Articles Posted in Government Contracts Fraud

upmisxb0wd0-srikanta-h-uBetween Oct. 2015 and Sept. 2016, the Department of Justice (DOJ) won more than $4.7 billion in judgements and settlements from civil fraud and false claims against the government, a DOJ press release stated. This recovery is from cases brought under the False Claims Act (FCA), including qui tam claims in which a whistleblower brings to light a fraud being perpetrated against the government. The amount is particularly important to note since it is the third highest recovery for a fiscal year since the FCA was enacted. It is also crucial in the sense that it confirms the effectiveness of qui tam cases and other claims brought under the FCA. The legal protections and incentives for whistleblowers to come forward enables the government to stop fraudulent schemes and return funds back to programs that support low-income families, veterans, and the elderly.

Fraud is Common within the Health Care Industry

Fraudulent claims within the health care industry cost the government billions of dollars. The DOJ reported $2.5 billion was recovered for the federal government in relation to this sector from hospitals, physicians, nursing homes, labs, medical device companies, and drug companies during the 2016 fiscal year. Additionally, a total of $19.3 billion has been won in health care fraud claims since January 2009. The recovered funds go back to federally funded medical programs such as Medicare, Medicaid, and TRICARE.  

It is no secret that, as a whistleblower’s law firm, we are big fans of the False Claims Act (“FCA” or “the Act”).  The Act holds liable any person/entity that presents a false or fraudulent claim for payment to the federal government (or an agency thereof) and/or create false records to that end.  In essence, it forbids overcharging the government for goods or services or charging for goods/services that are never delivered.  The Act’s qui tam provision is particularly powerful since it enables private individuals to bring suits on the government’s behalf.  This is key because it is often private parties, rather than the government itself, who are aware of these fraudulent schemes.  Recent trends show that the legislature and the courts are committed to working with whistleblowers and, more generally, to using the False Claims Act as a powerful tool to battle health care fraud and other forms of fraud on the U.S. government.

DOJ Nearly Doubles Per Claim False Claims Act Penalties

As Becker’s Hospital Review, a healthcare industry journal, reported last month, the Department of Justice (“DOJ”) recently published an interim final rule substantially increasing the monetary penalty for violations of the FCA.  Previously, penalties ranged from $5,500 to $11,000 per claim.  The new penalties neacash2rly double the old ones and range from $10,781 to $21,563.  These increased penalties took effect on August 1 and only apply to violations occurring after November 2, 2015.  The increase was made pursuant to the Bipartisan Budget Act of 2015 which required agencies to increase FCA penalties and authorized rulemaking to implement a “catch up adjustment” to account for inflation.  The DOJ is just one of the agencies updating penalties (the Railroad Retirement Board was the first), but it is certainly among the most impactful.

Last week, we flag2wrote about the importance of the False Claims Act as a tool for fighting defense contract fraud.  This week, we continue that discussion by focusing on a case that we touched upon in last week’s post.  This case stands out as particularly egregious of allegations that, if true, could have cost countless military members their lives.  It is an important example of the type of military contract fraud that honest whistleblowers can help bring to an end when they partner with the team at our government contract fraud law firm.

Defense Contractor to Pay $3 Million to Settle Allegations Regarding Ballistic Helmets that Failed Safety Tests

Earlier this year, the Department of Justice (“DOJ”) issued a press release announcing that ArmorSource, LLC would pay $3 million to settle a lawsuit filed pursuant to the False Claims Act.  As the DOJ explains, the U.S. Army entered into a contract with ArmorSource in 2006 pursuant to which the company was to manufacture Advanced Combat Helmets (“ACHs”).  ACHs are used by soldiers in combat and made out of Kevlar to help provide ballistic protection for the wearer.  According to the government, from 2006 to 2009, ArmorSource provided the Army with ACHs that did not conform to the requirementsoldierss in the government contract and did not meet contract performance standards.  The Army began recalling the ArmorSource helmets in May 2010 after several lots failed ballistic safety tests.

