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Dentons lawyers to Participate in Webinar About Opportunities in Government Contracting for IT and Commercial Companies, and How Companies Can Stay Out of Trouble

On November 12, 2014 from 1:30 pm to 3:00 pm ET, our colleagues Mike Rizzo, Gary Chadick and Todd Canni will present at a PCI webinar entitled “IT and Service Contracting with the Government: How Commercial Companies Can Stay Out of Trouble and Off the Radar.”  Their presentation will focus on the federal government contracting opportunities that IT and commercial companies have to increase their revenue.  The webinar also will discuss: (1) developments in the Department of Defense’s Mandatory Disclosure Rule; (2) how to mitigate litigation, government investigation, and suspension and debarment risks by creating a culture of compliance; and (3) best practices in ethics and compliance.  (CLE, CEU, and CPE credit may be earned.)  This is a great learning opportunity, and shouldn’t be missed.

Dentons lawyers to Participate in Webinar About Opportunities in Government Contracting for IT and Commercial Companies, and How Companies Can Stay Out of Trouble

Recent Developments in the Public Disclosure and First-To-File Bars Under the False Claims Act

Yesterday, Sandeep Nandivada published a feature comment in The Government Contractor entitled, “The Public Disclosure And First-To-File Bars: Are They Still Jurisdictional?”.  In his article, Sandeep analyzes the “jurisdictional nature of the public disclosure and first-to-file bars” under the 2010 amendments to the civil False Claims Act (31 USCA § 3729, et seq.) through an in-depth discussion of recent Circuit Court of Appeals and District Court decisions.  He concludes that “long-standing assumptions” about the jurisdictional nature of these bars are now “in flux” and “may no longer apply.”  I encourage you to read this important  article on a topic that may one day reach the Supreme Court.

Recent Developments in the Public Disclosure and First-To-File Bars Under the False Claims Act

COFC Decision Provides Valuable Lessons to Contractors About Termination for Defaults, Fixed Price Contracts and Fraud Counterclaims

Those looking for an intriguing summer read should look no further than Judge Bruggink’s 84-page opinion in Liquidating Trustee Ester Du Val of Ki Liquidation, Inc. v. United States, CoFC No. 06-465C (June 2014).  This story stems from the government’s decision to terminate for default Kullman Industries’ (Kullman) contract to build the U.S. Embassy compound in Dushanbe, Tajikstan.  After trial, the Court of Federal Claims ruled on a myriad of claims.  Pertinently, it (i) upheld the government’s termination for default decision; (ii) denied the Kullman’s $4.3 million claim for geotechnical work allegedly performed outside the terms of the contract; and (iii) granted the government’s fraud counterclaims based on the violations of the False Claims Act.  This decision provides a few valuable lessons:

