Sandia Corporation Agrees to Pay $4.7 Million to Settle Allegations Related to its Lobbying Activities
On August 21, 2015, the Justice Department announced that Sandia Corporation—owned by Lockheed Martin, the world’s largest defense contractor—agreed to pay $4,790,042 to settle allegations that it violated the Byrd Amendment and the False Claims Act by using federal funds for lobbying activities.
The settlement with Sandia is a recent example of the Justice Department’s willingness to use the Byrd Amendment as a hook for FCA claims. The Byrd Amendment, 31 U.S.C. § 1352, prohibits federal contractors from using appropriated funds “to pay any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with any Federal action.” 13 U.S.C. § 1352(a)(1). And, importantly for FCA purposes, the Byrd Amendment also requires a certification that no federal funds have been used for prohibited lobbying activities.
In 1993, Sandia was competitively awarded a contract to manage a government-owned laboratory that is one of the country’s premier nuclear weapons labs. But after a series of short-term contract extensions, Sandia began lobbying Congress and other officials to rehire them and close the bidding to competition.
According to a report issued by Inspector General Gregory H. Friedman of the Department of Energy, Sandia hired a consulting firm in 2009 to lobby top federal officials for a seven-year extension of Sandia’s contract. The consulting firm gave explicit guidance on how to influence those in Washington who would decide whether and how Sandia’s contract would be renewed, including members of Congress, their staffs, top Department of Energy Officials, a governor of New Mexico, and a retired senator. At the time, the contract was valued at about $2.4 billion per year.
Sandia’s message was that competition for the contract was not in the best interest of the government. In a position paper, Sandia stated: “It is in the taxpayer’s best interest to not compete for competitions sake, but to use the regulatory process already available” to keep the existing contractor.
The Department of Energy report alleges that Sandia used public funds for this lobbying activity. Those funds were used to pay the salaries and fees of Sandia employees and consultants who designed and implemented the lobbying strategy. The report concludes that “the use of Federal funds to advance [a corporate] interest through actions designed to result in a noncompetitive contract extension was . . . prohibited by Sandia Corporation’s contract and Federal law and regulations.”