Today SCOTUS issued its Mixx Delicious Digg Facebook Twitter
Introducing the New and Improved Federal False Claims Act!
As I mentioned a week or two ago, the Federal False Claims Act has been updated and improved by the Fraud Enforcement and Recovery Act of 2009.
While the amendments to the FCA fall short of those proposed in the still-pending False Claims Correction Act of 2009, the amendments are important and were needed.
Top qui tam defense lawyer Jack Boese has produced a red-lined version of the new Federal False Claims Act, which I am sharing Mixx Delicious Digg Facebook Twitter
THE FEDERAL FALSE CLAIMS ACT IS REVAMPED FOR THE TWENTY-FIRST CENTURY!!!!
In 1986, with the budgetary strains caused by the cold-war, and with fraudsters draining the U.S. Treasury with impunity, Congress acted by revitalizing the False Claims Act.
Today, Congress once again strengthened the False Claims Act, and brought that Act into the twenty-first century with passage of the Fraud Enforcement & Recovery Act of 2009. Passage of the Act was a beautiful example of bipartisan cooperation and civility, I should add!
The Fraud Enforcement and Recovery Act of 2009 is rumored to be on its way to President Obama, who has promised to quickly sign this bipartisan legislation. In a nutshell, the Fraud Enforcement and Recovery Act of 2009 removes many of the judicially created limitations and qualifications to the False Claims Act.
This much-needed legislation will modernize the Act, allowing the False Claims Act to reach modern-day fraud schemes. It will also remove many of the impediments to the Government’s investigative powers, strengthen anti-retaliation protections, and clarify many of the procedural questions that have derailed qui tam actions in recent years.
This is a giant first step forward for our country’s fraud-fighting efforts. The bipartisan support for this legislation demonstrates, once again, that when it comes to fighting fraud, politics takes a back seat to doing the right thing. Now that Congress has plugged the False Claims Act liability loopholes, we look forward to Congress addressing the rest of the problems identified in the False Claims Act Corrections Act of 2009.
No question about it, this is an historic day–more precisely, tomorrow will be the historic day, if the President signs the Act into law tomorrow. As I point out in my Practice Commentary on the False Claims Act (LexisNexis, 2009) changes to the Federal False Claims Act always accompany major changes in American society, and tomorrow is no different.
State Qui Tam Legislative Updates
Sadly, as the last of the state legislative sessions wind down this month, it appears that we do have a single new state False Claims Act to report. Kansas appears to have passed a non-qui tam state statute, which can only be enforced by that state’s OAG.
There is a glimmer of hope from Minnesota, however, as both houses of the MN state legislature have apparently passed slightly different versions of a “true” FCA–that is, one with qui tam provisions which allow a private individual to file suit in the name of the state to recover treble damages, civil penalties, and attorney’s fees and costs for fraud on the state.
Important New Opinion from the U.S. District Court for the Eastern District of Virginia Addresses the Seal Requirements of the Federal False Claims Act
An important new opinion issued today by the U.S. District Court for the Eastern District of Virginia (Alexandria Division) discusses the mandatory disclosure and seal requirements of the Federal False Claims Act. The opinion can be found on Westlaw as United States ex rel. Ubl v. IIF Data Solutions, et al., 2009 WL 1254704 (E.D.Va.) or by clicking I posted on the topic of whether the provisions of Va. Code 8.01-216.5 apply to the Virginia Attorney General’s Office. In other words, would the OAG need to file a self-initiated VFATA complaint under seal. Judge O’Grady’s opinion provides further support for my position.
The specific issue in the May 5 opinion is an amended complaint filed by the relator, and defendants’ motion to dismiss on the grounds that relator did not comply with the seal requirements of the statute.
Fools–or in this case, the Government Accountability Project, OMB Watch, and the ACLU–Rush In Where Angels Fear to Tread
A lawsuit currently pending in the U.S. District Court for the Eastern District of Virginia seeks to have most the Federal False Claims Act declared unconstitutional. The previously addressed the necessity of the seal in qui tam litigation, and the numerous interests served by requiring qui tam relators to file their cases under seal. In addition to the practical reasons, there are a number of very sound legal reasons why the complaint should be dismissed, and I am sure DOJ’s brief will state them very well.
A number of amicus briefs are expected as well–stay tuned for more.
News from the Virginia Attorney General Race–Former Attorney General Jerry Kilgore Endorses John Brownlee for Attorney General in 2009
Former Virginia Attorney General Jerry Kilgore announced this morning that he has endorsed John Brownlee’s bid to secure the Republican nomination for that post. Kilgore also announced that he has agreed to serve as General Chairman of Brownlee’s campaign.
