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This week’s episode covers debarment, defense spending, and FCA news, and is hosted by partners Peter Eyre and David Robbins. Crowell & Moring’s “Fastest 5 Minutes” is a biweekly podcast that provides a brief summary of significant government contracts legal and regulatory developments that no government contracts lawyer or executive should be without.

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In this episode, hosts Mana Lombardo and Jason Crawford are joined by Tully McLaughlin, co-chair of the firm’s False Claims Act Practice, to discuss some of the unique considerations for trying False Claims Act cases. “Let’s Talk FCA” is Crowell & Moring’s podcast covering the latest developments with the False Claims Act.

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Recently, in United States ex rel. Hunt v. Cochise Consultancy Inc., the Eleventh Circuit widened a split in authority regarding the applicability of the tolling provision of the False Claims Act’s statute of limitations, holding that it is applicable to qui tam actions even when the government declines to intervene.  The court also found that the period is triggered by a government official’s knowledge of the fraud. 887 F.3d 1081 (11th Cir. 2018).  In so holding, the Eleventh Circuit disagreed with the Fourth, Ninth, and Tenth Circuits’ interpretation of the statutory language and arguably extended the filing period for relators within its jurisdiction.

Continue Reading Just When You Thought It Was Over: Eleventh Circuit Deepens Disagreement on FCA’s Tolling Provision

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“Let’s Talk FCA” is Crowell & Moring’s podcast covering the latest developments with the False Claims Act. In this episode, hosts Mana Lombardo and Jason Crawford interview Will Chang, a partner in the firm’s Health Care and White Collar & Regulatory Enforcement groups and a former trial attorney at the DOJ Criminal Division, Fraud Section, on health care fraud and FCA issues.

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Are we experiencing a shift towards a higher bar for pursuing False Claims Act Cases?  Department of Justice guidelines may signal a new direction from the last two decades of DOJ FCA enforcement history through policies that reign in relators and articulate some boundaries for cases pursued by DOJ.  Meanwhile, Escobar progeny continues to develop  and refine the materiality requirement under the FCA.  Join us on May 17, 2018, at 8:30 AM Eastern, as Crowell & Moring attorneys Brian Tully McLaughlin, Mana Lombardo, Jason Crawford, and Nkechi Kanu lead a discussion highlighting recent developments impacting FCA investigation, enforcement, and litigation under the False Claims Act.  Specific topics include:

  • DOJ Enforcement Trends and Developments: What They Mean for Investigation and Litigation Strategy
  • The Continuing Emphasis on Materiality in the Wake of Escobar
  • Case developments and impacts

For more information and to register for OOPS, please click here.

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On March 22, 2018, an Indiana state trial court judge granted a motion to dismiss in State of Indiana ex. rel Harmeyer v. The Kroger Co. et al. Relator Harmeyeran attorney and Kroger patron—alleged that the grocery chain knowingly failed to collect and remit state sales tax on hundreds of goods throughout the state.  Under Indiana law, the state’s gross retail tax does not apply to “food and food ingredients” but it does apply to candy, soft drinks, dietary supplements, and prepared foods.  Relator’s sixth amended complaint identified more than 1,400 food items that relator alleged were mischaracterized as tax-exempt based on the ingredients and food preparation.  For example, relator alleged that a protein bar should be classified as taxable candy rather than nontaxable food.  By classifying items as tax-exempt, relator alleged that the grocery chain cost the state millions of dollars in tax revenue each year.

The superior court judge dismissed relator’s complaint with prejudice holding that the complaint failed to meet the heightened pleading requirement of 9(b) because Harmeyer failed to allege the time, place, and method by which misrepresentations were made to the state.  The court also noted that Harmeyer, whose similar case against a grocer in another state had been dismissed, was not an employee of Kroger, had no inside knowledge of what took place within the company, and merely presumed, as he had in his other case, that the defendant’s characterization of the items as tax-exempt was false and done with reckless disregard of the truth.  While Harmeyer argued that the allegation of 1400 mischaracterizations was sufficient to plead recklessness, the court could not determine from the complaint whether this was a substantial percentage of the products sold by defendant and therefore could not presume recklessness from that number. The judge dismissed the case with prejudice, and the relator filed a notice of appeal on April 13.

Continue Reading Court Dismisses FCA Suit Alleging that Grocery Chain Failed to Collect Sales Tax

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This week’s episode covers False Claims Act items, GAO protests, and cybersecurity and is hosted by partners Peter Eyre and David Robbins. Crowell & Moring’s “Fastest 5 Minutes” is a biweekly podcast that provides a brief summary of significant government contracts legal and regulatory developments that no government contracts lawyer or executive should be without.

We are still accepting questions for Ask Us Anything! Have questions you’d like answered anonymously? Want our thoughts in general on a particular topic? Send in questions and we’ll do our best to feature them in a future podcast. Email your questions to David at drobbins@crowell.com. Disclaimer: we cannot give legal advice unless and until we have an engagement letter in place.

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On December 21, 2017, the Department of Justice announced that it recovered more than $3.7 billion in settlements and judgments from civil False Claims Act (FCA) cases in Fiscal Year 2017. The FY 2017 figures reflect the government’s continued trend of annually amassing multi-billion dollar recoveries under the FCA.  This recovery is the fourth largest total in thirty years, and the eighth consecutive year that recoveries have exceeded $3 billion.

At the industry level, DOJ reported $2.47 billion in recoveries from the health care sector, and $220 million from defense companies.  The largest health care industry recoveries in FY 2017 came from the drug and medical device industry.  In the procurement fraud arena, the bulk of the recovery came from two large settlements, one involving charges to the Department of Defense and the other involving charges to the Department of Energy.  The government collected approximately $1 billion from the remaining industries, including national security, food safety and inspection, federally insured loans and mortgages, highway funds, small business contracts, agricultural subsidies, disaster assistance, and import tariffs.

The change in presidential administration appears to have had little effect on FCA activity.  DOJ continued its pursuit of individual owners and executives of private corporations under the FCA.  It entered into numerous settlements wherein individuals agreed to joint and several liability with their company.  DOJ also obtained over $60 million in FCA settlements and judgments with individuals that did not involve joint and several liability with the corporate entity.  Also, the number of new FCA actions in FY 2017 remained high with relators bringing 674 new qui tam matters and DOJ initiating 125 matters on its own.  Of the $3.7 billion recovery, $3.4 billion related to suits initiated by whistleblowers, and over $3 billion of that came from suits where the government either intervened or otherwise pursued the matter.  These numbers are consistent with the prior five years and suggest that the FCA will remain an active area for investigations and litigation in 2018.

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On May 16, 2017, the Fourth Circuit issued a decision in United States ex rel. Omar Badr v. Triple Canopy, holding that the Government had properly alleged an implied certification claim under the standard articulated by the Supreme Court in Universal Health Servs. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016).  In the eleven months following the Supreme Court’s landmark ruling on the implied certification theory of liability, Escobar has been cited in nearly 100 court opinions. (Our recent Feature Comment in the Government Contractor highlights some of the key cases and developing trends).

In Badr, the relator alleges that a security contractor responsible for ensuring the safety of an air base in a combat zone employed Ugandan guards who were unable to meet the required marksmanship scores on a U.S. Army qualification course. According to the relator, Triple Canopy knowingly falsified marksmanship scorecards and presented claims to the government for payment for those guards.

Continue Reading It’s the Cover-Up That Gets You