It is no secret that the False Claims Act (“FCA”) is the government’s primary anti-fraud tool and that recoveries under the statute have hit record highs in recent years.  For example, since 1987, FCA recoveries have totaled $56 billion with no single year since 2010 falling below $3 billion.  Moreover, most of these cases have been brought by qui tam relators and where the Department of Justice (“DOJ”) did not intervene.  Accordingly, DOJ’s remarks during the American Bar Association’s June 14, 2018, 12th National Institute on the Civil False Claims Act and Qui Tam Enforcement, were certainly welcome for industry.

During this session, top DOJ leadership addressed a number of “reform” projects of significant interest.  First, DOJ emphasized that the greater the degree of cooperation that DOJ receives from a defendant or potential defendant the more leniency the company may receive when it comes time for settlement.  In this regard, the FCA allows for penalties ranging between $11,181 and $22,363 per false claim and treble damages, which allows damages to rack up quickly.  DOJ confirmed that companies which fully cooperate with the Department can expect to receive “tremendous enforcement discretion with respect to structuring settlements while also providing a discount.”  DOJ stated that cooperation can come in many forms, but that the government is usually looking for voluntary disclosures (which DOJ considers to be most valuable), sharing information during an internal investigation, making individuals available for interviews, and identifying culpable individuals (in accordance with the Department’s focus in the Yates Memorandum on individual, and not just on corporate, responsibility).

DOJ also acknowledged that even the best compliance systems fail from time-to-time and assured that “when fraud occurs, the DOJ will give the greatest consideration” to companies that live by a robust compliance culture that is deeply engrained in the organization.  These comments reinforce the fact that having a compliance program is only the first step because it is even more critical that companies continuously update, monitor and stress those principles to its stakeholders, while still making compliance both practical and effective to apply from a business standpoint.

DOJ did not specify the types of leniency that companies can expect, but if lessons can be taken from parallel criminal fraud cases, the incentives for cooperation may result in a below double damages multiplier (or perhaps even no multiplier), a reduction of penalties from even the low end of the range, and no requirement for a corporate integrity agreement and monitor.

Finally, DOJ spoke about two other pressing issues—DOJ’s authority to dismiss frivolous qui tam cases and cases which rely on informal agency guidance, as opposed to an actual regulation or statute, to allege a legal violation in support of a false claim.  As for its dismissal authority, DOJ acknowledged that its policy of dismissing frivolous cases, as set forth in the Granston Memorandum, remains an important objective for DOJ but acknowledged that such dismissals by DOJ, to date, have been rare.  That said, DOJ is “now instruct[ing] [its] attorneys” to give a hard look at cases where DOJ has declined to intervene to determine whether dismissal is warranted.  While results remain to be seen, this and similar recent statements by senior DOJ leadership signal that the Department is trending down this appropriate path.

And, with regard to reliance (often by qui tam relators) on internal and informal agency policies or practices to fashion the basis for a legal violation, DOJ’s remarks, which are consistent with statements in the Brand Memorandum, are especially welcomed because those informal policies lack the force and effect of law and should not serve as the basis for alleging an actual legal violation that could cost a company millions of dollars, especially when such policies and practices are both subjective and inconsistent in their application.

In sum, DOJ continues to send a positive message that companies which act as good corporate citizens by conducting their businesses ethically and in good faith, pursuant to established compliance systems, and which promptly disclose any potential issues to the government will enjoy the benefits of those practices, and that meritless cases should not be used to extract millions of dollars from responsible contractors.

The case of Green Valley Company, ASBCA No. 61275, presents an interesting conundrum for contractors facing fraud allegations who also have a contract claim against the government.  In 2006, the contractor presented invoices for payment to the government.  In 2017, the contractor converted those invoices into a certified claim requesting payment.  Under the CDA, the contractor had clearly exceeded the 6-year statute of limitations.  However, the contractor requested the ASBCA equitably toll the CDA for what appeared to be sensible grounds.  From 2009 until 2016, the contractor had been defending a lawsuit the government filed against it alleging false claims act violations and breach of contract among other causes of action. The government had simultaneously been considering the contractor for debarment, the death penalty of government contracts.

