a design-builder’s guide to government lawsuits (and how ... · • q uitam relator (private...
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A Design-Builder’s Guideto Government Lawsuits
(and How to Avoid Them)
Wednesday, August 20, 2014
Federal Project Symposium
3:15 – 4:45 pm
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Introducing Our Panel
• Reggie Jones– Fox R othschild,L L P– Chair,FederalGovernm entContracts& P rocurem entP racticeGroup
• Andrew Steinberg– T rialAttorney,U nitedS tatesDepartm entofJustice– CivilDivision
• Tanya Matthews– P resident,T M G ConstructionCorporation– Form erDBIA N ationalBoardChair
• Nick Solosky– Fox R othschild,L L P– Attorney,FederalGovernm entContracts& P rocurem entP ractice
Group
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Why We Are Here
• Lusk Mechanical - $6.25M Settlement– Alleged FalseS tatem entsby M echanicalContractorstotheS BA concerning
HU BZoneP rogram P articipationand FalseClaim sto theU .S .Arm y
• Okland Construction – $1M Settlement– Alleged FalseS tatem entsandFalseClaim sby aL argeConstructionCom pany
totheS BA concerning8(a)M entor-P rotégéP rogram P articipation
• Granite Construction - $367,500 Settlement– Alleged FraudrelatingtoInflated InvoicesS ubm itted by anInfrastructure
ContractortotheDO T andU S ACE
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Why We Are Here• T heCivil False Claims Act (31 U S C 3729-
3733)andliability totheU .S .Governm ent
• P rim ary andm osteffectivetoolusedby theGovernm enttocom batfraud onFederalcontracts
• Inthelast4 years,theU .S .hasrecoveredmore money from private contractors basedonallegedfraudagainsttheGovernm entthanithadintheprevious150
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The Importance for Design-Builders• U pdatestotheFederal Acquisition Regulation
(FAR) toprovideexpressdesign-buildprovisionsareleadingto increasedopportunities forDesign-Buildersw ithFederalagencies.
• Designersm ay belessexperiencedw iththeConstruction-R elated FAR Certifications.
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The Importance for Design-Builders
• FAR Part 36 andRequired ContractorCertifications
• Mandatory Treble Damages andMandatory Civilpenalties;
• FAR Subpart 3.10—Contractor Code of BusinessEthics and Conduct
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Today’s FCA Reality
• T heConstructionIndustry isanEasy T argetforCivilFalseClaim sActAllegations.
• T hereisBi-P artisanP oliticalS upportforEnforcem ent
• R iskofU nintentionalFalseClaim sisHigh
• R egularEthics& Com plianceT rainingistheBestP rotection
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False Claims Act LiabilityDirect False Claim
Know ingly presenting,orcausingtobepresented,afalseclaim
False StatementKnow ingly m aking,usingorcausingtobem adeorusedafalserecord/statem entm aterialtoafalseorfraudulentclaim
Reverse False ClaimKnow ingly concealingordecreasinganobligationtopay m oney togovernm ent
Conspiracy to Commit a False ClaimFrequently usedinm ulti-defendantactions
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The Elements of a False Claim
Claim – M eansany request formoney orproperty
Multiple requests = multiple false claims
Knowingly – M eansaContractor:
1. Hasactual knowledge offalsity;
2. Actsindeliberate ignorance oftruth/falsity;or
3. Actsinreckless disregard oftruth/falsity.
* A specificintenttodefraudisnotrequired*
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R ecentAm endm entstotheFCABroad Knowledge Standard
• Actual Intent to Defraud is Irrelevant
• FraudEnforcem ent& R ecovery Actof2009 (“ FER A” )low eredthethresholdforthegovernm enttoproveintent(scienter)
• Know ingly subm ittingafalseclaim isenough,andnow “ know ingly” doesnotm eanactualknow ledge
• R eversalofAllisonEngineCo.v.U nitedS tates,553 U .S .662 (2008)
• Presentment Directly to Government is Irrelevant
– Itisenoughthataclaim thatshouldnotbesubm itted reachesthegovernm ent
• Just $1 of federal money is enough to subject the entireclaim amount to FalseClaims Act litigation
– U nitedS tatesv.CusterBattles,562 F.3d295 (4th Cir.2009)
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Who Can Bring aFalse Claims Action?
• Contracting Officer• W hatm ustCO doiffalsecontractclaim issuspected?
