The devastating economic impact of the COVID-19 pandemic already has set in, with the future of thousands of businesses hanging in the balance.  Big and small businesses alike are finding it difficult to cope with the downturn.  The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) provisions related to small business loans provide a glimmer of hope.  Among other forms of economic relief, the CARES Act created the $349 billion Paycheck Protection Program (“PPP”) to provide funding to assist small businesses impacted by the pandemic.  After the initial allocation of PPP funds was exhausted the President signed a bill providing an additional $484 billion in relief, including $310 billion for the PPP, on April 24, 2020[1].  It may turn out for some businesses, however, that these provisions will be nothing more than fool’s gold.  The U.S. Small Business Administration (“SBA”) loan programs, including the PPP under the CARES Act, only are available to qualifying businesses that strictly comply with complex rules related to the size of the business, including its employee count, financial condition, affiliations, control and ownership, and industry classifications.  Businesses that reflexively jumped at the SBA money grab without discipline or compliance are at risk of aggressive government enforcement that surely will follow.
Continue Reading Small Business Money Grab Under the CARES Act Brings Enforcement Risks

Introduction

Federal and state governments are ready to roll out over one trillion dollars in funding in response to the novel coronavirus (COVID-19) pandemic.  As past is often prologue, we expect this new round of massive government spending to someday be subjected to strict government oversight, targeted audits and investigations, and whistleblowers all searching for potential fraud, waste and abuse.  Economic downturns and the unfortunate necessity of layoffs may also lead to an increased risk of whistleblower claims by former employees.  Flooding the healthcare industry and other negatively impacted industry streams with hundreds of billions in aid will no doubt prove too tempting for the ever-present fraudsters in society who are always looking to take advantage.  As we have learned from past crises, however, when government enforcement eventually gets around to casting its False Claims Act (FCA) nets far and wide in search of potential fraud and abuse, many unwary businesses may be ensnared along with the usual fraudsters because of their sloppy or reckless practices. Deficient practices today could trigger an FCA investigation or enforcement action tomorrow along with all of its draconian treble damages and penalties.  This article details the risks businesses face under the FCA when responding to COVID-19, and provides guidance on how to guard against them now.


Continue Reading Guard Against False Claims as Massive Government Spending Rolls Out to Combat COVID-19

The United States District Court of the Eastern District of Pennsylvania recently issued a decision unsealing a False Claims Act case over the objections of the government, the relator and the defendant.[1] In United States ex. Rel. Brasher v. Pentec Health, Inc. No. 13-05745, 2018 WL 5003474 (E.D.P.A. Oct. 16, 2018), a case initially filed five years ago, the government filed a motion to continue the seal – which happened to be its eleventh such motion – arguing that additional time was necessary, in part, to finalize its decision whether to intervene in the action, as well as to pursue settlement options. The Court disagreed.
Continue Reading District Court Determines that the Eleventh Time is NOT the Charm

On January 25, 2018, Associate Attorney General Rachel Brand issued a memorandum (the “Brand Memo”) limiting the use of agency guidance documents in affirmative civil enforcement cases. The memorandum builds on Attorney General Jeff Sessions’ November 16, 2017 memorandum prohibiting DOJ from promulgating guidance documents that create rights or obligations that are binding on regulated parties. When DOJ issues a guidance document with voluntary standards, it must also contain a statement that noncompliance is not subject to future DOJ enforcement actions. The Brand Memo makes clear that this principle also applies to other agencies’ guidance documents. In other words, agency guidance, in and of itself, cannot create new binding legal requirements.
Continue Reading “Brand Memo” Prohibits US DOJ From Converting Agency Guidance Into Binding Legal Obligations In Civil Enforcement Actions

On October 29, 2015, DOD renewed the DFARS deviation implemented in February, which prohibits contracting with entities that require employees or subcontractors to sign internal confidentiality agreements or statements that prohibit, or otherwise restrict, such employee or subcontractor from lawfully reporting waste, fraud, or abuse.  Defense contractors should review their policies to ensure they meet the requirements of these new clauses.
Continue Reading Contractors Beware: An Overly Broad Confidentiality Agreement Could Cost You!

On August 11, 2015, the U.S. Court of Appeals for the D.C. Circuit issued a writ of mandamus supporting the robust applicability of the attorney-client privilege and attorney work product doctrines in the context of False Claims Act (“FCA”) investigations conducted under the direction of corporate and outside counsel. This marks a continuation of its repudiation of a 2014 lower-court decision that significantly eroded these privileges. Interpreting the scope of the privileges in the context of internal investigations of potential FCA violations is especially tricky because of the unique roles played by the parties (the Government as a potential plaintiff, the relator as a bounty hunter, and the corporation-as-defendant). This latest ruling from the D.C. Circuit, in a case arising out of wartime contracts in Iraq run by Kellogg, Brown & Root, Inc. (“KBR”)(formerly part of Halliburton), is a breath of fresh air for companies doing business with the Federal Government. The ruling from the Court of Appeals also sends a signal to the trial court that an overly narrow view of the attorney-client privilege and attorney work product doctrine creates unacceptable uncertainty that will ultimately be rejected on appeal.
Continue Reading Whew! That Was Close – D.C. Circuit Reaffirms Application of Attorney-Client Privilege and Attorney Work Product Doctrine in Internal Investigations