The contractor argued it could not have submitted its claim to the contracting officer while the lawsuit was pending because the government would have alleged the contractor had made yet another false claim thus further potentially exposing the contractor to additional treble damages.  The ASBCA rejected the contractor’s argument stating “[n]or does [the contractor] explain why the possibility that the government might respond to its claim with fraud based defenses or causes of action would block it from submitting a claim.  The mere fact that such a response from the government might be undesirable to [the contractor] is irrelevant.”  Thus, the contractor’s claim was held to be outside the statute of limitations and the appeal was considered time-barred. Continue Reading Threat of Contractor Death Penalty Does Not Toll the CDA Statute of Limitations

The Granston memorandum released in early 2018 caused a stir amongst False Claims Act qui tam relators and defendants alike. The practical effects of the Granston memo, however, are not yet fully apparent. Defendants in FCA suits should nonetheless take note that following the release of the Granston memo, the Department of Justice has doubled-down on the importance of its dismissal power.

Leveraging the Government’s Position

One issue the Granston memo raises is whether defendants can leverage the government’s dismissal power in qui tam suits pursuant to seek dismissal pursuant to 31 U.S.C. § 3730(c)(2)(A). Two months after the Granston memo’s release there is some indication that it may have a positive effect on dismissals. Deputy Associate Attorney General Stephen Cox delivered confirming remarks at the Federal Bar Associations Qui Tam Conference on February 28, 2018:

Continue Reading Borrowing a Page from the USAO’s Playbook—Get Your FCA Suit Dismissed

Howard Roth authored an article on Buy America and Buy American for the Seattle Daily Journal of Commerce.

Below, learn about the differences between the two acts and why they matter to contractors.

In this first year of Donald Trump’s administration, American sourcing requirements are receiving heightened focus that impacts business by providing opportunities and threats.

For instance, President Trump’s “Buy American HireAmerican” executive order restates the policy of the government to buy American. Federal agencies are required to make an assessment of what the executive order calls the “Buy American Laws” aimed at maximum use of United States materials. The executive order is now on the road to changing the landscape of preferences for American products by the end of the year. Continue Reading Buy America and Buy American: What’s the difference and why it matters

Escobar was initially feared as authorizing another avenue for plaintiffs bringing False Claims Act (FCA) claims. Some federal district courts, however, have used the two-step test of Escobar as a stringent requirement for an implied certification theory for proceeding against a contractor. Other courts, however, have charted a different pathfinding that the two-test step is not a requirement, but rather one means of establishing an implied certification theory based claim.  This is an important development for companies to understand in the face of FCA litigation.

The U.S. Supreme Court held in Escobar that a claim under the implied certification theory, which we wrote about previously, required that: (1) the claim make specific representations about the goods or services and (2) the failure to disclose those representations make the claim misleading. The issue arising in recent cases is whether Escobar created an exclusive two-step test that applies to any false certification theory.

Some recent cases illustrate diverging views on the application of the two-part test:

Continue Reading Escobar: Two-Stepping Away from False Claims Act Liability?

With every new administration, there is both great uncertainty and opportunity in federal government contracting. To help you navigate the rough seas of doing business with the federal government in this new administration, we have assembled nationally recognized practitioners who will cover topics relevant to government contractors large and small, novice and seasoned. Session topics include:
– Ten Things Every Contractor Needs to Know When Doing Business with the Federal Government
James F. Nagle | Oles Morrison Rinker & Baker LLP | Seattle, WA
 
– Writing a Winning Technical Proposal – From the Contracting Officer’s Perspective
Mona Carlson, Mary Jo Juarez | PTAC Kitsap Economic Dvlpmnt. Alliance – Navy Contracting Officer (retired) | Kitsap, WA
 
– Keys to Winning Bid Protests and Defending Contract Awards
Adam K. Lasky | Oles Morrison Rinker & Baker LLP | Seattle, WA
 
– Navigating the Complex Rules Governing Data Rights
Jonathan M. Baker | Crowell & Moring LLP | Washington D.C.
 
– Overlooked Risks of Being a Lower-Tier Government Contractor
Alan C. Rither | Pacific Northwest National Laboratory | Richland, WA
 
– Mistakes to Avoid in the Claims and Litigation Process
Donald G. Featherstun | Seyfarth Shaw LLP | San Francisco, CA
 
– Adapting to Buy American and Domestic Preference Rules in the Trump Administration
Howard W. Roth | Oles Morrison Rinker & Baker LLP | Seattle, WA
 
– Understanding & Managing the Risk of Suspension & Debarment
Dominique L. Casimir | Arnold & Porter Kaye Scholler LLP | Washington D.C.

Thursday, November 16th 

SEATING IS VERY LIMITED AND WILL GO QUICKLY!
You may also attend via WEBINAR

Register for seminar or webinar at www.washingtonptac.org/seminar

Click HERE to see the event flyer.

 SEATTLE AGC BUILDING
Second-floor conference room
1200 Westlake Avenue North – Seattle WA 98109
Parking will be validated.

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