• FAR 33.209 – Ifcontractorisunabletosupportany partofaclaim ,assum edtobefalseandm ustbereportedtoagency’sfraudunit
• Q uiT am Relator (Private Citizen Plaintiff)– W histleblow erAction
– Com petitor
– Em ployee• Incentive= upto30% ofthegovernm ent’sdam ages
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False Claims Act:What Can’t You Do?
• S ubm itfalseinvoices
• S ubm itfalsecontractclaim s
• Concealrebateorcredit
• Illegitim ately frontloadinvoices
• S ubm itinflated m aterial/personnel/equipm entcosts
• S ubstitutenon-conform ingm aterials
• Concealdefective/non-conform ingw ork
• S ubm itfalsecertifications– S BA certifications
• Colludeonbid/proposalprices
• S ubm itafalsefederalS m allBusinessS ubcontractingP lan
• Implied Certifications
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False Claims Act:What Can’t You Do?
• Daew ooEng’g & Const.Co.v.U nitedS tates,73Fed.Cl.547 (2006)
• Bidlow andplanned tosubm itR EAstom akeupthedifference
• S ubm itted$13 m illionclaim disguised as$64 m illionclaim
• CourtofFederalClaim sheld Daew ooliableunderfraudprovisionoftheCDA for$50 M ;required Daew ootoforfeit$14 M claim ;andheld Daew ooliablefor$10 KundertheFCA
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What Happens if You Do?
• U pto$11,000 civil penalty foreachfalseclaim• Automatic Treble damages – T hreetim estheam ountof
dam agessustainedby thegovernm ent(e.g.,3 tim estheam ountofthefalseinvoices
• Forfeit legitim ateclaim s• “ Benefit of the Bargain” dam ages
– M orseDieselInt’lv.U .S .,79 Fed.Cl.116(2007)• $467,000 claim led to$7 million inpenalties
• S m allBusinessJobActpresum ed dam ages(fullvalueofthecontract)
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Unsealed Civil False Claims ActCase Studies
Andrew Steinberg– T rialattorney
– CivilDivisionoftheU .S .Departm entofJustice
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Case Studies U nitedS tatesex rel.How ardv.HarperConstructionCo.,
etal.CaseN o.7:12-CV-215-D (E.D.N .C.)
CaddellConstructionS ettlem ent
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Ethics & Compliance Requirements
FAR 52.203-13 (effective12/31/08)requirescontractorsto:
1. Implement Contractor Code of Business Ethicsand Conduct
2. Establish Business Ethics Awareness andCompliance Program
3. Establish Internal Control System
Inform Office of Inspector General (“OIG”) of“credible evidence” of any violation
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Code of Business Ethics and Conduct
• Must be drafted within 30 days after award
• Applies to contracts in excess of:
• $5 million in value and
• 120 days in contract duration
• Should address false claims, conflicts of interests,bribes, kickbacks, anticompetitive actions, hiring
government employees
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Application of the Code
• To whom does the Code of Business Ethics andConduct apply?
– Any officer,director,oremployee
– All employees haveaduty toreportallsuspectedviolationsoftheCodeorotherpotentially unethicalbehaviorby anyone,includingofficers,directors,em ployees,agents,custom ers,subcontractors,suppliers,andprim econtractorstotheCorporateCom plianceO fficer
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Internal Control System• Establish procedures to:
• Monitor and detect improper conduct
• Conduct periodic reviews of business practices
• Establish internal reporting mechanisms – Hotline,Compliance Officer – to allow anonymous reporting
• Display Agency Fraud Hotline
• Ensure corrective measures carried out – Disclose anddiscipline
• No retaliation against Whistleblowers
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Business Ethics Awareness andCompliance Program
• Take “Reasonable Steps” to educateprincipals and employees
• Communicate “Periodically” and in a “PracticalManner” about ethics program
• Conduct effective training programs
• Disseminate information regarding roles andresponsibilities
• Include agents and subcontractors
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Disclosure of Credible Evidence
• Timely disclose “ credibleevidence” ofim properconduct,inw riting,totheagency O fficeoftheInspectorGeneral,w ithacopy tothecontractingofficerinvolving:– Crim inalActs:
• Fraud• Bribery• Gratuities
– ViolationsofthecivilFalseClaim sAct
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How to Implement a ContractorCode of Business Ethics and Conduct
Tanya Matthews
– P resident,T M G ConstructionCorporation
– ExpertintheFieldofDesign-BuildConstruction
– DBIA'sFirstFem aleN ationalBoardChair
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