False Claims Act: When Does Embellishing Become Fraud?

Join us for this engaging webinar where you will gain valuable insights into the significance of comprehending the definition of "knowingly" and what qualifies as a "claim" under the False Claims Act. Discover the legal consequences that can arise from a lack of understanding and equip yourself with the knowledge necessary to navigate this complex legal landscape.

This Webinar's Main Takeaways

• The importance of understanding the definition of "knowingly" and what constitutes a "claim" under the False Claims Act.
• The serious consequences, including potential criminal and civil penalties, of violating the False Claims Act.
• Contractors must fully comprehend the technical specifications of what they're selling to the government, and any misrepresentations or failure to meet specified capabilities can pose significant legal hazards.
• The need to stress on the absolute accuracy when it comes to disclosure, especially regarding technologies that may not yet be available.
• The importance of detailed and accurate documentation as a protective measure.
• Understanding the concept of Qui TAM, allowing individuals to file a False Claims Act violation on behalf of the government.
• The whistleblower's entitlement to compensation under the False Claims Act and the investigation process by the US Attorney.
• The crucial need for legal representation with expertise in the False Claims Act when dealing with allegations of False Claims Act violations.

The webinar addresses the following legal questions:

What are the potential civil and criminal consequences of violating the False Claims Act?

What is the definition of "knowingly" and what constitutes a "claim" under the False Claims Act?

1. Can presenting misrepresentations about a product's capabilities in a bid or proposal lead to legal consequences under the False Claims Act?
2. How important is understanding the technical specifications of the product or service being sold to the government in terms of potential liability under the False Claims Act?
3. What is the relevance of accurate disclosure, specifically in relation to technologies that may not yet be available?
4. How does Qui TAM, the process that allows individuals to file a False Claims Act violation on behalf of the government, work?
5. What compensation can a whistleblower expect under the False Claims Act and how does the US Attorney handle investigations into false claims?
6. How critical is having legal representation when dealing with allegations of False Claims Act violations?

This insightful webinar on the False Claims Act delves into the intriguing topic of when embellishment crosses the line into fraud. As the founder of a reputable firm in Denver, Colorado, Joe Whitcomb brings his expertise in government contracting to the forefront, particularly in relation to the False Claims Act. While the Act primarily focuses on government contracting, it is important to note that it also extends its reach to combat Medicare fraud, a significant issue accounting for a staggering 80% of government recoveries each year. During the webinar, Whitcomb and Selinsky shed light on the ways in which government contractors can unknowingly find themselves in violation of the False Claims Act and the severe consequences that follow. With a wealth of experience in litigation, the webinar offers valuable advice on how to steer clear of any potential violations. They emphasize the significance of every word within the Act's definition, highlighting that many of the terms have been judicially defined rather than explicitly outlined in the statute itself. Don't miss the opportunity to gain insights into the meaning of key terms such as "knowingly" and "claim" within the context of the False Claims Act. Discover how a seemingly innocuous invoice, response to a request for proposals, or bid can have far-reaching implications under this Act. The webinar stresses the importance of understanding the potential liability that can arise under the False Claims Act, with damages potentially amounting to the entire value of a contract. So, join us for this enlightening webinar and equip yourself with the knowledge necessary to navigate the complex landscape of government contracting and avoid any missteps that could lead to allegations of false claims.

Understanding the Definition of "Knowingly" and the Scope of a "Claim" under the False Claims Act

The webinar explores the important topic of "material" misrepresentations in bids and proposals within the context of the False Claims Act. It emphasizes the potential consequences that can arise from such misrepresentations, including damages that can be up to three times the contract amount. In order to establish liability, the webinar explains that a person can be deemed to have "knowingly" made a false claim through actual knowledge, constructive knowledge, or reckless disregard of the truth. The determination of whether a person knew or should have known about the falsehood of a claim is typically made through the process of discovery or investigation.

Furthermore, the webinar delves into the concept of "deliberate ignorance" and its implications under the False Claims Act. An example is provided to illustrate this concept, where a contractor was held responsible for failing to meet a requirement that the government neglected to specify. The webinar underscores the importance of recognizing the significance of all requirements and avoiding a mindset of disregarding or being willfully ignorant of their importance.

