In this episode, Jason Crawford, Brian Tully McLaughlin, and Agustin Orozco explore the issues before the Supreme Court in two consolidated cases involving the False Claims Act. The hosts discuss the April 18 oral argument in Schutte/Proctor where the question before the Justices is whether a defendant’s subjective knowledge about whether its conduct was legal
False Claims Act
New Jersey Firm Pays $2.2M to Settle FCA Allegations it Received Improper PPP Loan
On April 3, 2023, the U.S. Attorney’s Office for the District of New Jersey announced a settlement with a public relations firm to resolve allegations that the New Jersey company violated the False Claims Act (FCA) by receiving a $2 million second-draw loan from the Paycheck Protection Program (PPP) to which the company was not…
Fair Warning Protection or a “Free Pass to Fleece the Public Fisc”?: SCOTUS Takes Up the Safeco Objective Reasonableness Standard and Subjective Intent Under the FCA
Next Tuesday, April 18, 2023, the highest court in the land will hear arguments in what is poised to be the most influential False Claims Act (FCA) case since the landmark decision in Universal Health Servs. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016). On January 13, 2023, the U.S. Supreme Court granted certiorari to hear two consolidated appeals from the U.S. Court of Appeals for the Seventh Circuit in United States ex rel. Schutte v. SuperValu Inc., 9 F.4th 455 (7th Cir. 2021) and United States ex rel. Proctor v. Safeway, Inc., 30 F.4th 649 (7th Cir. 2022). The Court’s decision will likely have far-reaching ramifications for FCA cases involving ambiguous contractual or regulatory requirements and may also provide benchmarks for assessing the key element of scienter across all FCA cases.
In Supervalu and Safeway, the Seventh Circuit joined several of its sister circuits in applying the scienter standard articulated by the Supreme Court in Safeco Insurance Company of America v. Burr, 551 U.S. 47 (2007) to the FCA, finding that a defendant’s conduct is not reckless when (1) acting under an objectively reasonable, albeit erroneous, interpretation of an ambiguous regulation or contract provision; and (2) no authoritative guidance existed to warn the defendant away from that interpretation.
Continue Reading Fair Warning Protection or a “Free Pass to Fleece the Public Fisc”?: SCOTUS Takes Up the Safeco Objective Reasonableness Standard and Subjective Intent Under the FCA
Let’s Talk FCA: False Claims Act Enforcement Trends
In this episode, hosts Michael Shaheen and Jason Crawford discuss the Department of Justice’s recently announced False Claims Act (FCA) recovery statistics for fiscal year 2022. The podcast breaks down last year’s FCA activity—which included a record number of new matters—and considers what the trends could portend for fraud enforcement in the year to come.
Fasted 5 Minutes: GSA Software Acquisition and False Claims Act
This week’s episode covers new guidance from GSA about acquisition of approved software, DOJ’s report of activity under the False Claims Act during FY22, and DoD’s use of innovative commercial products and services using general solicitation competitive procedures, and is hosted by Peter Eyre and Yuan Zhou. Crowell & Moring’s “Fastest 5 Minutes” is a…
FCA Settlement Offers Reminder of the Importance of TAA and PRC Compliance
The Department of Justice has announced a $14 million False Claims Act (FCA) settlement with Coloplast, a medical product manufacturer, after Coloplast self-disclosed violations of the Trade Agreements Act (TAA) and Price Reduction Clause (PRC) while under contract with the Department of Veterans Affairs (VA). The TAA requires contractors to furnish end products that are U.S.-made or “substantially transformed” in designated countries. Coloplast disclosed that it misapplied the substantial-transformation standard, causing Coloplast to report incorrect countries of origin for products and to improperly retain certain products on contract after manufacturing moved to non-designated countries. Coloplast also disclosed that it overbilled the Government by failing to provide the VA with discounts pursuant to the terms of the PRC, which normally requires tracking discounts offered to designated commercial customers and offering corresponding downward price adjustments to VA customers. …
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DOJ Announces First-Ever False Claims Act Settlement with PPP Lender and Creation of COVID-19 Fraud Strike Force Teams
On September 12, 2022, the Department of Justice (DOJ) announced the first-ever settlement with a Paycheck Protection Program (PPP) lender. The lender, Prosperity Bank, agreed to pay $18,673.50 to resolve allegations it improperly processed a PPP loan on behalf of an ineligible applicant. The announcement coincides with DOJ’s creation of three COVID-19 fraud “Strike Force” teams designed to enhanced DOJ’s efforts to combat and prevent COVID-19 related fraud.
Pursuant to the Coronavirus Aid, Relief and Economic Security (CARES) Act, lenders who originated PPP loans were entitled to receive a fixed fee from the Small Business Administration (SBA) ranging from 1% to 5% of the loan amount. Prosperity Bank, a regional bank with branches throughout Texas and Oklahoma, was one of those lenders.
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When is the Price of a Fixed-Price Contract Not Fixed?
In Tolliver Group, Inc. v. United States (Aug. 17, 2022), the Court of Federal Claims (“COFC”) granted the contractor’s request for summary judgment, awarding $195,890 in legal fees the contractor incurred to successfully defend against a False Claims Act suit brought by a whistleblower. The court held that the cost principles in Federal Acquisition Regulation (“FAR”) Subpart 31.2 applied to the contractor’s fixed-price task order, and the contractor’s legal fees were allowable and payable under the contract. This is the second time that the COFC addressed the contractor’s entitlement to legal fees, having previously held that the contractor could recover a portion of them under the Spearin doctrine (which we reported on here). The Federal Circuit later vacated that award on jurisdictional grounds (reported on here) and remanded the case to the COFC.
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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)
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)
Subcontracting Status Reports, Even if False, Are Not Claims Under the FCA
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. …
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