The False Claims Act has long protected relators from retaliation for preparing a qui tam complaint. But what if an employee “blows the whistle” on a garden-variety problem — for instance, a laboratory that she believes is falling short of standards in a federal funding agreement?
Continue Reading Blowing the Whistle on a Breach of Contract? D.C. Circuit Addresses Scope of FCA’s Anti-Retaliation Rules
Procurement Fraud and Internal Investigations
Alleged TAA Non-Compliance Is Not “Material” Under The False Claims Act, Federal Court Holds
Contractors that must comply with the government’s domestic preference laws should take note of United States ex rel. Folliard v. Comstor Corp., __ F. Supp. 3d __, 2018 WL 1567620 (D.D.C. 2018) — a recent decision dismissing a country-of-origin fraud lawsuit initiated by serial relator Brady Folliard.
Continue Reading Alleged TAA Non-Compliance Is Not “Material” Under The False Claims Act, Federal Court Holds
Common Sense Prevails: “Tougher” To Satisfy Rule 9(b) Standard in “Implied Certification” FCA Case Arising from GSA Schedule Contractors’ Alleged TAA Non-Compliance
A U.S. District Court recently dismissed a False Claims Act (FCA) qui tam action alleging that numerous GSA Schedule contractors violated their obligations under the Trade Agreements Act (TAA), resulting in the submission of false claims under the “implied certification” theory of FCA liability. As discussed further below, the court’s decision — United States ex rel. Berkowitz v. Automation Aids, No. 13-C-08185, 2017 WL 1036575 (N.D. Ill. Mar. 12, 2017) — is important for at least two reasons:
- The court found that “often” it is “tougher” to satisfy the heightened pleading requirements of Federal Rule of Civil Procedure 9(b) when FCA allegations are based on an implied certification theory.
- The court held that, when dealing with conduct arising from a “sprawling federal procurement statutory and regulatory framework” (like the TAA), general allegations of non-compliance may support a breach-of-contract claim, but are insufficient in an FCA case. Rather, “specific allegations” about the fraudulent scheme are needed.
This decision comes at a particularly opportune time for contractors, given the likelihood of increased TAA and Buy American Act (BAA) enforcement during the Trump Administration and the corresponding potential uptick in whistleblower FCA activity involving these country-of-origin issues.
Continue Reading Common Sense Prevails: “Tougher” To Satisfy Rule 9(b) Standard in “Implied Certification” FCA Case Arising from GSA Schedule Contractors’ Alleged TAA Non-Compliance
Confidentiality Agreements Continue To Pose Potential Compliance Trap for Contractors
Federal contractors who require employees to sign confidentiality agreements—including those selling only commercial products or in small quantities—need to examine their agreements closely. For the last two years, the government has sought to prohibit confidentiality agreements that restrict employees’ ability to report fraud, waste, or abuse to “designated investigative or law enforcement representative[s]” for federal agencies authorized to receive that information.”[1] Most recently, the Department of Defense issued a new class deviation on November 14, 2016 prohibiting DoD from using funds from recent appropriations to contract with companies using overbroad confidentiality agreements.[2] While these restrictions may not be new, the deviation’s broad application and significant consequences mean that contractors should give close scrutiny to ensure any agreements with employees comply with the prohibition.
Continue Reading Confidentiality Agreements Continue To Pose Potential Compliance Trap for Contractors
ASBCA Addresses CDA Jurisdiction Over Claims Involving Contractor Fraud
The Armed Services Board of Contract Appeals (“ASBCA” or the “Board”) recently issued an opinion addressing several important, and controversial, topics of interest to government contractors. The lengthy opinion addressed key issues related to the Board’s jurisdiction over government claims and affirmative defenses based on alleged contractor fraud, the Contract Disputes Act (“CDA”) statute of limitations, and the impact of criminal plea agreements and civil False Claims Act settlements on contract disputes.
Continue Reading ASBCA Addresses CDA Jurisdiction Over Claims Involving Contractor Fraud
Inside New FAR Whistleblower Rule: Key Takeaways for Contractors
On January 22, 2016, the FAR Council published a proposed rule that, if adopted, would impose a government-wide prohibition on contracting with companies that limit the ability of employees or subcontractors to lawfully report fraud, waste, and abuse to the government. Given the proposed rule’s near-universal application and potentially devastating consequences for violators, contractors would be wise to take a hard look at their confidentiality policies and procedures to ensure that they will not run afoul of the proposed rule’s restrictions.