The webinar cautions against conducting business with the government without a thorough understanding of the product or service being offered. It emphasizes that the interpretation of "reckless disregard" can be subjective, underscoring the need for awareness and diligence in dealings with the government. An example is shared of a contractor facing accusations of False Claims Act violations for supplying the wrong-sized ball bearing to the government, despite the mistake being made by a third-party supplier. This highlights the contractor's responsibility for the items they deliver, regardless of the source of the error.

Additionally, the webinar highlights the importance of including clauses in contracts that allow for the rectification of defective products. It stresses the need for suppliers to be contractually obligated to replace faulty products at no cost and within a reasonable timeframe. The webinar also advises against making false representations about capabilities, especially in relation to technology. It suggests erring on the side of over-disclosure to mitigate the risk of potential False Claims Act allegations. Furthermore, the webinar strongly discourages misrepresenting the existence of technology that is not yet developed. Instead, it recommends disclosing the anticipated availability of the technology in the proposal. An example is provided to demonstrate a favorable court ruling for a contractor who did not misrepresent their capabilities despite the government's attempt to argue inducement.

The webinar emphasized the importance of clearly and accurately describing one's capabilities and experience while cautioning against exaggeration, as it could lead to false claims allegations. It also warned about the potential liability and termination that may result from securing a contract beyond one's capabilities. Meticulous documentation was stressed as vital to protect oneself in the event of a bid protest, with the reminder that submitted information would be subject to a protective order.

Materiality was discussed in relation to the False Claims Act, highlighting its subjectivity and reliance on whether the government relied on the information provided. Understanding the type of contract with the government was deemed crucial, as it determines what information is considered "material." For instance, in a firm, fixed price contract, completion of the work takes precedence over specific hours worked. In contrast, in a full-time equivalency contract, the number of people on site becomes significant, and providing false information in this regard could be considered a material false claim. Clear and intentional communication with the government was emphasized.

The webinar also pointed out that specific intent to defraud is not required to establish that someone acted knowingly under the False Claims Act. It stated that most False Claims Act claims arise from Qui Tam claims initiated by disgruntled employees, self-appointed monitors, or competitors. Accusers in Qui Tam claims must possess insider knowledge. Proof of intent to defraud is unnecessary to establish fraud; it is sufficient to demonstrate that a material misrepresentation was knowingly made. Qui Tam actions are filed by third parties and not by contracting officers or the Office of Investigation. False Claims Act claims, in essence, enable "whistleblower" allegations where individuals accuse contractors of lying or making material misrepresentations to induce government payment or contract awards. The accuser stands to benefit from Qui Tam claims. Examples of False Claims Act claims include contractors being careless with proposals or falsely representing their inspection capacity.

Furthermore, the webinar mentioned that complaints are filed under seal in a US District Court and are not publicly available. The US attorney has a six-month period to act on the claim. The concept of a "reversed false claim" was also discussed, which occurs when a contractor makes a false statement to reduce the amount owed to the government. As an example, a contractor may falsely claim hindrance in completing work to avoid liquidated damages.

The webinar delves deeper into the concept of a "reversed false claim," shedding light on how it occurs when a contractor deliberately misrepresents information that the government relies on. An example is provided of a contractor falsely claiming to have left work due to an emergency, in an attempt to avoid penalties. However, it is important to note that most False Claims Act cases involve much larger sums of money.

Moving on, the webinar discusses the role of a "key TAM litigant" or "relator," who files a complaint alleging that someone knowingly deceived the government to obtain funds. They also explain the existence of a "public knowledge bar," which prevents individuals from filing a False Claims Act case if they only learned about the alleged fraud from public sources. To illustrate this, a case is presented where the original relator possessed firsthand knowledge of the fraud, but other employees with different knowledge were able to join the case as additional relators.

Furthermore, the webinar highlights that relators are entitled to a percentage of the government's recovery, typically ranging between 20 and 30 percent. They note that attorneys often work on a contingency fee basis, meaning they receive a portion of the relator's award. Addressing a common question, the webinar explains that companies may not always be aware if a False Claims Act case has been filed against them, as the complaint is typically filed under seal and the US attorney usually keeps the investigation confidential.