  • Don’t walk off the job – Although the project experienced delays and a new completion date was not formally established, Kullman eventually stopped working on the project with no apparent intention of returning to work.  As a result, the government terminated the contract for default.  Kullman argued that its actions were justified because (i) it was experiencing financial distress and (ii) it would not have been able to complete the project due to the government not providing permanent power to the worksite as of the termination date.  The Court summarily rejected these arguments, finding that the “overwhelming evidence that [Kullman] abandoned the project . . . alone trumps any possible shortcomings in contract administration.”  A “[t]ermination for default is justified when the contractor abandons the project while there is still work to be completed.”  In other words, no matter what the government does, never walk off the job and abandon it.
  • Understand your written contract –  Kullman unsuccessfully argued that it was required to perform certain geotechnical work outside the terms of the contract, and that it was provided an allowance for this work, the price of which would be set at a later date.  Dismissing a variety of arguments, the Court’s decision focused on its review of the contract:  “a literal reading of the contract plainly supports defendant’s contention that plaintiff assumed the risk for how much the geotechnical and foundation work would cost when it agreed to a fixed price.”  The Court also found that Kullman’s apparent understanding was “merely the agency’s recognition that, only if [Kullman] could establish a differing site condition due to unusual soil condition would the agency have to face additional cost.”  Contractors must understand the implications of entering into a fixed price contract, and realize that, but for the execution of a modification increasing the contract price, there is no guarantee of payment for work performed over the contract’s firm fixed price.  In addition, contractors should carefully review the solicitation, their proposal and the statement of work to ensure the proposed price reflects that actual scope of work.
  • Carefully review certifications –  In its invoices, Kullman certified that “[a]ll payments due to subcontractors and suppliers from previous payments received under the contract have been made, and timely payments will be made from the proceeds of the payment covered by this certification . . . .”  The government argued that Kullman violated the False Claims Act (FCA) because Kullman was paid in full for all of one supplier’s work, but Kullman failed to pay in full that supplier.  At trial, Kullman explained its interpretation of the certification – that Kullman “had paid its subcontractors and suppliers as much as it could of the amounts due under the subcontract agreements, or, alternatively, that [Kullman] could make the certification so long as it had some understanding with the suppliers about paying amounts due over time.”  Although the Court found that Kullman did not “mean to deceive the government” and that Kullman truly believed its interpretation was appropriate, this “nuanced interpretation does not, however, overcome its clear inaccuracy. We remain persuaded that he should have known the statement was inaccurate and should not have signed it.”  Although this false certification did not amount to a violation of the Forfeiture of Fraudulent Claims Act, it did violate the FCA.  The Court explained: “ [t]he fact that [Kullman] thought [the certification] was accurate under a strained view of the circumstances does not make it any less false in the sense meant by the statute.”  The Court also dismissed Kullman’s argument that there was no FCA violation because the government was aware of Kullman’s financial issues and had reasons to know that it could not pay all its suppliers.  The Court found that the contracting officer did not “specifically know” or have “first hand knowledge” that the certifications at issue were “not correct.”  “[F]or government knowledge to vitiate fraud, it must approach something like specific consent or an agreed-upon interpretation of the terms of the certification such that the parties agree that the certification does not mean what it otherwise appears to mean.”  The upshot is that contractors should carefully review all certifications, and when in doubt about an interpretation, contact counsel.
COFC Decision Provides Valuable Lessons to Contractors About Termination for Defaults, Fixed Price Contracts and Fraud Counterclaims

Join Dr. Patricia Harned, President of the ERC and Dentons for a Discussion on Corporate Ethics

I hope you can join me and Dentons’ Government Contracts Department Chair, Fred Levy for an ABA Committee lunch meeting featuring Dr. Patricia J. Harned, President of the Ethics Resource Center (ERC). She will be speaking to the Committee regarding the results of ERC’s National Business Ethics Survey (NBES).  The NBES is a study, conducted every two years, of ethical behavior within corporations. Specifically, it gauges ethics in the workplace and forecasts where corporate America is heading from a cultural standpoint.

This year’s findings are quite interesting.  The current NBES reveals a reduction in overall observed workplace misconduct, which the ERC attributes to corporate America’s increased commitment to enhancing ethics and compliance programs.  On the other hand, according to the NBES, 60-percent of misconduct is committed by someone within management, 1 out of every 3 people who observe misconduct choose not to report it, and 21-percent of those reporting misconduct believe that they suffer retaliation.

Dr. Harned will discuss these issues and many other interesting findings from ERC’s NBES that we believe will be both informative and valuable.

 

Join Dr. Patricia Harned, President of the ERC and Dentons for a Discussion on Corporate Ethics

Join NCMA and Todd Canni in a Discussion on Developments & Issues on Debarments and Suspensions

When Friday April 18, 2014 from 8:30 AM to 10:30 AM EDT Networking & Breakfast Starts at 7:30 AM

Where: Washington Technology Park Conference Center 15000 Conference Center Drive Chantilly, VA 20151

Suspension, debarment or exclusion from government contracts or other transactions with the federal government can have devastating consequences to companies that rely on the federal government for business as a prime contractor, subcontractor or grantee. Being listed on the government’s “Excluded Parties List” not only renders the company ineli gible for federal government work, but can have collateral consequences such as ineligibility to obtain federal export licenses or debarment from state and local contracts. Companies can be suspended or debarred based on a criminal conviction or finding of civil fraud not directly related to the performance of a government contract, grant or transaction. In addition, a criminal violation of certain laws, such as the Clean Air Act and Clean Water Act, require that a company be debarred.