Proposed Rule
The proposed rule implements Section 743 of the Consolidated and Further Continuing Appropriations Act, 2015 (Pub. L. 113-235) (hereinafter, “Section 743”) and successor provisions in subsequent appropriations acts and continuing resolutions. Section 743 prohibits the federal government from using appropriated funds to enter into contract “with an entity that requires employees or subcontractors of such entity . . . to sign internal confidentiality agreements or statements prohibiting or otherwise restricting such employees or contactors from lawfully reporting such waste, fraud, or abuse” to the government.
The new proposed rule aims to implement this prohibition on a government-wide basis.[1] Given its wide application and significant potential consequences, it is particularly important for contractors to understand the rule’s key components:
Continue Reading Inside New FAR Whistleblower Rule: Key Takeaways for Contractors
Federal Felony Convictions and Delinquent Taxes Must be Reported Under New FAR Rule
Three major agencies—the Department of Defense (“DoD”), NASA, and the General Services Administration (“GSA”)—have published an interim rule that will require contractors to report federal felony convictions and delinquent taxes when responding to solicitations. The rule implements requirements imposed by the Consolidated and Further Continuing Appropriations Act of 2015, Pub. L. 113-235 (the “CFCAA”) and applies broadly to any procurements with the DoD, NASA, or GSA. Indeed, the FAR Council declined to exempt procurements for commercial items (including COTS items) or contracts below the simplified acquisition threshold from the reporting requirements, explaining that “[t]ax liability is a serious matter” and that the rule will impose a “minimal burden” on contractors.
Continue Reading Federal Felony Convictions and Delinquent Taxes Must be Reported Under New FAR Rule
Updated DoD IG Guidance Signals New Enforcement Emphasis for DCAA Auditors
The Department of Defense Office of Inspector General (“DoD IG”) appears poised to place new emphasis on the pursuit of fraud cases in certain key enforcement areas, at least according to updated agency guidance recently published online. Earlier this month, the DoD IG quietly revised its “Auditor Fraud Resources” page, intended to serve as guidance for DCAA auditors, by adding new materials addressing fraud scenarios in the context of defective pricing and forward pricing proposal audits. Although the appearance of this new guidance was the cause of little fanfare, the prospect of increased enforcement activity in these areas could significantly impact the defense contracting community.
Continue Reading Updated DoD IG Guidance Signals New Enforcement Emphasis for DCAA Auditors
SEC and State OIG Allege that Contractors’ Policies, Procedures, and Agreements Suppress Whistleblowing
In a span of two days, two separate agencies took action against contractor policies and agreements that may discourage whistleblowers. On March 30, 2015, the U.S. Department of State Office of Inspector General (“State OIG”) issued a report contending that certain contractor policies and agreements have a “chilling effect” on whistleblowers. On April 1, 2015, the Securities and Exchange Commission (“SEC”) imposed a fine of $130,000 on a contractor for requiring confidentiality agreements that allegedly impede individuals from disclosing securities law violations. Given recent scrutiny, contractors should consider reviewing policies, procedures, forms, agreements, or practices that may impede employees’ ability to report instances of fraud, waste, and abuse.
As we discussed recently, the SEC’s April 1 order was based on a violation of SEC Rule 21F-17, which prohibits “imped[ing] an individual from communicating directly with [the SEC] about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement. . . .” The contractor that received the fine required employees to sign a confidentiality agreement after discussions in internal investigations. Specifically, the confidentiality agreement prohibited employees from “discussing any particulars regarding this interview and the subject matter discussed during the interview, without the prior authorization of the Law Department.” The SEC found that this provision, coupled with a statement that such impermissible disclosures may be grounds for termination, violated Rule 21F-17, even though it was not aware of any evidence that the provision had been enforced.
State OIG similarly took issue with certain contractor confidentiality agreements and policies. State OIG, in analyzing the practices of the 30 largest State Department contractors, faulted 13 contractors for having policies that have “a chilling effect on employees who wish to report fraud, waste, or abuse. . . .” Specifically, State OIG criticized policies instructing employees to “consult with the Legal Department” or their supervisor before answering government investigators’ questions or handing over documents, or requiring consultants receiving subpoenas or other judicial demands for contractor confidential information to provide “prompt written notice” to the contractor in order to permit the contractor from seeking a protective order. State OIG also flagged separation and employment agreements that may have the same “chilling effect”—citing agreements prohibiting statements that could be “derogatory or detrimental to the good name or business reputation” of a contractor.Continue Reading SEC and State OIG Allege that Contractors’ Policies, Procedures, and Agreements Suppress Whistleblowing
Inside the Proposed DFARS Business Systems Rule
On July 15, 2014, the U.S. Department of Defense (“DOD”) issued a proposed rule that imposes new requirements for third-party audits of three contractor business systems, as well as a requirement for contractors to self-report deficiencies uncovered in these audits or in internal reviews of these business systems. The three…
Continue Reading Inside the Proposed DFARS Business Systems Rule