In recent months, Relators’ qui tam complaints have been subject to increased scrutiny by criminal prosecutors. In addition to civil False Claims Act (FCA) liability, individuals doing business with the federal government face potential criminal liability under various criminal fraud-related statutes. Potential charges for fraudulent activities are not limited to a criminal fraud charge, but also include bribery, false statements, conspiracy to defraud, wire fraud, mail fraud, and identity theft, among others. Most of these crimes are felonies and carry substantial penalties, including fines, freezing of assets, and imprisonment. Especially in the healthcare industry and defense procurement space, many criminal investigations originate as civil qui tam filings only later adopting a criminal component. These parallel investigations typically involve the U.S. Department of Justice (DOJ) and may include other enforcement agencies.

Recent DOJ rhetoric encourages an increased use of such parallel investigations. In September 2014, Assistant Attorney General for the Criminal Division of the DOJ, Leslie Caldwell, announced that the Criminal Division would be “stepping up” its review to look for potential criminal liability in qui tam complaints, noting that such complaints “are a vital part of the Criminal Divisions’ future efforts.”[1] Consistent with this message, Caldwell encouraged the Relator’s bar to notify the Criminal Division directly when a complaint is filed instead of coordinating only with the local U.S. Attorney’s Office. As part of the new process, the Criminal Division will receive and review new complaints so that prosecutors may determine the nature and extent of any criminal exposure.

Continue Reading New DOJ Qui Tam Protocols Likely to Lead to Increased Parallel Criminal Investigations

Following the federal government’s example, states are increasingly looking to their own false claims act (“FCA”) statutes to combat procurement and healthcare fraud. This trend is being driven by two main factors: (1) the huge recoveries by the Department of Justice (“DOJ”) under the federal FCA – $5.7 billion in Fiscal Year 2014 alone; and (2) a federal statute that provided a financial incentive for states to mirror their own FCAs on the federal FCA with regard to healthcare fraud. This state-level activity represents a new front in the battle against procurement fraud, one that government contractors must be aware of to fully analyze and mitigate risks when contracting with state entities.

Currently, 33 states and the District of Columbia have a false claims statute. Of these, 11 states have FCAs that are limited to healthcare fraud; the remaining statutes penalize a broad range of false claims. Many – but not all – of these state FCAs have provisions allowing for whistleblowers to file qui tam actions on behalf of the state government and to share in any recovery.

Continue Reading A New Front in the Battle Against Fraud – the Continued Expansion of State False Claims Act Liability

Lockheed Martin Integrated Systems (“LMIS”), a subsidiary of Lockheed Martin, agreed on Friday, December 19, 2014 to pay $27.5 million to resolve allegations that it inflated labor costs and submitted false claims to the government in violation of the False Claims Act.  Specifically, the Department of Justice (“DOJ”) alleged that LMIS overbilled for work performed by personnel who lacked the job qualifications required under Rapid Response and Strategic Services Sourcing contracts issued by the U.S. Army Communications and Electronics Command.

The overbilling allegations against LMIS are similar to the DOJ’s allegations in a separate case against DRS Technical Services Inc., which resulted in a $13.7 million settlement announced on October 7, 2014.  The DOJ also alleged in that case that DRS Technical Services overbilled labor costs for under-qualified employees under the Rapid Response contract.

Continue Reading Defense Contractor Reaches Settlement in Procurement Fraud Case Involving Overbilling Allegations

Government contractors must always be vigilant of prosecution under the False Claims Act (FCA). Charges and settlements are brought and announced in the news daily against government contractors for violations of this Act. On October 30, we published a client alert, Government Contractors Beware: Increased FCA Enforcement in Government Contracts, discussing recent cases and