The federal government has greatly increased its use of suspension and debarment. It is actively pursuing suspension or debarment of federal grantees, of companies that violate federal socio-economic laws and regulations, and even of companies that settle civil false claims allegations without an acknowledgement of wrongdoing. A contractor’s or grantee’s failure to disclose potential wrongdoing related to the award, performance or close-out of a federal transaction now has b een added to the long and growing list of gr! ounds for suspension or debarment.

About the Presenter:

Todd Canni serves as Counsel in the Washington D.C. office of Dentons and has worked on all sides of the government-contracting process, including in the Executive Branch with the Department of Air Force as Director, Suspension & Debarment Operations, the Judicial Branch at the U.S. Court of Federal Claims as Judicial Law Clerk to the Chief Judge and with Industry as outside counsel.

To register please contact Jessica Grant at info@ncmabd.org

Join NCMA and Todd Canni in a Discussion on Developments & Issues on Debarments and Suspensions

President Obama’s 2015 Budget Increases Funding for Fraud and Compliance Enforcement

President Obama announced his 2015 proposed budget last week.  The budget shows a renewed focus on combating fraud, waste and abuse in government contracting by increasing the number of compliance and fraud enforcers at several agencies.

The Department of Labor (“DOL”), Department of Defense (“DOD”), Department of Health and Human Services (“HHS”) and the General Services Administration (“GSA”) plan on hiring more personnel specifically to investigate fraud.  The President’s budget also increases the funding for HHS’ inspector general from $300 million to $400 million.  It appears that HHS will continue to pursue record breaking fraud recoveries, as an additional $325 million was earmarked for the Health Care Fraud Prevention and Enforcement Action Team, along with other program integrity efforts. GSA Office of Inspector General (“OIG”), which has been particularly aggressive in recent years, plans on hiring more special agents in FY2015, which will increase the OIG’s ability to investigate allegations of fraud and misconduct and achieve even higher civil and criminal recoveries than in past years.  GSA also expects audit work in the construction arena to increase significantly this year as Recovery Act projects come to completion.

The False Claims Act (“FCA”) will remain an important enforcement tool for agencies to use against government contractors. The government is looking to fraud enforcement as a mechanism to increase revenue.  Through a joint effort with DOJ, HHS’ FCA recoveries reached a record $4.3 billion in 2013.

Even in an era of flat and declining budgets, agencies are devoting increased resources to both audits and fraud investigations.  Contractors should be prepared for this trend by implementing comprehensive and up-to-date compliance programs, monitoring adherence, and promptly conducting their own investigation of any suspected non-compliances or fraud.

President Obama’s 2015 Budget Increases Funding for Fraud and Compliance Enforcement

It Wouldn’t Be the Holidays Without Another COFC Fraud Counterclaim Decision

Given the number of important government contracts decisions issued this year about fraud counterclaims, it is only fitting that the COFC issue another fraud counterclaim decision in the midst of the holiday cheer.  As a follow-up to her Gulf Group General Enterprises decision, Judge Horn once again tackles the Department of Justice (“DoJ”) fraud-related counterclaims and affirmative defenses under the False Claims Act (31 U.S.C. § 3729), pre-FERA, and the Special Plea in Fraud statute (28 U.S.C. § 2514) in Chapman Law Firm, LPA v. United States, No. 09-981c.  Weighing-in at 78 pages, this decision highlights how the tables turn in a litigation once the DoJ asserts such counterclaims and affirmative defenses – almost the entire focus of the decision shifts to these counterclaims and defenses which is a deeply factual inquiry.  It also highlights one of the many reasons why it is critical that every government contractor maintain satisfactory compliance practices and procedures – e.g., to curb potential fraudulent acts that may result in the forfeiture of viable claims and a damages/penalty assessment against the contractor.

