Freshpoint to Pay $4.2 Million to Settle False Claims Act Charge

FreshPoint Inc., a Houston, Texas-based food distribution company and wholly owned subsidiary of Sysco Corp., will pay $4.2 million to resolve allegations that it overcharged the Department of Defense for fresh fruit and vegetables purchased under fifteen separate contracts.

The contracts were awarded to East Coast Fruit Company and subsequently performed by FreshPoint following FreshPoint’s acquisition of East Coast Fruit Company in 2007.

“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,” said Assistant Attorney General for the Department of Justice’s Civil Division Stuart F. Delery.  “Contractors that do business with the government must do so honestly and fairly or suffer the consequences of their misconduct.”

The settlement resolves allegations that from Dec. 17, 2007, through Sept. 11, 2009, FreshPoint overcharged the government on hundreds of sales of fresh fruit and vegetables by improperly inflating its prices to the government to reflect FreshPoint’s view of the prevailing market price of the goods at the time of sale.

The government alleged that this practice violated FreshPoint’s contracts with the government that required FreshPoint to provide the produce at cost, plus a pre-established mark-up for profit, and did not allow FreshPoint to make additional price adjustments based upon perceived changes in market prices.

The allegations arose from a lawsuit filed under the whistleblower provisions of the False Claims Act, which allow private individuals to sue on behalf of the government and to share in the proceeds of any settlement or judgment.  The whistleblower in this case, former FreshPoint employee Charles Hall, will receive $798,000.

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