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A panel of the U.S. Court of Appeals for the Fifth Circuit recently rejected an argument advanced by two subsidiaries of a nationwide health care “watchdog” that the government improperly moved to dismiss two False Claims Act (FCA) lawsuits in U.S. ex rel. Health Choice Alliance LLC et al. v. Eli Lilly & Co. Inc. et al., No. 19-40906 (5th Cir. Jul. 7, 2021).  The relators accused Bayer Corp. and Eli Lilly & Co. Inc. of participating in a kickback scheme by offering free patient-education services to providers in exchange for providers prescribing their products in violation of the Anti-Kickback Act and the FCA.  The government initially declined to intervene in the cases, then a year later, notified the relators that it intended to move to dismiss and detailed its concerns about the viability of the cases.  After two-and-a-half months of negotiations with the relators, the government moved to dismiss the cases pursuant to its authority under 31 U.S.C. § 3730(c)(2)(A), citing, among other things, its two-year investigation into the relators’ cases.  The District Court granted the motions and the relators appealed.

Before undertaking its substantive analysis under the FCA, the Fifth Circuit analyzed whether it had jurisdiction to hear the relators’ appeal.  Though the relators and government agreed that there was appellate jurisdiction, the Fifth Circuit identified a potential issue based on the timeline of two events: (1) relators’ voluntary dismissal without prejudice; and (2) the District Court’s order granting the government’s motion to dismiss.  Specifically, the Fifth Circuit analyzed whether the relators’ voluntary dismissal eight months prior to the government’s motion to dismiss deprived the District Court of the ability to issue a final appealable order.  The Fifth Circuit declined to create a Circuit split on the question, and concluded “that the prior without-prejudice dismissals did not deprive the district court’s subsequent decision of finality.”


Continue Reading Fifth Circuit Declines to Take a Side in the FCA Circuit Split on DOJ’s Dismissal Authority Pursuant to 31 U.S.C. § 3730(c)(2)(A)

In U.S. ex rel. Howard v. Caddell Construction Company, Inc., 2021 WL 1206584 (E.D.N.C. Mar. 30, 2021), the District Court for the Eastern District of North Carolina held that status reports certifying compliance with subcontracting rules do not constitute false claims under the False Claims Act (“FCA”) because the claims were not relevant to the contract payments.
Continue Reading Subcontracting Status Reports, Even if False, Are Not Claims Under the FCA

On June 3, 2021, the district court judge in U.S. ex rel. Conyers v. Halliburton Co. et al., reversed on reconsideration a prior ruling that a kickback presumptively inflates a contract price under the False Claims Act (FCA). The court previously held that the government was entitled to a rebuttable presumption that kickbacks received by a former employee of the prime contractor, Kellogg Brown & Root (KBR), inflated the contract price under the False Claims Act. The judge revised that ruling, citing to a factual dispute over whether the kickback actually inflated the amount the government paid to reimburse KBR for its subcontract costs. The dispute centered on the falsity element of the FCA and whether KBR submitted, or caused to be submitted, a false claim for payment to the government. The revised decision is consistent with other FCA case law holding that falsity cannot be predicated on a presumption, and that the government must prove that kickbacks actually inflated the contract price.
Continue Reading District Court Reverses Course on Whether Kickbacks Presumptively Inflated Government Costs Under the False Claims Act

In its recent decision, CVE Appeal of First State Manufacturing, Inc., SBA No. CVE-184-A (2021), the Small Business Administration Office of Hearing and Appeals (OHA) denied an appeal of a decision by the Department of Veterans Affairs Center for Verification and Evaluation (CVE) to cancel First State Manufacturing, Inc.’s verification of service-disabled veteran-owned small business (SDVOSB) status. CVE issued its Notice of Verified Status Cancellation based on concerns of present responsibility related to a consent judgment entered into merely a month before to resolve a False Claims Act (FCA) lawsuit against First State that required First State to pay over $393,000. Prior to the FCA lawsuit, First State’s Vice President for Marketing/Contract Administration and Chief Executive Vice President/Chief Financial Officer were criminally charged, pled guilty, and were sentenced to prison terms for bribing an Amtrak official to win federal Government contracts. In the appeal before OHA, First State argued that CVE erred in cancelling its verified SDVOSB status for two reasons: (1) the FCA consent judgment was based upon an underlying FCA settlement agreement that did not admit liability or wrongdoing by First State; and (2) the Federal Railway Administration, which oversees Amtrak funding, determined that First State was “presently responsible,” and that the likelihood of future harm to the Government did not warrant suspension or debarment. First State further argued that as the Federal Railway Administration is the agency with the potential injury, its determination of present responsibility should have been given greater deference by CVE.
Continue Reading False Claims Act Consent Judgment Prompts Termination of SDVOSB Status Even Without an Admission of Liability