Specifically, Judge Horn determined that the contractor’s claims were forfeited under the Special Plea in Fraud Statute.  Based on an implied representation theory, the court found clear and convincing evidence that the contractor “intended to deceive HUD into thinking that plaintiff had performed the working entitling plaintiff of payment under the parties’ contract.”  Second, Judge Horn determined that the contractor violated the pre-FERA False Claims Act through “the knowing submission of fraudulent claims and the use of falsified inspection reports in support of fraudulent claims.”  Not only was the contractor now liable to the Government for $44,000, but it also was required to pay the Government’s litigation costs.

During a time of utmost scrutiny in government contracts and as this case demonstrates, government contractors must have adequate compliance practices and procedures in place to stop any behavior that could provide the basis for a fraud counterclaim or affirmative defense.  Otherwise, you run the unnecessary risk of having your holiday cheers turn into holiday jeers.

It Wouldn’t Be the Holidays Without Another COFC Fraud Counterclaim Decision

Upcoming Fed Pubs Program: New Developments in Contract Compliance and Fraud Enforcement

Next week, many of my colleagues will be participating in a two day program on new developments impacting government contractors including analyses of the whistleblower provisions of Fraud Enforcement and Recovery Act (FERA) and a special False Claims Act Workshop covering Government Contractors.

The program will take place at the L’Enfant Plaza Hotel in Washington DC on October 23rd and 24th.

To view the agenda and register, click here.

Upcoming Fed Pubs Program: New Developments in Contract Compliance and Fraud Enforcement

Where the Sports Page and False Claims Act Collide: The Lance Armstrong Case

It’s rare for a False Claims Act case to involve sports—much less “what was arguably the greatest fraud in the history of professional sports.”  But that’s how the government described the conduct of Lance Armstrong in its ongoing FCA case against the former cycling champion.

From around 1996 through 2004, the United States Postal Service sponsored a cycling team of which Armstrong was the lead rider.  In order to sponsor the team, the USPS paid approximately $40 million.  The sponsorship agreements required the USPS team to follow the rules of cycling’s governing bodies, which prohibited the use of certain performance enhancing substances and methods.  The government now claims that Armstrong violated the terms of the sponsorship agreements by using illegal substances and methods, and that Armstrong falsely denied doing so in order to conceal his cheating and retain the sponsorship money.

In June 2010, Armstrong’s former teammate, Floyd Landis, filed a qui tam suit under the FCA alleging that Landis, Armstrong, and others on the USPS team used banned substances and methods.  Later, after Armstrong admitted during an interview with Oprah Winfrey that he used banned substances and methods for years, the government intervened in Landis’s FCA suit.

In July 2013, Armstrong filed a motion to dismiss, arguing that the government’s claims are barred by the FCA’s six-year statute of limitations.  According to Armstrong, the government was aware for years of media coverage regarding possible doping by the USPS team, and even knew French authorities opened an investigation into the team’s possible use of banned drugs.  But, rather than conducting its own investigation, the government renewed its sponsorship agreement so that it would continue to enjoy favorable publicity and other benefits.  In Armstrong’s view, the government “got exactly what it bargained for”—the benefits of sponsoring a winner—and, because it waited more than six years after making its last sponsorship payment to file suit, its FCA claims are time-barred.

Recently, the government opposed Armstrong’s motion to dismiss, accusing him of carrying out “what was arguably the greatest fraud in the history of professional sports,” which allegedly deceived the USPS into paying $40 million to Armstrong’s cycling team.  Disputing Armstrong’s characterization of the case, the government stated that it did not get a “winner,” but instead got “a fraud”—“decidedly not what the Government bargained for.”  (Emphasis in original.)  Moreover, regarding the FCA’s statute of limitations, the government asserted that it was not aware of the truth until Landis filed his complaint in 2010; that the conclusion of the French investigation (without any finding of doping) did not put the government on notice of a possible claim; and that Armstrong’s repeated denials concealed the truth for years.

The parties’ competing arguments raise important questions about what constitutes sufficient notice to start the statute of limitations in an FCA case, and how a defendant’s alleged concealment of fraud may affect the limitations period.  Oral argument on Armstrong’s motion to dismiss has been scheduled for November 18, 2013.

Where the Sports Page and False Claims Act Collide: The Lance Armstrong Case