In Universal Health Services, Inc. v. United States ex rel. Escobar, 136 S.Ct. 1989 (2016) (discussion by C&M attorneys here), the Supreme Court held that an implied false certification can be a basis for False Claims Act (FCA) liability, “at least where two conditions are satisfied:” (1) the claim makes specific representations about the goods or services provided and (2) the defendant’s failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths. (Emphasis added).
In this episode, hosts Mana Lombardo and Jason Crawford talk with Gail Zirkelbach, partner in the firm’s Government Contracts Group and vice-chair of the Investigations practice, about practical tips for managing internal False Claims Act Investigations. “Let’s Talk FCA” is Crowell & Moring’s podcast covering the latest developments with the False Claims Act.
On March 1, the President announced his intention to impose tariffs of 25% on all imported steel and 10% on all imported aluminum. A more formal announcement of the tariffs is expected in the coming week and, while many might have been surprised by the timing of the President’s initial statement, it came after a 10-month process of investigation by the U.S. Department of Commerce, culminating with its January 2018 recommendation for tariffs or quotas to protect U.S. producers. The Commerce Department reports are available here and here.
When finalized, these tariffs could have significant impacts on contractors across a range of industries, increasing costs of performance and restricting available supply. Domestic prices are expected to rise, and foreign suppliers may turn their focus to other markets. Supply disruptions are possible, particularly in the short term. To protect themselves, federal contractors who manufacture or use products with steel or aluminum should examine existing contracts, re-evaluate bids being developed, and consider revisions to standard contract terms.
Although companies often conduct internal investigations in the normal course of business, recent developments suggest that companies need to reconsider certain aspects of how they structure their investigations to avoid potential new downfalls. On May 4, 2017 at the Renaissance Hotel in Washington, Crowell & Moring attorneys Gail Zirkelbach, Steve Byers, Jacintha Alves and Judy Choi will highlight some of these new developments and provide practical advice on the steps companies should take in conducting their internal investigations as a result. Specifically, the panel will discuss:
- The increased focus on the individual;
- The additional potential for criminal referrals;
- Recent decisions on the scope of the attorney client privilege; and
- New document preservation considerations.
On March 2, 2017, the U.S. Government Accountability Office (GAO) published a report highlighting necessary improvements to effectively implement the Whistleblower Protections Pilot Program (WPPP). The WPPP, introduced in the National Defense Authorization Act for Fiscal Year 2013, and made permanent by Congress in December 2016, expanded whistleblower rights against reprisal for employees of contractors, subcontractors, and grantees. That same year, the FAR was also amended to require contracting officials to include a contract clause requiring contractors to communicate to their employees their rights under the WPPP in contracts exceeding the simplified acquisition threshold and awarded after September 30, 2013. The WPPP also required agencies use best efforts to include the FAR clause in major contract modifications of existing contracts.
On February 14, the Fourth Circuit issued an opinion in United States ex rel. Michaels v. Agape Senior Cmty. Inc. addressing only the first of the two issues that the district court had certified for interlocutory appeal: (1) whether the Department of Justice (DOJ) possesses an unreviewable veto authority over proposed settlements and (2) whether statistical sampling, the analysis of data from a subset of the population of interest in order to make projections across the population of claims at issue, is an appropriate methodology for establishing liability and damages in False Claims Act (FCA) cases.
In its decision, the Fourth Circuit became the third circuit to affirm that the DOJ has absolute, unreviewable authority to veto settlements in qui tam cases where it has declined to intervene. However, notwithstanding that the name of the defendant corporation is derived from the Greek word for love, the Fourth Circuit’s decision (on Valentine’s Day) not to opine on the statistical sampling issue showed no love for those that hoped that the court would bring needed clarity on the permissibility of statistical sampling in FCA cases. Instead, as the authors predicted in a recent Law360 article, the Fourth Circuit dismissed the interlocutory appeal as “improvidently granted” because the panel viewed statistical sampling as an evidentiary issue, rather than a pure question of law.
On January 13, 2017, the FAR Council released a final rule (available here) that: (1) prohibits agencies from contracting with entities that require employees/subs to sign internal confidentiality agreements or statements that restrict the lawful reporting of waste, fraud, or abuse; and (2) requires bidders on federal contracts to certify that they do not utilize such agreements. Starting on January 19, 2017, the rule will apply to all solicitations and contracts using fiscal year 2015 funds and subsequent fiscal year funds, unless the solicitation or contract already contains a comparable provision/clause.
Continue Reading Final FAR Rule on Internal Confidentiality Agreements: Considerations for Contractors Before Employees Sign on the Dotted Line
On November 18, 2016, the Office of Government Ethics (OGE) issued a final rule revising the Standards of Ethical Conduct for Employees of the Executive Branch (“Standards”) applicable to the solicitation and acceptance of gifts from outside sources. See 5 CFR § 2635. The final rule imposes a duty to decline otherwise permissible gifts when the appearance of impropriety is present, adds new examples of how to apply the rules, codifies previous interpretations of the gift rule, and retains the $20 de minimis exception (despite pushback in comments to the proposed rule to raise the standard commensurate with inflation. ) Although Government employees are the primary subject of the final rule, the changes will have a direct impact on how contractors, referred to as “prohibited sources” can interact with Government officials. It is important for government contractors to understand that being implicated by a Government official’s violation of these Standards can lead to various consequences, such as facing public embarrassment, a tarnished reputation in the marketplace, suspension and debarment, or penalties for violating the bribery or illegal gratuities statutes.
