On March 8, 2022, the Department of Justice announced the first settlement of a case under the Civil Cyber-Fraud Initiative.  Established in October 2021, the Initiative aims to utilize the government’s authority under the civil False Claims Act to pursue alleged instances of fraud and misrepresentation concerning cyber practices.  (We previously wrote about the Initiative here.)  The Initiative has been a point of emphasis in DOJ speeches and public comments in recent months.  This settlement is a milestone in the rollout of the program and confirmation that DOJ intends to take allegations of cyber fraud seriously.

Comprehensive Health Services LLC (CHS) is a provider of global medical services that contracted to provide medical support services at Government-run facilities in Iraq and Afghanistan.  Under the settlement, CHS agreed to pay $930,000 to resolve the allegations that it violated the False Claims Act by falsely representing to the State Department and the Air Force that it complied with contract requirements relating to the provision of medical services at State Department and Air Force facilities in Iraq and Afghanistan.

CHS submitted claims to the State Department for the cost of a secure electronic medical record (EMR) system to store confidential patient records for service members, diplomats, officials and contractors working and receiving medical care in Iraq.  The Government alleged that CHS did not consistently store patient records on the EMR, and failed to disclose this fact to the State Department.  Specifically, the Government claimed that some copies of patient medical records were improperly saved to an internal network drive that may have been accessible to non-clinical staff in contravention of contractual requirements and notwithstanding privacy concerns raised by certain CHS staff.

Although this is the first settlement agreement under the Cyber Fraud Initiative, it is worth noting that the initial complaint filed by the relator relating to the cyber issues dates back to well-before DOJ’s announcement of the initiative.  The settlement, which also covered non-cybersecurity issues, confirms DOJ’s intent to use its False Claims Act enforcement authority to incentivize qui tam relators to come forward with evidence of cybersecurity failures at government contractors.

 

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Robert Huffman

Bob Huffman represents defense, health care, and other companies in contract matters and in disputes with the federal government and other contractors. He focuses his practice on False Claims Act qui tam investigations and litigation, cybersecurity and supply chain security counseling and compliance…

Bob Huffman represents defense, health care, and other companies in contract matters and in disputes with the federal government and other contractors. He focuses his practice on False Claims Act qui tam investigations and litigation, cybersecurity and supply chain security counseling and compliance, contract claims and disputes, and intellectual property (IP) matters related to U.S. government contracts.

Bob has leading expertise advising companies that are defending against investigations, prosecutions, and civil suits alleging procurement fraud and false claims. He has represented clients in more than a dozen False Claims Act qui tam suits. He also represents clients in connection with parallel criminal proceedings and suspension and debarment.

Bob also regularly counsels clients on government contracting supply chain compliance issues, including cybersecurity, the Buy American Act/Trade Agreements Act (BAA/TAA), and counterfeit parts requirements. He also has extensive experience litigating contract and related issues before the Court of Federal Claims, the Armed Services Board of Contract Appeals, federal district courts, the Federal Circuit, and other federal appellate courts.

In addition, Bob advises government contractors on rules relating to IP, including government patent rights, technical data rights, rights in computer software, and the rules applicable to IP in the acquisition of commercial items and services. He handles IP matters involving government contracts, grants, Cooperative Research and Development Agreements (CRADAs), and Other Transaction Agreements (OTAs).

Photo of Michael Wagner Michael Wagner

Mike Wagner helps government contractors navigate high-stakes enforcement matters and complex regulatory regimes.

Combining deep regulatory knowledge with extensive investigations experience, Mr. Wagner works closely with contractors across a range of industries to achieve the efficient resolution of regulatory enforcement actions and government…

Mike Wagner helps government contractors navigate high-stakes enforcement matters and complex regulatory regimes.

Combining deep regulatory knowledge with extensive investigations experience, Mr. Wagner works closely with contractors across a range of industries to achieve the efficient resolution of regulatory enforcement actions and government investigations, including False Claims Act cases. He has particular expertise representing individuals and companies in suspension and debarment proceedings, and he has successfully resolved numerous such matters at both the agency and district court level. He also routinely conducts internal investigations of potential compliance issues and advises clients on voluntary and mandatory disclosures to federal agencies.

In his contract disputes and advisory work, Mr. Wagner helps government contractors resolve complex issues arising at all stages of the public procurement process. As lead counsel, he has successfully litigated disputes at the Armed Services Board of Contract Appeals, and he regularly assists contractors in preparing and pursuing contract claims. In his counseling practice, Mr. Wagner advises clients on best practices for managing a host of compliance obligations, including domestic sourcing requirements under the Buy American Act and Trade Agreements Act, safeguarding and reporting requirements under cybersecurity regulations, and pricing obligations under the GSA Schedules program. And he routinely assists contractors in navigating issues and disputes that arise during negotiations over teaming agreements and subcontracts.

Photo of Ryan Burnette Ryan Burnette

Ryan Burnette advises clients on a range of issues related to government contracting. Mr. Burnette has particular experience with helping companies navigate mergers and acquisitions, FAR and DFARS compliance issues, public policy matters, government investigations, and issues involving government cost accounting and the…

Ryan Burnette advises clients on a range of issues related to government contracting. Mr. Burnette has particular experience with helping companies navigate mergers and acquisitions, FAR and DFARS compliance issues, public policy matters, government investigations, and issues involving government cost accounting and the Cost Accounting Standards.  Prior to joining Covington, Mr. Burnette served in the Office of Federal Procurement Policy in the Executive Office of the President, where he worked on government-wide contracting regulations and administrative actions affecting more than $400 billion dollars’ worth of goods and services each year.