It’s no secret that as a government fraud militarywhistleblowers’ law firm, we are big fans of the False Claims Act (“FCA”).  The FCA is a valuable tool that gives ordinary citizens the power to help fight back against frauds perpetrated on the federal government. While we often write about health care fraud matters, one of the most important things to know about the FCA is that it can apply to frauds involving a wide-range of subject matters.  In these complex times, the FCA’s power is especially critical for fighting instances of defense contractor fraud.

Government Files Suit Alleging Defense Contractor Committed Fraud in Conjunction with Contract to Train Iraqi Civilian Police Forces

Last week, the Department of Justice (“DOJ”) issued a press release announcing that it had filed suit against DynCorp International Inc. (“DynCorp”), a government contractor headquartered in Northern Virginia, for allegedly submitting inflated claims for payment pursuant to a State Department contract.  In 2004, the State Department awarded DynCorp a contract to train civilian police forces in Iraq and provide other services related to that effort.  The government alleges that DynCorp knowingly permitted one of its main subcontractors to charge “excessive and unsubstantiated rates” for lodging, security, driving, and other services and that DynCorp included those charges in the claims for payment it submitted to the State Department.  Additionally, the DOJ alleges that DynCorp added a markup to these already excessive charges that further inflated the amount charged.

Regular readers of this blog know that part of what makes the False Claims Act such a powerful tool is its qui tam provision which allows individuals to bring claims for repayment on the government’s behalf.  This is important because the government cannot police every single claim it pays and individuals who witness fraud and act on that knowledge are critical to the fight against fraud.  A recent trend in litigation under the Act involves individuals in a very different sense – individual liability under the False Claims Act.  Our whistleblowers’ law firm for fraud on the government is watching this trend and is prepared to help honest individuals fight fraud committed by both organizations and individuals.

DOJ Focuses in on Individual Liability for Corporate Wrongdoing

At the beginning of the year, Becker’s Hospital Review, a leader in healthcare industry information, published a piece entitled “5 False Claims Act Trends, Cases that will Fuel Recoveries in 2016.”  One of the trends identified in this article is a “spotlight on individual liability” whereby the government is increasingly holding individuals, not just the companies they work for, liable for fraud.  This stance grows, in part, out of a Department of Justice (“DOJ”) memorandum issued in September 2015 that discusses steps the DOJ is taking to increase legal accountability for individual corporate wrongdoing.  One change announced in the memo is that corporations will only receive credit for cooperating with an investigation if they reveal the names of the individuals involved in the fraud.

scotusThe False Claims Act (“FCA” or “the Act”) is a powerful tool that allows private citizens to play a key role in fighting fraud on the federal government.  As we have reported in previous blog posts, this term the Supreme Court agreed to look at a disagreement among appellate courts regarding the issue known as implied certification.  Our whistleblowers’ law firm is pleased to report that the Court recently released a decision that affirms and strengthens the Act, ensuring it is available to fight a wide range of fraudulent acts.

Background: The Implied Certification Theory and the Escobar Case

As explained in The False Claims Act: A Primer, a guide released by the Department of Justice (“DOJ”), a person violates the FCA when they knowingly submit a false claim for payment to the government, knowingly cause another to submit a false claim, or knowingly create a false record/statement in order to induce the government to pay a false claim.  The Act was originally passed during the Civil War.  It underwent substantial revisions in the 1980s and again in 2009 and 2010.

As a small law firm, we are particularly aware of the many contributions that small businesses and small business owners make to our economy.  In our case, we believe being a small firm allows us to have a more personal touch and collaborate more closely with every client while providing top-notch legal services.  There are also unique challenges to running a small business.  One way that the government recognizes these important contributions and special challenges is by requiring that a certain percentage of federal contracts be awarded to small businesses.  Sadly, some companies attempt to lie to the government and the American people by holding themselves out as small businesses when they truly do not qualify as such.  This a form of fraud.  Our government contract fraud lawyer is dedicated to partnering with honest individuals to protect the integrity of small business set-aside programs and ferret out other forms of fraud on the federal government.

