14567606128_ee826cf9bd_kFollowing Executive Order 13788 issued April 18, 2017, “Buy American and Hire American,” contractors and subcontractors should prepare for increased enforcement of the Buy American Act (BAA), Buy America legislation, the “Little Buy American Acts,” and related civil or criminal prosecution under the False Claims Acts (FCA).

In recent years, the Department of Justice has increased efforts to prosecute FCA violations in concert with BAA or Buy American violations. In 2016 alone the Department of Justice obtained more than $4.7 billion in settlements and judgments from civil cases under the FCA, its third highest recovery.

Every contractor or subcontractor on a federally funded project supplying construction materials must certify that the materials used are in compliance with the BAA.  Construction work for the DOT, DoD, and other federal agencies may trigger compliance requirements under both with the BAA and Little Buy American Acts. Certificates of compliance, however, can be fruitful grounds for federal prosecutors looking for FCA violations

When a certificate of compliance does not accurately reflect the origin of the materials used under the BAA or Little Buy American Acts, there is a high likelihood that FCA liability may follow. Executive Order 13788 is likely to bring additional attention to the dual enforcement of buying American under the FCA.

A few recent cases illustrate the FCA risks arising from BAA and related laws that require compliance certifications:

  • In 2016, Wisconsin-based architectural firm Novum Structures LLC entered a guilty plea and agreed to pay $3 million to resolve its criminal and civil liability under the False Claims Act 18 U.S.C. § 1001 arising from its concealment of the use of foreign materials on construction projects involving federal funds. Novum has also agreed not to contest its debarment from federal funded projects.

Continue Reading Uptick in Buy American Enforcement Means Increased False Claims Act Risks

A federal judge in the Western District of Washington has ruled that tribal employees may still be liable in their individual capacities under the False Claims Act, even if Native American tribes themselves are protected from such suits by sovereign immunity. This interpretation could have important implications for Alaska Native-owned and Native American-owned businesses as federal courts across the country confront a range of tribal sovereignty issues in the coming months. Continue Reading Tribal Employees Potentially Liable Under False Claims Act, Washington Federal Court Finds

ASBCAWhile the Armed Services Board of Contract Appeals (ASBCA or Board) has jurisdiction over contract claims, the ASBCA does not have jurisdiction over fraud.  This can lead to competing cases in multiple jurisdictions if the government has a claim of fraud against a contractor while the contractor is pursuing a contract claim concerning the same contract at the ASBCA.  To manage these conflicts, the Board will stay the Board proceeding or dismiss it without prejudice pending the outcome of the fraud proceeding based on the consideration of the following four factors: 1) whether the facts, issues and witnesses in the two proceedings were similar; 2) whether the parallel matter would be compromised by proceeding here; 3) whether the non-moving party would be harmed by more delay; and 4) whether the duration of the suspension sought was reasonable.

In Kellogg Brown & Root Services, the ASBCA held that a request to stay or dismiss without prejudice had limits.  In 2010, Kellogg Brown & Root (KBR) submitted certified claims for subcontract settlement costs, which it later appealed to the ASBCA.  In 2013, the ASBCA dismissed these appeals without prejudice because of a pending FCA suit.  In February 2016, the ASBCA reinstated the appeals.  The government moved to stay or dismiss the appeals again because the FCA case was still in the discovery stage.  For the fourth factor, the Board held the stay sought was not reasonable because it would essentially be an indefinite stay.  For the third factor, the Board held another dismissal could prejudice KBR due to the length of time that had occurred since the certified claims had been submitted.  The Board found there was a “substantial risk” that evidence would become stale if a more significant delay occurred.  For the second factor, the government had admitted the Board proceeding would not compromise the government’s FCA case as long as it could obtain complete discovery and develop the record.  For the first factor, the Board held similarity of facts, witnesses, and issues between the two proceedings alone were insufficient to dismiss the appeal.  Therefore, the ASBCA denied the government’s motion to dismiss or stay the appeals. Continue Reading Fraud Jurisdiction at the ASBCA: Complicated and Complex

James F. NagleJames F. Nagle will give a special presentation at The Seminar Group’s upcoming 23rd Annual Washington Construction Law conference on September 15 at the Hilton Seattle. In Jim’s federal construction law presentation, he will provide an update on the False Claims Act, new programs  from the Small Business Administration and other new developments affecting construction law. Guests of Jim are eligible for a $100 discount with the promo code “FAC100.” Continue Reading Join James Nagle at the 23rd Annual Washington Construction Law Conference on September 15th

5856856317_994b86725b_oThe Armed Services Board of Contract Appeal’s (ASBCA) decision in BAE Systems Tactical Vehicle Systems LP, ASBCA Nos. 59491, 60433 (July 25, 2016), denying the government’s motion to stay appeals due to a parallel False Claims Act (FCA) case in federal district court is an important reminder that the agency boards of contract appeals do not have jurisdiction over fraud.  The decision underlines the CDA jurisdictional mandate and required statutory government contracts expertise of board judges to decide federal contractor claims, and the right of the contractor to have such claims decided by the board even when a fraud case is pending in federal court. Therefore, determination of a Contract Disputes Act (CDA) claim due to alleged defective pricing under the Truth in Negotiations Act (TINA) may proceed to a decision even if there is a district court FCA case concerning the same defective pricing allegation.  This decision also highlights the benefit to a contractor of electing the agency boards over the Court of Federal Claims (COFC), as the government cannot assert a fraud counterclaim as may be done in a CDA claim action at the COFC.

The appeals concern a $56M CDA government claim that BAE provided defective cost or pricing data in connection with award of the Army’s Family of Medium Tactical Vehicles and BAE’s CDA TINA offset claim of $65M.  The government moved to stay the appeals due to a civil defective pricing FCA case in federal district court.  The ASBCA denied the motion to stay and lifted a temporary stay.

