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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.  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.” 

HUD contracts for document and data storage services through the General Services Administration (GSA), a Federal entity that provides centralized procurement for the Government.  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, and received storage services between 2001 and 2012.  The qui tam relators filed complaints and amended complaints in U.S. District Court and the United States joined 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.  The Government alleged that Iron Mountain: 1) made false disclosures and false statements regarding GSA contracts; 2) 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; and 3) 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.

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.[2]  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 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.

We recommended that HUD’s Office of General Counsel, Office of Program Enforcement, ensure that HUD records the $202,237 settlement refund as return of an ineligible cost.