In 1988, shortly after James Holzrichter, a young analyst and systems auditor, began discovering questionable practices at defense contractor Northrop, he received a disturbing phone call from Richard Zott, a federal agent with the U.S. Department of Defense Criminal Investigative Service.
“He said, ‘I’m aware that you know of some improprieties, and we want to talk to you,’ ” Holzrichter said during the closing General Session at the 26th Annual Global Fraud Conference in Baltimore, Maryland.
Holzrichter told Zott that he’d need his credentials, and then he’d talk to his supervisors.
“ ‘Let me explain what will happen, Jim,’ ” said Holzrichter to the attendees. “ ‘You’re going to work tomorrow, and you’ll tell them I’ve talked with you. … They’re going to talk to their corporate lawyers, and they’re going to scare the hell out of you. And you’re not going to talk to me. I’m going to come with handcuffs, and I’m going to put you in prison.’ ”
“And I said, ‘What time can you be here tomorrow?’ ” Holzrichter said.
Holzrichter had noticed that Northrop was ordering parts “as soon as they were coming in for receiving and inspection, and they were thrown into the garbage. They weren’t even being inspected.” The parts had been scrapped and wiped from inventory with tracking records reflecting that they were excess and no longer needed. However, they actually were still needed for other projects and would have to be reordered from the vendor who would be paid a second time for the same parts. Northrop workers would hide that they were ordering the parts a second time by changing three numbers at the end of the designations.
“They told me not to file a report because it was only half a million dollars, and we’re a multibillion dollar corporation so it doesn’t matter,” he explained.
In the next year, Holzrichter smuggled out copies of incriminating documents that showed additional alleged fraud to the tune of millions of dollars. An employee from the U.S. attorney’s office blew his cover by calling him at his office and asking if he’d wear a wire during the next attrition committee meeting. Holzrichter left Northrop shortly after. He and another Northrop whistleblower filed a qui tam suit in 1989. The case languished in the courts for 17½ years, the longest False Claims Act case to date, until it was settled for $134 million on March 1, 2005.
Between the suit filing and the final decision Holzrichter lost his health and his savings, but he kept his integrity and his family. “For Choosing Truth Over Self,” the ACFE presented him with the Cliff Robertson Sentinel Award during the closing General Session.
“I can’t tell you how much it means to me to be recognized,” Holzrichter told the attendees. “[Through] the work that you do and the dedication you’ve shown through in your lives, it wouldn’t be possible for whistleblowers to come forward.”