Construction Company Pays $5.4 Million to Settle Government Contract Fraud Allegations

Earlier this month, the Times of San Diego reported that a California-based construction company paid $5.4 million to settle allegations of fraudulent billing for work performed at Camp Pendleton and other military bases.  Harper Construction is a privately held company that earns a substantial share of its revenue through government contracts.  As indcontract2icated in the report, Harper had contracts to construct facilities at the military bases and these contracts specifically required that Harper subcontract a specified portion of the work to small disadvantaged businesses.  These requirements stem from government programs intended to ensure that such businesses receive a fair share of federal contract dollars.  According to the article, Harper stood accused of knowingly using sham companies and falsely certifying that it complied with the small business subcontracting requirements.  Instead of having legitimate small businesses perform the work, the lawsuit alleged that Harper actually passed the work to a large affiliate.

The government cash2is, in many ways, a large business.  Given its size and the breadth of its duties, the government relies on individuals and companies for a wide range of goods and services.  However, because of the government’s special position, government contracts often contain clauses unique to agreements between the government and private entities.  When contractors knowingly violate these clauses, they commit fraud.  Government contract fraud is ultimately a fraud on all taxpayers and a way of stealing from already strained coffers needed for important services like education, health care, and national defense.  Our government contract fraud law firm partners with whistleblowers to fight these wrongs.

$11.38 Million Settlement in Case Alleging Government Contract Fraud and Violation of Price Reduction Clause

On May 31, the Department of Justice (“DOJ”) issued a press release announcing that Deloitte Consulting LLP (“Deloitte”) has agreed to pay $11.38 million to settle claims it violated a pricing clause in its federal contracts.  According to the government, the General Services Administration (“GSA”) awarded Deloitte a contract in 2000 pursuant to which the consulting company was to provide information technology services.  Under the agreement, if Deloitte offered a lower price to specific commercial customers during the term of the contract, it was also required to reduce to price the company charged the government.  In a lawsuit filed under the False Claims Act, the government alleged that Deloitte violated the price reduction clause between 2006 and 2012 and charged the government more than comparable commercial clients.  It is important to note that the settlement is not an admission of wrongdoing.

The False Claims Act is a powerful weapon and, as we’ve talked about on this page numerous times, a large part of that power comes from the fact that ordinary citizens can use it to fight many forms of fraud on the United States government.  After the initial filing of a whistleblower fraud claim, the government will eventually decide whether or not to intervene in the case.  This is an important part of the process and our whistleblowers’ law firm knows that intervention in False Claims Act cases, such as recently occurred in a health care fraud suit, is often a positive sign.  However, it is important to know that claims can be and are successful even absent government intervention.

The FCA and Intervention Generally

lawbooksThe False Claims Act (“FCA” or “the Act”) is a Civil War Era statute that was reenergized by a series of amendments in the 1980s.  In short, a company or individual violates the Act when it defrauds the government, typically by overcharging the government or a government agency.  Under 31 U.S.C. §3730(b), private citizens are given the power to bring FCA claims on the government’s behalf.  These whistleblowers, also known as relators, are crucial since fraud by its nature is secretive and the government could not effectively fight fraud without the assistance of individuals who witness fraudulent acts.  After the suit is filed, the government investigates the claim and then the Department of Justice (“DOJ”) decides whether or not it wants to take over the case.  The decision to do so is known in legal circles as intervention.

We talk a lot courthouseabout the False Claims Act (“FCA” or “the Act”)) on this blog.  We do that because it is a powerful tool that allows ordinary Americans to take a stand and fight fraud.  The frauds it fights are frauds perpetrated against the government and government programs, frauds that are ultimately crimes against the American people.  Our posts often look at specific cases involving alleged violations of the FCA, but from time to time our whistleblowers’ law firm likes to take a step back and look at the FCA more generally to help our readers understand exactly what kind of wrongs the FCA tackles.

“A False or Fraudulent Claim”

The FCA is actually several sections of the United States Code, with 31 U.S.C. §3729 containing the basic description of what actions violate the Act.  Although it is only one of a number of subsections that describe these actions, §3729(1)(a) explains the basic wrong the Act tackles “a false or fraudulent claim for payment or approval.”  Essentially, this means that a person or entity is liable under the Act if they ask the government to pay an obligation that is not actually due or ask for more money than they are actually due.