The False Claims Act (FCA) again proved itself to be the government’s primary tool to combat procurement fraud. According to the Department of Justice, in 2015 alone, the government recovered more than $3.5 billion from FCA settlements and judgments for the fourth year in a row, bringing the total recovery since January 2009 to $26.4 billion. Of the $3.5 billion recovered last year, roughly $1.1 billion came from settlements and judgments in cases alleging false claims for payment under government contracts, raising the total recovery for government contracts and procurement fraud settlements and judgments since January 2009 to around $4 billion.
Of the large recoveries for government contracts, significant cases involved contracts with the U.S. Department of Defense (DoD), resulting in a $146 million settlement for allegations of improper claims on food, water, fuel, and transportation cargo to troops serving in Afghanistan; U.S. Army Communication-Electronics Command (CECOM), resulting in a total $41.2 million settlement for allegations of higher than permitted charges for employees without the proper job qualifications; U.S. General Services Administration (GSA), resulting in a total $120 million settlement for allegations of misrepresentations of commercial sales practices for software products; and U.S. Office of Personnel Management (OPM), resulting in a $30 million settlement for allegations of background checks and reviews that were of a lower than promised quality. In some of these cases, defendants not only paid out in FCA settlements, but also pled guilty to related criminal offenses, which resulted in other criminal fines.
As practitioners know and government contractors come to understand, false claims are often first exposed by individuals—within companies or doing business with companies—who observe or learn of fraudulent behaviors. The number of lawsuits first filed by these whistleblowers has grown since 2009: the government has recovered $19.4 billion in settlements and judgments related to whistleblower lawsuits, known as qui tam suits, from 2009 through the end of 2015. If successful, the whistleblowers may receive individual awards separate from the government recovery. For the same period of 2009 through 2015, whistleblowers have been awarded $3 billion.
These recoveries indicate the severity and seriousness of properly doing business with government entities. One well-known legal scholar and jurist, Oliver Wendell Holmes, once said: “Men must turn square corners when they deal with the Government.” Rock Island A. & L.R. Co. v. United States, 254 U.S. 141, 143, 41 S. Ct. 55, 56, 65 L. Ed. 188 (1920). It’s true! Each claim, representation, certification, and offer to the government must pass the truth test and squarely fit within the confines of the contractual agreement. This year’s FCA review continues to underscore the importance of having a deep familiarity with your business practices and offerings, and also highlights how obtaining legal counsel—even in an advisory capacity—is an important step in maintaining or establishing healthy corporate relationships with government entities.
