Prosecution of Minor Subcontractors Under the Major Fraud Act of 1988

In the late 1980s, a series of well-publicized defense contractor abuses brought the ordinarily obscure topic of government contracting into the public eye. These abuses included not only instances of seemingly wasteful charges, like the infamous $600 toilet seat, approved by a complicit Department of Defense, but also examples of truly fraudulent activity such as knowingly overbilling and supplying inferior quality goods. The fraud cases grabbed the public attention for three primary reasons. First, enormous sums of money were involved. Second, the nature of the fraud often posed a direct danger to United States troops, potentially compromising “national security.” Finally, large contractors, perceived as the perpetrators of the fraud, were apparently going unpunished. In response, Congress passed the Major Fraud Act of 1988 (“the Act”). Congress intended the Act to “provide federal prosecutors with an additional criminal statute targeting major procurement fraud committed against the United States.” As a general matter, prosecution under the Act is limited to “major fraud”: instances where the value of the contract exceeds $1,000,000.