In GSC Constr., Inc., ASBCA No. 62530 (Mar. 1, 2021), the Armed Services Board of Contract Appeals (the Board) denied the Government’s motion to dismiss for lack of jurisdiction.  The contractor submitted a certified claim to the contracting officer (CO) that included costs associated with a change order, and then subsequently filed an appeal

On April 21, 2021, the Department of Justice (DOJ) inked its second civil settlement resolving allegations of fraud involving loans issued pursuant to the Paycheck Protection Program (PPP). Sandeep S. Walia, M.D., a Professional Medical Corporation (Walia PMC), and its owner, Dr. Walia, agreed to pay $70,000 in damages and penalties to resolve alleged violations of the False Claims Act (FCA) tied to allegations that Dr. Walia falsely certified in a second PPP loan application that his medical practice had not previously received a PPP loan after it had already received one from a different lender.  Walia PMC also agreed to repay the second PPP loan for $430,000.  This latest settlement is a continued reflection of the heightened scrutiny of the PPP, and suggests that the FCA may quickly become a favored enforcement tool by the government in its continued pursuit of PPP-related fraud.
Continue Reading Avoiding Loan Forgiveness Is No Shield from False Claims Act Liability in Latest Paycheck Protection Program Fraud Settlement

On February 25, 2021, the U.S. Attorney’s Office for the Southern District of Illinois announced a settlement to resolve allegations that a contractor that was not an eligible participant in the Small Business Administration’s 8(a) Business Development Program violated the False Claims Act by controlling a joint venture that claimed 8(a) status and won an

In this episode, host Mana Lombardo and partner Tully McLaughlin discuss the top FCA decisions and developments of 2020 and look ahead to what’s in store in 2021 and beyond. “Let’s Talk FCA” is Crowell & Moring’s podcast covering the latest developments with the False Claims Act.

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Yesterday, February 17, 2021, Senator Chuck Grassley (R-IA) and Acting Assistant Attorney General of the Civil Division, Brian Boynton, highlighted the central role that the False Claims Act (FCA) has held and will continue to play in the government’s civil fraud enforcement toolkit for years to come. In prepared remarks at the Federal Bar Association’s 2021 Qui Tam Conference, Grassley confirmed that he is drafting legislation intended to curb what he called the government’s incorrect interpretation that the Department of Justice (DOJ) has unfettered authority to dismiss qui tam lawsuits brought by relators. In an apparent reference to the Supreme Court’s landmark decision in Universal Health Services v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016), Senator Grassley also asserted that the courts have weakened the statute by dismissing cases based on a misapplication of the FCA’s materiality requirement, another area that he suggested was ripe for Congressional intervention. In separate remarks, Boynton highlighted DOJ’s top priority areas for FCA enforcement in the coming years as well as tools the government is developing to increase its ability to uncover complex fraudulent schemes.

Continue Reading “You Have to Come Down with a Sledgehammer, Not a Toothpick!” – Senator Grassley Previews Potential Amendments to Increase False Claims Act Enforcement and Recoveries

On February 3, 2021, the Pandemic Response Accountability Committee (PRAC) issued an update to its Top Challenges in Pandemic Relief and Response, identifying new challenges in funding oversight and reiterating others identified in its original report issued in June 2020. The updated report, based on feedback received from Offices of Inspectors General (OIG) at more than 40 agencies, identifies four new challenges focused on ferreting out fraud related to pandemic funding and the health and safety of federal employees: (1) preventing and detecting fraud against government programs; (2) informing and protecting the public from pandemic-related fraud; (3) data transparency and completeness; and (4) federal workplace safety. The PRAC also identifies contributory risk factors within each new challenge and makes recommendations for agencies to conduct additional oversight. This PRAC update, along with a recently-issued quarterly report from the Special Inspector General for Pandemic Recovery (SIGPR), confirm the rising tide of civil enforcement activity with respect to pandemic relief funds and the attendant risks to recipients and entities involved in administering such funds, particularly in light of the punitive damages provided for by the government’s most powerful civil fraud enforcement tool, the False Claims Act, 31 U.S.C. § 3729.

Continue Reading February Reports from PRAC and SIGPR Confirm Government’s Focus on Pandemic Funding Oversight and Enforcement Challenges