The rule becomes effective on January 1, 2017. Continue Reading OGE Finalizes Rule Regarding Solicitation and Acceptance of Gifts for Executive Branch Employees
On January 14, 2016, the U.S. Department of Defense (DoD) issued Directive 4715.21 to organize comprehensive agency-wide action to address and mitigate the risks of climate change on U.S. military assets and operations. The Directive implements for DoD the requirement established by Executive Order 13653 (Preparing the United States for the Impacts of Climate Change) that each federal agency develop and institute policies designed to improve climate resilience. It also follows several DoD reports and assessments of the military’s 7,000 bases, installations and facilities that found that climate change poses a present security threat.
The Directive states that to maintain an effective military, DoD “must be able to adapt current and future operations to address the impacts of climate change” and must do so by (1) identifying the effects of climate change on DoD’s mission, (2) taking those effects into consideration when developing plans and implementing procedures, and (3) anticipating and managing climate change risks.
The Directive establishes and assigns responsibilities for integrating climate change considerations into DoD planning throughout the Office of the Secretary of Defense (OSD). The Undersecretary of Defense for Acquisition, Technology and Logistics (USD(AT&L)) is charged with control and management of overall DoD climate risk policy and the management of climate-related risks. Under the oversight of the USD(AT&L), among others:
- The Assistant Secretary of Defense for Energy, Installations and Environment (ASD(EI&E)) will serve as the primary DoD adaptation official, and have responsibility for inter-agency coordination and providing guidance and direction on relevant technologies, standards and approaches.
The Assistant Secretary of Defense for Logistics and Materiel (ASD(L&MR)) will have responsibility for considering climate change risks posed to logistics infrastructure, materiel acquisition and supply, and transportation modes.
The Assistant Secretary of Defense for Acquisition (ASD(A)) will oversee integration, in accordance with DoDD 5000.01 and DoDI 5000.02, of climate change considerations – including greenhouse gas and lifecycle analyses, in (i) DoD acquisitions of weapon systems, platforms, equipment, and products, (ii) acquisition strategies, and (iii) defense acquisition workforce training and education.
In addition, the twelve OSD offices along with DoD Component Heads, the Chairman of the Joint Chiefs of Staff, and the Combatant Commanders, are charged with: integrating climate change considerations into DoD policy, guidance, plans and operations; assessing and managing risks to infrastructure (e.g. construction, asset management, utility systems), capabilities and capacity (e.g. force structure, basing, military operations, stability); managing vulnerabilities to acquisition and supply chains, and integrating resource considerations and cost management, including life-cycle costs, into DoD plans, business processes, material management, acquisition strategies, and all associated investment and risk management processes at “all relevant levels” within the DoD.
While the Directive provides broad, top-level climate change policy, it is likely that there will be multiple new or modified policies, standards, guidelines and DoD regulations to implement the broad policies into practice. As with so much federal policy today, government contractors will be on the front lines of implementation. Consequently, in the coming months there are a variety of questions that may be answered, including:
• When will DoD contracting activities begin adding climate change considerations into evaluation criteria? How will DoD measure such climate change considerations in competitive acquisitions?
• When will DoD implement the climate change policy in the Defense Federal Acquisition Regulation Supplement (DFARS)? What shape will the DFARS implementation take?
• What impact will the Directive have on existing DoD contracts and programs?
• How widely will DoD require considering, monitoring, and reporting on greenhouse gas emissions and lifecycle impacts? To what extent will contractors be required to measure and mitigate climate change risks?
• Will all energy-related infrastructure, or transport modes and equipment, be evaluated based on long-term climate resilience metrics?
• Will additional energy and fuel usage requirements be imposed on contract awardees?
• What opportunities exist for contractors to shape the answers to these questions? What new risks do contractors face from the Directive and forthcoming implementation efforts?
As DoD continues to build energy and environmental considerations into its operations and acquisitions, we are available to assist our clients to take advantage of these new opportunities and to navigate and mitigate the associated risks.
On February 17, the Federal Register published a proposed rule that would amend the FAR to implement section 857 of the National Defense Authorization Act, making unallowable any “costs incurred by a contractor in connection with a Congressional investigation or inquiry into an issue that is the subject of a proceeding resulting in a disposition as described in 10 U.S.C. 2324(k)(2)” (i.e., criminal convictions, matters involving an allegation of fraud or similar misconduct, suspension and debarment, default termination). The proposed rule would also expand the applicability of section 857’s requirements beyond DoD to all agencies subject to the FAR, and, as written, is not clearly limited to the contractor that is actually the subject of the “proceeding or inquiry,” an important detail that should be addressed in contractor and industry comments submitted over the next 60 days prior to the publication of the final rule.