Four Factors Considered In Parallel Proceedings

In denying the motion the ASBCA considered four factors: (1) whether the facts, issues, and witnesses in both proceedings were substantially similar; (2) whether the on-going investigation or litigation would be compromised by going forward with the appeal; (3) the extent to which the proposed stay could harm the non-moving party; and (4) whether the duration of the requested stay is reasonable. Continue Reading ASBCA Appeals Proceed Despite Parallel False Claims Act Case

6071512063_8dc286774e_oLast week, the Supreme Court issued its much anticipated opinion in Universal Health Services, Inc. v. U.S. ex rel. Escobar.  As we discussed in a prior blog, the Universal Healthcare case presented two important questions regarding the scope and breadth of the False Claims Act (31 U.S.C. §§ 3729 et seq.) (the “FCA”): (1) whether the implied certification theory of liability is appropriate under the FCA; and (2) if so, whether the implied certification theory should be limited to statutes, regulations, and/or contract provisions that expressly condition payment upon compliance.

In a unanimous decision authored by Justice Thomas, the Court approved the implied certification theory of liability under the FCA, but held that its application should be limited.  Specifically, the Court explained that FCA liability may attach under the implied certification theory when the following two conditions are satisfied:

  1. The claim does not merely request payment, but also makes specific representations about the goods or services provided; and
  1. The failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths.

The Court’s decision emphasized that the FCA is not “a vehicle for punishing garden-variety breaches of contract or regulatory violations.”  To curb the expansive reach of the FCA, the Court turned its attention to the impact of the materiality requirement as it relates to the implied certification theory.  Explaining that a noncompliance with a statute, regulation, or contractual requirement “must be material to the Government’s payment decision to be actionable [under the FCA],” the Court cautioned that the materiality standard is “demanding.” Continue Reading Supreme Court: Implied Certification Theory Can Create Falsity under the False Claims Act…But Only Sometimes

6071512063_8dc286774e_oA powerful tool to combat fraud, waste, and abuse, the False Claims Act (31 U.S.C. §§ 3729 et seq.) (the “FCA”) imposes civil liability upon any individual or corporation who knowingly submits, or causes the submission of, a false or fraudulent claim to the United States.  As we discussed in a previous blog, the amount of damages recovered pursuant to the FCA suggests that the Government’s aggressive enforcement of the FCA is unlikely to subside any time soon.  In fact, recent figures reflect that the Government’s recovery of damages and settlements under the FCA has exceeded $17 billion since 2009.

Earlier this week, the U.S. Supreme Court heard oral argument in United Health Srvs., Inc. v. United States ex rel. Escobar, an FCA case. The United Health Services case presents two important questions for the Supreme Court concerning the scope of the FCA: (1) whether the implied certification theory of liability is appropriate under the FCA; and (2) if so, whether the implied certification theory should be limited to statutes, regulations, or contract provisions that expressly condition payment upon compliance. Continue Reading Supreme Court Weighs the Viability of the “Implied Certification” Theory Under the False Claims Act

3286566742_c673e4845d_bIn Fiscal Year (“FY”) 2015, the Department of Justice (“DOJ”) raked in $3.6 billion in settlements and judgments from civil actions filed under the False Claims Act (“FCA”).  This marks the fourth consecutive year that the United States’ recovery under the FCA exceeded $3.5 billion.   This trend suggests that aggressive enforcement of the FCA is here to stay.

As a refresher, Congress enacted the FCA to combat rampant fraud during the Civil War.  Since then, the FCA has become the federal government’s most power tool to detect and prevent fraud, waste, and abuse.  In accordance with 31 U.S.C. §§ 3729 et seq., the FCA imposes civil liability upon any individual or corporation who knowingly submits, or causes the submission of, a false or fraudulent claim to the United States.  The FCA also sets forth “qui tam” provisions, which permit private citizens (referred to as “relators”) to initiate a lawsuit under the FCA on behalf of the United States as a “whistleblower” (31 U.S.C. § 3730(b)).  Under these provisions, a relator is entitled to recover a proportional share of any FCA damages obtained by the United States.

The United States’ $3.6 billion recovery in FY 2015 marks the lowest amount of FCA damages claimed by the United States since FY 2011.  This figure also indicates a steep drop from the United States’ record-breaking year in FY 2014, in which the DOJ recovered approximately $5.8 billion in FCA damages.  While many factors may have contributed to the decline in FCA recovery, it is noteworthy that the number of new civil actions initiated under the FCA (both non-qui tam and qui tam actions) in FY 2015 dropped to its lowest point since FY 2010. Continue Reading Department of Justice Reports on Another Busy Year of False Claims Act Activity

Government contractors routinely provide certifications during the contracting process. For example, these certifications ask the contractor to verify that the cost or pricing data or claims submitted are true and honest. Submitting a false claim can create liability under the Federal False Claims Act (“FCA”). See 31 U.S.C. § 3729. Lawsuits against contractors for potential violations of the FCA may come directly from the Government or through qui tam suits. The central question in these cases is whether the contractor presented a false or fraudulent claim to the Government.

In some jurisdictions, not every failure to comply with a federal statute, regulation, or contract provision automatically creates liability. Courts may distinguish between “express” and “implied” certification theories of liability. Under an “express” certification theory, courts look to whether payment from the Government is contingent on an express requirement to certify compliance with an applicable statute or regulation. Absent an express requirement, a contractor may not be liable for a false certification. Under an “implied” certification theory, the very act of seeking payment implies that the contractor complied with applicable rules and regulations. If a contractor does not comply with applicable rules and regulations, the absence of an express requirement may not bar a court from holding a contractor liable. Continue Reading When a false certification may not be “false” under the False Claims Act