The webinar also discusses the possibility of the government taking more overt action, such as showing up at an office with a subpoena or search warrant. They clarify that the US attorney has a six-month period to decide whether to intervene in a False Claims Act case. Additionally, the government has the authority to pursue civil or criminal penalties against companies. It is emphasized that the nature of the allegations may not become clear until the investigation is complete. Drawing on their experience with False Claims Act cases, the webinar shares insights from situations where the government either intervened or did not intervene. The potential outcomes if the government decides not to intervene are explored, highlighting that the relator could recover up to 30% of the amount recovered by the government. Ultimately, it is stressed that the US attorney has the final say on whether to accept a settlement offer or dismiss the case.

Finally, the webinar explains that the accused party can hire legal counsel to defend against the allegations. The importance of understanding insurance coverage is also emphasized, noting that general liability insurance may not provide protection against allegations of fraud. Thoroughly investigating insurance policies to determine if there is a duty to defend in such cases is advised. Additionally, anyone, including disgruntled employees or competitors, can be accused of violating the False Claims Act. The government has the authority to pursue both criminal and civil penalties against those accused.

When it comes to criminal penalties, the webinar discusses how sentencing guidelines typically dictate the punishment. For instance, a $3 million theft from the government could result in a prison sentence of 48 months. It is important to note that even a small government contract has the potential to result in a significant prison sentence. On the civil side, penalties range from $5,000 to $10,000, excluding any damages that may be awarded. These damages can be substantial, especially if the amount obtained under false pretenses is significant.

The webinar delves into the potential outcomes of a False Claims Act case, highlighting two possible paths: accepting a settlement offer or proceeding with a trial. If the case goes to trial, the jury will be responsible for determining liability. To reinforce the importance of the topic, the webinar promises to send out the slide presentation and other relevant information within 24 hours. They also emphasize their experience in representing both sides of False Claims Act cases and acknowledge the anxiety that defendants often face when confronted with these charges.

To illustrate the seriousness of the matter, the webinar shares a real-life scenario where multiple government agencies arrived at a client's house to investigate a potential violation of the False Claims Act. This further emphasizes the significance of engaging an attorney with expertise in this area, even if the defendant is innocent. It is cautioned not to assume that the US Attorney will be cooperative, as their presence with a search warrant already suggests a presumption of wrongdoing.

In concluding, the webinar expresses gratitude towards the attendees and provides contact information for any follow-up questions. In response to a question about subcontractor invoices potentially constituting false claims, the webinar explains that the determination hinges on the contract's wording and whether the prime contractor has received payment from the government. If the prime contractor has been paid but has not paid the subcontractor, they could potentially be held liable under the False Claims Act. The webinar also explores the possibility of a false claim arising from a contractor misrepresenting that they require payments to cover their own expenses. They emphasize the importance of determining the government's payment status to the prime contractor, as it may impact the subcontractor's entitlement to payment.

Differentiating between a breach of contract claim and a false claims case, the webinar mentions that proving the former may be easier, and notes that different states have their own False Claims Acts with varying provisions. Addressing another question about a government contractor misrepresenting that they have paid all material costs, the webinar references separate provisions in the Federal Acquisition Regulation (FAR) and the Miller Act that specifically address this issue.

Lastly, in response to a question about malicious reporters, the webinar suggests that defamation and libel claims may be appropriate in such cases. They also mention the existence of anti-SLAPP statutes that protect against frivolous lawsuits.

Throughout the webinar, the significance of protecting oneself against baseless accusations is stressed, even if it means investing resources. The webinar recommends gathering compelling evidence to effectively refute false allegations, which can be presented to legal counsel.

Regarding subcontractors who misrepresent their expertise or capabilities, the webinar advises implementing an indemnification agreement as a safeguard against potential liabilities. They also suggest requesting proof of errors and omissions insurance from subcontractors to ensure adequate coverage. Verifying a subcontractor's financial stability is highlighted as an important step to mitigate any liability in the event of a false statement, emphasizing the need for thorough due diligence.

In conclusion, the webinar expresses gratitude for the thought-provoking questions raised and encourages further engagement via email for additional support.