Whistleblower urges Fourth Circuit to revive fraud case against defense contractors

A federal inmate claims he has insider information about fraud in the U.S. government's procurement process, but the federal government refuses to hear it.(CN) — A whistleblower accusing defense contractors of subverting the U.S. government’s procurement process asked the Fourth Circuit on Wednesday to revive his case and remove federal prosecutors from it.An attorney for Roger C. Day Jr. argued the federal government failed to investigate his client’s claims of procurement fraud before dismissing his case against the nation’s five largest defense contractors.Federal prosecutors say they followed the proper procedures and determined the claims were unfounded.The three-judge panel appeared skeptical Day could bar the government’s intervention in a Federal Claims Act case.Day, who is himself serving federal time for orchestrating a fraudulent procurement scheme, claims the U.S. Defense Logistics Agency and the contractors have for years misused an online bidding system to sell and acquire sole-source replacement parts for military vehicles.The government is not supposed to use the bidding system for sole-source parts, Day says. Instead, the government and contractors are supposed to follow different procurement procedures, which cap the profit margins for parts, among other requirements.“This has been taking place for over two decades and has unlawfully come at the expense of the American taxpayer to the tune of hundreds of billions of dollars,” Day says in his appellate brief.Day says he learned about the fraud while he himself was cheating the government through a parts substitution scheme. Day used shell companies and an automated system to bid on DLA contracts and then delivered nonconforming or inferior parts.One day, he says he received a call from the DLA office in Richmond, Virginia, asking why he bid on a contract for a replacement part when no one but the manufacturer could fulfill the contract’s terms.Day, who is serving 105 years in prison for wire fraud, says that is when he learned of the scheme.“This raised his suspicions because DIBBS is a competitive bid system — why would the DLA say no third party is able to fill the contract as a matter of fact?” he asks in the brief.Day sued the contractors — Boeing, Lockheed Martin, Raytheon, General Dynamics and Northrup Grumman — in 2023 in the Eastern District of Virginia under the False Claims Act, which allows whistleblowers to bring financial fraud cases on behalf of the U.S. government.The U.S. government intervened in the case — but not in Day’s support.The U.S. Attorney’s Office for Eastern Virginia filed a motion to dismiss Day’s case. Federal attorneys initially failed to provide a reason for dismissal, arguing they did not need to do so, but after prodding by the court, they explained that Day failed to identify any specific instance of fraud.Instead, he was using the False Claims Act “to challenge various government policies and commercial business practices that he disagrees with” including the contractors’ refusal to sell parts to distributors, the attorneys said in a memorandum.Dismissing the case was in the public interest, they said, because the discovery demands would be unduly burdensome on the government.Day asked the court to dismiss the federal government as a plaintiff, pointing out that the United States, through the DLA, is effectively a defendant, too.U.S. District Judge Robert E. Payne denied Day’s motion and dismissed the case in 2025. Payne said the False Claims Act did not address whether a whistleblower could block federal intervention in a case, but the law made it clear the government was the victim and dominant party.Day’s attorney, Elliott Harding of Charlottesville, Virginia, told the panel the government violated his client’s due process rights by dismissing the case, but the judges questioned whether Day had a property interest in the case.Harding argued his client would receive 15% of the awarded damages if his case succeeded, but U.S. Circuit Judge Allison Jones Rushing pointed out that was purely speculative.“Nobody who files a lawsuit is entitled to damages,” the Donald Trump appointee said. “They’re entitled once the jury returns a verdict in their favor.”Rushing added Day’s fraud claim ultimately belongs to the government — not him.Harding argued the government acted in an egregious and exceptional manner that denied Day’s rights. The government could not act as the plaintiff in the case when its own agency was accused of fraud.“You’re getting structural unfairness in a manner that violates his procedural due process,” he said.U.S. Circuit Judge Stephanie Thacker, a Barack Obama appointee, agreed with Rushing — it was the government’s case.“The government is the one who has been defrauded, and the statute gives the government the right to enter before there has been a response, before the sealing period is over, and dismiss it,” she said.Assistant U.S. Attorney Robert McIntosh said the government met its requirements under the False Claims Act by providing notice to dismiss the case and holding a hearing on it.“He alleges that the defendants submitted false claims,” McIntosh said. “Defense Logistics Agency says no, they didn’t.”U.S. Circuit Judge Toby Heytens, a Joe Biden appointee, also sat on the panel, which did not indicate when it would rule.Subscribe to our free newslettersOur weekly newsletter Closing Arguments offers the latest about ongoing trials, major litigation and rulings in courthouses around the U.S. and the world, while the monthly Under the Lights dishes the legal dirt from Hollywood, sports, Big Tech and the arts.Additional Reads