Product Substitution Fraud – Whistleblowers for Government Contracts

What is Product Substitution Fraud?

Product substitution fraud is the intentional substitution of a substandard or unspecified product in order to cheat on a government contract. If a contractor is obligated to provide a certain standard of product but provides a lower quality or less expensive product to save money, that’s product substitution fraud. 

How mctlaw Can Help You File a Product Substitution Whistleblower Claim

Whistleblower lawsuits are filed under the False Claims Act, which imposes fines of up to three times the amount lost by the government, plus penalties. It’s a powerful tool that protects whistleblowers and holds people guilty of fraud against the government accountable.

Whistleblowers in successful product substitution cases can win substantial amounts of money.  Companies found liable can be fined up to three times the amount lost by the government plus penalties on each claim. The whistleblower is entitled to get a percentage of what’s recovered. 

Whistleblowers also are protected to encourage those who are aware of fraud to come forward. Whistleblowers file qui tam lawsuits so they can be protected from retaliation by the company where they work. A qui tam lawsuit is “under seal,” or secret, for at least 60 days while the government investigates the potential fraud. That means the company will not know who reported them during that time. 

There’s also protection for whistleblowers after they’re identified. The False Claims Act says that if an employee is fired, harassed, or discriminated against, he or she may be eligible to get their job back with back pay and compensation for legal fees.

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Types of Product Substitution Fraud

False Invoice

False invoices are those that do not accurately represent the goods sold or services provided. Another type of false invoice is if the invoice bills for products or services not received.

Duplicate Invoice

Duplicate invoices are sent more than once to collect multiple payments for the same item or service. 


Overbilling can happen if the hours worked are inflated to get a higher payment. Another way is if the invoice shows more goods than were actually delivered. Finally, overbilling is also providing an invoice with higher prices than agreed upon. 

Diversion of Payment

Diversion of payment is if the payment for a good or service is misdirected to an employee. Frequently, employees in the payment processing department may be part of this scheme. 

Conflict of Interest

Conflicts of interest include giving business to someone based on relationships. For example, if a government contractor needed a subcontractor to procure supplies and gave that job to their brother, even though there were more qualified or better-priced subcontractors available.

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