million to settle allegations that it inflated cost estimates in proposals for no-bid contracts and engaged in improper negotiations with a government official who wanted a job with the firm, the U.S. Department of Justice said Monday.
The polling and market research firm with offices in Omaha was suspended from government contracting last year after the Justice Department joined a whistleblower lawsuit.
“This case exposed a cozy arrangement between a contractor and a government employee where nobody was looking out for the American taxpayer,” Ronald C. Machen Jr., U.S. attorney for the District of Columbia, said in a statement. “This significant corporate settlement and the related criminal prosecution should send a clear message that contractors and government officials alike must operate with honor and integrity.”
In a statement, Gallup said, “By ending this civil action with no admission of wrongdoing, Gallup can avoid further distraction and focus on serving its customers. The company continues its dedication to the highest standard of ethics in business.”
The case, which the Justice Department joined in August 2012, was first brought in 2009 by a former Gallup employee who sued the company under whistleblower provisions of the False Claims Act. Michael Lindley, an Iowa native, worked in the firm’s Washington, D.C., office as director of client services. Lindley will receive $1.93 million of the total settlement amount.
Lindley alleged that Gallup knowingly overstated labor hours in proposals to the U.S. Mint and State Department for contracts awarded without a competitive bidding process. He said Gallup inflated prices in order to improve the margin on projects and allow partners bigger bonuses. The contracts included market research about new coins issued by the U.S. Mint, and surveys that could predict the increase in the number of passport applications that would result from changes in border laws.
Lindley also said the company overestimated the number of hours it would take for Gallup to complete subcontracts for national laboratories and for the U.S. Navy. And he said the firm had too much influence over the contract award process, writing the U.S. Army’s request-for-proposal on a $15 million polling contract to ensure it had a competitive advantage over other bidders.
Lindley also accused Gallup of firing him because he brought up his concerns about the billing practices to a manager, saying he would report them if Gallup did not.
In addition to the $1.93 million of the federal settlement, Lindley will receive a separate, personal settlement amount from Gallup over his wrongful termination claim, according to the written settlement agreement and Lindley’s attorney. That amount, which was not made public Monday, includes Lindley’s expenses and legal costs.
Additionally, the government said Gallup negotiated to hire a Federal Emergency Management Agency official who was responsible for awarding a contract at the same time the company sought more money under the contract.
Internal Gallup emails cited by the Justice Department show Gallup Chairman and CEO Jim Clifton and another Gallup employee discussing their plans to hire the official, Timothy Cannon, if Cannon could get FEMA to award Gallup a contract.
Cannon pleaded guilty in January to violating a federal conflict-of-interest statute and was sentenced to probation. In April he agreed to pay a $40,000 fine to resolve allegations that he improperly negotiated and accepted an employment offer while involved in Gallup’s FEMA contract.
The U.S. Attorney’s Office agreed to not criminally prosecute Gallup related to the FEMA allegations in exchange for Gallup paying a $50,000 penalty and making changes to its corporate compliance and ethics programs.
Lindley said Monday the $10.5 million settlement proves that the legal process allowing for whistleblowing can work.
“I’m sure there are other people out there who are in the same position as I was four years ago, people who want to come forward and do the right thing but who are afraid to risk their careers and reputations,” Lindley said in a statement released by his attorneys. “Whistleblowers should know that they are not alone.”
Lindley, born in Indianola, south of Des Moines, graduated from the University of Iowa in 2005 and lived in Council Bluffs while working in support of President Obama’s re-election campaign before taking the position with Gallup in February 2008.
Gallup, headquartered in Washington, D.C., has 1,300 employees in Nebraska, including 550 at its riverfront campus in Omaha.