oversight

Iron Mountain Settled Allegations of Making False Disclosures and False Statements Regarding Discounts and Prices Relevant to Contracts It Had With HUD

Published by the Department of Housing and Urban Development, Office of Inspector General on 2015-09-29.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                                        U.S. DEPARTMENT OF
                                       HOUSING AND URBAN DEVELOPMENT
                                                 OFFICE OF INSPECTOR GENERAL




                                                   September 29, 2015
                                                                                                      MEMORANDUM NO:
                                                                                                      2015-CF-1809



Memorandum
TO:                 Dane M. Narode
                    Associate General Counsel, Office of Program Enforcement, CACC

                    //signed//
FROM:               Kimberly R. Randall
                    Director, Joint Civil Fraud Division, GAW

SUBJECT:            Final Civil Action: Iron Mountain Settled Allegations of Making False
                    Disclosures and False Statements Regarding Discounts and Prices Relevant to
                    Contracts It Had With HUD


                                                   INTRODUCTION

The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General
(OIG) assisted the U.S. Attorney’s Office for the Eastern District of California in the civil
investigation of Iron Mountain, Incorporated, and Iron Mountain Information Management, LLC
(Iron Mountain). Iron Mountain is headquartered in Boston, MA.

The investigation began due to a qui tam 1 filing in the U.S. District Court for the Eastern District
of California.

                                                     BACKGROUND

HUD contracts for document and data storage services through the General Services
Administration (GSA). GSA is a Federal entity that provides centralized procurement for the
Government, offering billions of dollars worth of products, services, and facilities that Federal
agencies, such as HUD, need to serve the public. GSA establishes long-term, governmentwide
contracts with commercial firms to provide access to millions of commercial products and

1
    The False Claims Act allows private persons to file suit for violations of the False Claims Act on behalf of the
    Government. A suit filed by individuals on behalf of the Government is known as a qui tam action, and the
    persons bringing the action are referred to as “relators.” If the Government prevails in a qui tam, the court may
    award the relator a share of the False Claims Act award, based on the contributions the relator made to the
    investigation.
                                                       Joint Civil Fraud Division
                                         400 State Avenue, Suite 501, Kansas City, KS 66101
                                  Visit the Office of Inspector General Web site at www.hudoig.gov.
services at volume discount pricing. GSA entered into contracts with Iron Mountain to provide
document and data storage for many Federal agencies beginning in 2001. HUD entered into
storage service contracts with Iron Mountain, based on GSA-negotiated terms and pricing. HUD
received storage services from Iron Mountain under the relevant contracts between 2001 and
2012.

The qui tam relators filed complaints and amended complaints in the U.S. District Court of the
Eastern District of California in December 2011, April 2012, and May 2013. The United States
intervened 2 in the civil action, contending that it had certain civil claims against Iron Mountain
for its alleged conduct related to contracts it held with GSA to provide storage facilities for
Federal agencies.

The Government alleged that Iron Mountain made false disclosures and false statements
regarding GSA contracts. The Government further alleged that Iron Mountain did not disclose
the discounts or prices it provided to its other customers, violating price reduction terms of the
contracts, and as a result, Iron Mountain presented inflated claims for payment to the United
States. The Government also alleged that Iron Mountain charged the United States for storage in
facilities that complied with certain requirements of the National Archives and Records
Administration (NARA) when the facilities where the materials were stored did not comply with
NARA requirements.

                                      RESULTS OF INVESTIGATION

On December 17, 2014, Iron Mountain agreed to pay the United States $44.5 million to settle the
matter. Iron Mountain specifically denied the allegations in the civil action. However, the
parties entered into the settlement agreement to avoid the delay, uncertainty, inconvenience, and
expense of prolonged litigation. The agreement was neither an admission of liability by Iron
Mountain nor a concession by the United States that the claims were not well founded.

GSA received approximately $24 million of the settlement amount to distribute to affected
agencies and was responsible for determining the pro rata amount these Federal agencies were to
receive. The remaining $20.5 million was to be remitted to the U.S. Treasury and the relators.

In support of GSA’s distribution efforts, HUD identified three contracts that it had with Iron
Mountain during the applicable period. Appropriations accounts funding two of the contracts
were closed; therefore, HUD was to receive no refund on these contracts. 3 The appropriation
account for the remaining contract was expired but not closed, so HUD was allowed a refund on
this contract.

GSA determined that HUD’s pro rata share of the settlement amount was 18 percent of the more
than $1.1 million contract amount for the appropriation account not yet closed, which resulted in

2
    If the Government intervenes in the qui tam action, it has the primary responsibility for prosecuting the action.
3
    According to 31 U.S.C. (United States Code) 1552(a), “On September 30th of the 5th fiscal year after the period
    of availability for obligation of a fixed appropriation account ends, the account shall be closed and any remaining
    balance (whether obligated or unobligated) in the account shall be canceled and thereafter shall not be available
    for obligation or expenditure for any purpose.”


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a refund to HUD of $202,237. Using the same pro rata share methodology, GSA determined that
$523,024 was to be remitted to the U.S. Treasury for the closed appropriations accounts funding
the HUD contracts.

The following chart details the relevant HUD contracts, contract amounts, and pro rata shares.

                                                                        Amount eligible
                             Amount in                  18 percent    for refund to HUD      18 percent of
                              contract      Amount      of expired       appropriation      eligible refund
    Contract number            period       expired      amount            accounts             amount
 C-OPC-21551                   $696,095      $696,095     $125,297                     $0                 $0
 C-ATL-01776                 $1,678,275    $1,678,275     $302,090                     $0                 $0
 C-ATL-01935                 $1,654,855      $531,317       $95,637            $1,123,538          $202,237
 Totals                      $4,029,225    $2,905,687     $523,024             $1,123,538          $202,237
 HUD-related refund
 remitted to U.S. Treasury                                $523,024
 Refunded to HUD                                                                                  $202,237



                                          RECOMMENDATION

We recommend that HUD’s Office of General Counsel, Office of Program Enforcement,

lA.     Ensure that HUD records the $202,237 settlement refund as return of an ineligible cost.




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