Houston-based FreshPoint Inc. has agreed to pay $4.2 million to resolve allegations it overcharged the Defense Department for fresh fruit and vegetable purchases after the government was tipped off about the fraud case through a whistleblower lawsuit.
Owned by Sysco Corp, FreshPoint is a leading distributor that operates 31 distribution facilities throughout the United States and western Canada. The government contracts at issue were awarded to East Coast Fruit Co. but later performed by FreshPoint when the company acquired East Coast in 2007.
From Dec. 17, 2007 to Sept. 11, 2009, FreshPoint overcharged the government on hundreds of sales of fresh fruit and vegetables by improperly inflating its prices to reflect FreshPoint's view of the prevailing market price of the goods at the time of sale, according to the Justice Department.
A former employee of East Coast Fruit Co. alleged that FreshPoint added "market earned income" on DOD orders, which the government said violated FreshPoint's contracts, which required all produce sales at cost, plus a pre-established mark-up for profit.
"The Department of Justice is committed to ensuring the integrity of federal contracts and will pursue contractors that knowingly overcharge the government for goods or services," Stuart Delery, an Assistant Attorney General for the Department of Justice's Civil Division, said in a Nov. 19 statement announcing the settlement. "Contractors that do business with the government must do so honestly and fairly or suffer the consequences of their misconduct."
The allegations stemmed from a whistleblower lawsuit filed by Charles Hall, a former general manager for East Coast Fruit Co., who said the company marked up the price for produce delivered to schools and troops. His job involved receiving, warehousing and delivering the fresh produce to government to customers in South Carolina.
As part of the settlement, Hall will receive $798,000 as a provision in the law allows individuals to share the proceeds of any settlement or judgment with the government. FreshPoint will pay for wrongful termination claims and Hall's attorney fees as part of the agreement.
"This agreement is neither an admission of facts nor liability by FreshPoint or Sysco, which expressly deny the allegations set forth herein and in the civil action and deny that they engaged in any wrongful conduct in connection with the covered conduct," the government settlement said. "Nor is this agreement a concession by the United States that its claims are not well founded."
“The associates of FreshPoint take great pride in striving to be our customers' most valued and trusted business partner," Sysco said in a statement. "We work diligently to fully comply with our contractual commitments. While settling with the U.S. Attorney does not constitute an admission of liability, in the spirit of cooperation and the desire to bring the matter to a conclusion, FreshPoint has agreed to settle the matter and move forward.”