A federal jury has awarded the government $428,532.49 in damages from a contractor who faked invoices for fixing Internal Revenue Service laptop computers.

The jury found John J. Rachel, 72, of Nokesville Va., and two of the corporations he controlled, RGI and Computer Specialties of Maryland, liable under the False Claims Act, which allows the recovery of damages for the submission of false or fraudulent claims to the federal government.

The IRS contracted in 1995 with a company to repair laptop computers that it used throughout the country. The contract called for the company to charge the IRS a fixed hourly rate, plus the actual cost of parts used in the repairs. The contractor subcontracted much of the work to RGI, but RGI in turn contracted with a third party to perform certain repairs to the IRS laptops. Instead of billing for the actual cost of the third party’s work, Rachel and RGI artificially inflated the costs by claiming that a shell company, CSM, had actually performed this work. 

When questioned about the transactions, Rachel and RGI provided the IRS with phony invoices reflecting that the work had been done by CSM at prices much higher than was actually charged by the true vendor. The IRS paid an additional $428,532 under the contract as a direct result of the fraudulently inflated invoices.

The jury found, however, that Priscilla Rachel, John’s wife, was not liable for any damages. The government had argued at the trial that she had participated in and benefited from the scheme.

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access