Feds accuse Gallup of price gouging over contracts
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WASHINGTON --The Justice Department accused the Gallup Organization on Wednesday of bilking federal agencies out of millions of dollars by routinely inflating prices for contracts.
The 57-page civil complaint says that Gallup, the world's best-known polling organization, inflated estimates for the number of hours that it would take to perform its polling services for the Treasury and State departments. The Justice Department accused Gallup of submitting false invoices totaling $13 million.
Federal officials also accused Gallup of negotiating to hire a federal employee who was responsible for Gallup's contract at the Federal Emergency Management Agency while it was trying to get more funding from FEMA.
"As a result of Gallup's false and/or fraudulent representations and conduct . . . the government was falsely and/or fraudulently induced to enter into and accept terms and conditions on contracts . . . to which it would not have agreed had it known the truth," Stuart F. Delery, principal deputy assistant attorney general, said in the suit, filed in U.S. District Court in Washington.
Gallup, which bills itself as "the most trusted name in polling," said it looks forward to "clearing our name in court."
William E. Kruse, a vice president and associate counsel with Gallup, said: "I'm confident that there were no inappropriate actions taken by Gallup staff on any government contract or any other contract for that matter."
The allegations were first brought to the Justice Department by former Gallup employee Michael Lindley, who said he saw Gallup repeatedly inflate its prices while negotiating single-bidder contracts with government agencies.
Mr. Lindley was 27 when he was hired in 2008 as director of client services in Gallup's Washington government division. His job was to help Gallup partners prepare cost estimates for budgets submitted to government agencies on proposals and contracts.
One of his first assignments was to prepare the internal budget for part of a $7.5 million contract awarded to Gallup by the U.S. Mint to conduct market research on the likely purchasers of newly issued $1 presidential coins, according to the suit.
A Gallup partner, Sameer Abraham, instructed Mr. Lindley to create a smaller internal budget, calling for significantly fewer hours of work, the complaint said. Mr. Abraham brought Mr. Lindley paperwork with the higher numbers submitted to the Mint crossed out and lower numbers written in their place, according to the suit.
"I knew something was wrong," Mr. Lindley said in an interview. "It was two sets of books. He wanted me to create a different internal budget that was vastly reduced in comparison to the official budget that had been submitted to the Mint."
The practice allowed Gallup to earn outsized profits from its government business, according to the Justice Department. Two Gallup partners frequently boasted that the profit margins on government contracts were among the highest in the company, according to the suit.
Mr. Lindley took his concerns to a supervisor, but was told that he didn't understand government contracting. He said the fraudulent conduct continued, with partners inflating the hours by a multiple of two or three times the number of previous, similar projects, according to court documents.
In one case, Mr. Lindley said Gallup planned to bid $25 million on a sole-source contract with the State Department, which he said was more than double the internal cost.
Mr. Lindley also discovered that Gallup had promised a job to FEMA official Timothy Cannon, who was instrumental in obtaining a multimillion-dollar contract for Gallup. After Mr. Cannon was interviewed for the Gallup job and met with the company's chief executive, he sent an email to a Gallup employee about the contract with FEMA. "I got another 500K put on the contract. Cool, huh?" he wrote, according to the suit.
As part of the lawsuit, the Justice Department also brought a civil claim against Mr. Cannon. David Schertler, Mr. Cannon's attorney, did not immediately reply to messages.
In 2009, Mr. Lindley was honored by Gallup as "Rookie of the Year," given a raise and selected to attend partnership boot camp. But later that year, after months of raising concerns about the contracts, Mr. Lindley took his complaints to his supervisor again, according to court documents.
"I told my supervisor, 'If you don't end this practice, I'm going to the Department of Justice,' " Mr. Lindley said.
Mr. Lindley was fired the next day by Gallup's chief counsel, Steve O'Brien, according to court documents. "When you start talking about going to the Department of Justice, we don't trust you anymore," Mr. O'Brien told Lindley, according to the documents.
Mr. Kruse, the Gallup lawyer, said he is confident that the associates named in the suit will be cleared.
Mr. Lindley turned down a severance package and contacted an attorney, Janet Goldstein of Vogel, Slade & Goldstein. Ms. Goldstein and another firm filed a civil suit against Gallup on Lindley's behalf three years ago.
First Published November 29, 2012 12:00 am