On June 8, 2015, the U.S. Court of Appeals for the Seventh Circuit rejected the doctrine of implied false certification in a False Claims Act (“FCA”) lawsuit, U.S. ex rel. Nelson v. Sanford-Brown Ltd.  No. 14-2506, 2015 WL 3541422.  In a welcome decision for government contractors, the Court held that the FCA is “not the proper mechanism” for Government enforcement of regulations.  Instead, regulatory violations should be handled by the appropriate Government agency–not the courts.
Continue Reading Seventh Circuit Rejects FCA Implied False Certification Theory

In an opinion released May 26, 2015, Kellogg Brown & Roots Services, Inc. v. United States ex rel. Carter, the U.S. Supreme Court unanimously held that whistleblowers cannot extend the statute of limitations for war-related civil false claims under the Wartime Suspension of Limitations Act (“WSLA”), reinstating an already generous statute of limitations period under the civil False Claims Act (“FCA”).  The Court also settled a split between the U.S. Courts of Appeals for the D.C. Circuit and the Fourth Circuit.  For purposes of the FCA’s “first-to-file” bar, the FCA only limits a lawsuit based on the same underlying facts as another case that is actually open and pending when the later lawsuit is filed.  In reaching these holdings, the Court relied heavily on the plain meaning of the statutory language, simultaneously handing a victory to both Defendants (on the statute of limitations issue) and Plaintiffs (on the first-to-file issue).  But, the holding relating to the WSLA may prove to be the greatest legacy from the KBR decision, reigning in aggressive whistleblowers and government lawyers who would try to allege a case of “fraud” decades after the conduct occurred, and long after a Defendant is able to defend itself effectively.
Continue Reading SCOTUS: No Unlimited Suspension of the Statute of Limitations Under the False Claims Act; “First-to-File” Doctrine Does Not Bar Related Suits in Perpetuity

The federal crop insurance program is an often overlooked area of potential liability under the False Claims Act (“FCA”).  The program, which is governed by a substantial body of regulatory law, is subject to intense oversight by the U.S. Department of Justice.  So much so that the U.S. Department of Agriculture’s Risk Management Agency maintains and keeps public a long list of DOJ prosecutions for fraud and violations of the False Claims Act.  See DOJ Prosecutions.  These prosecutions include criminal charges brought against North Carolina tobacco farmers, Texas peanut growers, and California fruit and vegetable producers for fraudulently filing claims against the USDA crop insurance program.
Continue Reading When it Comes to Crop Insurance, the FCA Bears Fruit

On February 12, 2015, the Department of Justice (“DOJ”) announced that three U.S.-based importers had agreed to pay more than $3 million to resolve a lawsuit brought by the United States under the False Claims Act (“FCA”).  The Government alleged that the importers had made false declarations to U.S. Customs and Border Protection (“CBP”) and conspired with other domestic companies to make false declarations to CBP in order to avoid paying “antidumping” and “countervailing” duties.  No Government contracts were involved.  These were “reverse” FCA claims based upon underpayment of duties for private sector import transactions.
Continue Reading Add Importers to Those Facing Expanding Whistleblower Claims Under the False Claims Act

The Federal False Claims Act (“FCA”), 31 U.S.C. § 3729, et seq., has unique procedural aspects that come into play when a private whistleblower (the “relator”) seeks to sue on behalf of the Government.  One of these, the so-called “first-to-file” bar, applies when two “related” whistleblower actions are filed:  “When a person brings an [FCA action], no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.”  31 U.S.C. § 3730(b)(5).  The circuits are split as to whether the bar applies only while the first-filed action is “pending,” or applies even if the first-filed action has been dismissed.  For example, the Fourth Circuit held “that once a case is no longer pending the first-to-file bar does not stop a relator from filing a related case.”  U.S. ex rel. Carter v. Kellogg Brown & Root Servs., Inc., 710 F.3d 171, 181, 183 (4th Cir. 2013), cert. granted, 134 S. Ct. 2899, 189 L. Ed. 2d 853 (2014).  On the other hand, the D.C. Circuit expressly disagreed with Carter, rejecting the concept that the first-to-file bar is a “temporal limit” to related suits, and concluding that related actions are barred “regardless of the posture of the first-filed action.”  U.S. ex rel. Shea v. Cellco P’ship, 748 F.3d 338, 343-44 (D.C. Cir. 2014), reh’g denied en banc (July 16, 2014).   In finding that the statutory reference to “pending action” means the first-filed action, the D.C. Circuit noted that its interpretation “better suits” the policy of the bar—to prohibit subsequent private actions once the Government is on notice of the fraud.  The Supreme Court’s July 1, 2014 grant of certiorari to review the Fourth Circuit’s decision in Carter should resolve the circuit split.
Continue Reading You Again?: Application of the First-to-File Bar Where Subsequent Actions Are Brought By the Same Relator