Photo of Patrick S. Brown

In United States ex rel. Vavra v. Kellogg Brown & Root, Inc. (Feb. 3, 2017), the Fifth Circuit held that under Section 8706(a)(1) of the Anti-Kickback Act — permitting recovery of twice the amount of each kickback plus $11,000 for each occurrence of a prohibited conduct — corporations are liable “for the knowing violations of those employees whose authority, responsibility, or managerial role within the corporation is such that their knowledge is imputable to the corporation.”  In applying this standard to the two Kellogg Brown & Root, Inc. (“KBR”) employees who had accepted meals and entertainment (on 33 occasions) from a supplier, the court found that one employee’s knowledge could be imputed to the corporation because the employee was responsible for supervising the subcontract at issue, for ensuring the supplier met its obligations, including contract performance, and for executing technical evaluations for rebidding the subcontract and therefore “had somewhat significant managerial authority over the sphere of activities in question.”  In contrast, the court found the other employee who was neither involved in nor had the authority to take any procurement action regarding the subcontract at issue during the relevant period had only “limited authority” that was not enough to impute his knowledge to KBR. 

With respect to whether numerous instances of meals, drinks, and other entertainment constituted “kickbacks” under the Act, the court concluded that “anything of value offered in order to subvert the ‘proper’ process for awarding contracts is a potential kickback,” noting that while merely seeking to develop good will or a good working relationship to gain more business would be insufficient, it was “enough to connect the gratuity with the specific kind of treatment sought in a way that establishes impropriety.”   The court found the connection was satisfied with testimony that the supplier provided gratuities, in part, to subvert proper procedures:  the supplier employee testified that the KBR employee “was the highest-ranking guy that we dealt with … [and] the most important [person at KBR] with regard to controlling service issues.”  When asked why he provided gratuities, the supplier employee answered that it was because the KBR employee “would bring service issues to us.  Specifically he knew me based on entertaining; so, if they had issues, he would bring them to me before they escalated out of control.”   The court found the testimony provided sufficient specificity to support a finding that the KBR employee received gratuities to overlook and/or forgive performance deficiencies in subversion of proper procedures and in violation of the Anti-Kickback Act.

 

Congress amended the civil False Claims Act in 1986 to give the statute more teeth as a fraud enforcement tool. Thirty years later, FCA litigation is as active as ever with more than 800 new cases filed in 2016, which is the second highest number of new cases on record. Not only was 2016 a major year for FCA recoveries (the third-highest ever) but the year also saw major developments ranging from a massive increase in civil penalties and a landmark decision on the implied certification theory of liability. In a “Feature Comment” published in The Government Contractor, C&M attorneys highlight some of the most important settlements and decisions from 2016 on key issues—from liability to damages, qui tam provisions, and more.

“False Claims Act cases have been particularly hot in 2015”—so reads the opening line of an opinion in a FCA decision from the past year. This is an apt description for a year that saw total FCA recoveries exceed $3 billion, a sign that the FCA will continue to be the source of government and whistleblower initiated litigation in 2016. In “The Top FCA Decisions of 2015 For Government Contractors,” a Feature Comment published in The Government Contractor, C&M attorneys highlight the recent decisions that will prove important for contractors in the coming year and beyond on topics such as implied certification, scienter, seal violations, and more.