“We need a strong candidate for Attorney General and that’s why we are here today,” said Kilgore. “It’s important for our Party and for our ticket that Republicans unite around the candidacy of John Brownlee.”
Kilgore noted that he had moderated several debates between the three Republican candidates for Attorney General this year, and had anticipated staying neutral until a nominee was selected on May 30. “However,”
Kilgore said, “one candidate stood out at those debates. One candidate demonstrated an understanding of the office, an understanding of the issues and an understanding of how to win this campaign. That candidate was John Brownlee.
“I have been impressed with John’s abilities to attract supporters in every region of our Commonwealth. He has impressed me with his e-campaign and willingness to use new technologies in reaching voters….He will have the ability to bring together business and social conservatives and focus on the winning formula for the Attorney General’s office.
“John Brownlee already has run an office very similar to the Attorney General’s office. Like John, I served in the U.S. Attorney’s office. Like the Virginia Attorney General’s office, the U.S. Attorney’s office deals with much more than criminal cases. They deal with every civil matter that the United States becomes a party to in the respective district.”
Kilgore also mentioned the importance of Brownlee’s experience as a former prosecutor. “Virginians, for more than a quarter century, have elected an experienced prosecutor as their Attorney General when given the choice between a candidate with prosecutorial experience and no prosecutorial experience, and 2009 will be no exception.
“Importantly, John has worked with the entire law enforcement community in Virginia – federal, state and local. They understand his abilities and why he would be a great Attorney General. That’s why John has been endorsed by so many Sheriffs and Commonwealth’s Attorney throughout the Commonwealth.”
Brownlee said Kilgore’s decision to join the campaign was a “significant moment” that placed his campaign in a “unique position” going forward in the nominating contest.
“This is a man who has dedicated his entire life to public service….He served as Attorney General for nearly four years, and was a very successful Attorney General. His efforts led to a better and safer Virginia.
“This is a man who knows; he knows the job, he knows the people, he knows the challenges. And the fact that he would stand here today and put his seal of approval on our campaign means so much to Lee Ann and me.”
Kilgore, who was elected Attorney General by a wide margin in 2001, said he would take an active and visible role in Brownlee’s campaign between now and the Virginia Republican Convention on May 29 and 30, 2009.
“The Virginia Republican Party is at a crossroads,” concluded Kilgore. “As we near our Convention, we must unite behind the ticket that will not only bring us together as a Party but will win in November. That ticket should include John Brownlee as our next Attorney General.”
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An Important and Groundbreaking New Fourth Circuit Opinion is Issued today in United States ex rel DRC v. Custer Battles, LLC, et al.
Today, the Fourth Circuit issued its opinion in the highly-publicized case U.S. ex rel. DRC, Inc., et al. v. Custer Battles, LLC, et al. The opinion is noteworthy for a number of reasons, not the least of which is that it provides the first Fourth Circuit interpretation of last year’s Allison Engine opinion by SCOTUS.
True to the predictions of many in the qui tam community, Allison Engine has turned out to be a win, and today’s Fourth Circuit in opinion in the Custer Battles case is an unmitigated victory for the American taxpayer.
The case was filed in the U.S. District Court for the Eastern District of Virginia in 2004, and arises out of fraud in various contracts related to the rebuilding of Iraq in 2003 and 2004. The time frame is important, because during this period Iraq was governed by the Coalition Provisional Authority (“CPA”), and one central issue in the case was whether presenting a false claim to the CPA was the same as presenting a false claim to the United States under 31 U.S.C. 3729(a)(1).
The case was filed under seal, as required by the False Claims Act, and served on the government, which declined to intervene. The case was then unsealed and served, and proceeded through discovery, summary judgment motions, a jury trial, and numerous motions under Fed. R. Civ. P. 50. Prior to submitting the case to a jury, Judge Ellis had granted judgment for the defendants on all amounts except for one–a $3 million payment to Custer Battles that had been paid with a U.S. Treasury check.
Judge Ellis conducted a “source of funds” analysis, and reasoned that the remainder of the money outside of the one $3 million payment had not been money of the United States, but rather money that came to the CPA from various other sources, included assets seized in Iraq after the Hussein government was toppled.
The jury found in favor of the relators, and determined that Custer Battles had defrauded the United States to the tune of $3 million, which Judge Ellis ostensibly trebled as per the requirements of the FCA.
(As an aside, in FCA jury trials, the jury simply decides whether false claims were submitted to the government, and if so, in what amount. The court then trebles the damages as a matter of law.)
Relators appealed the district court’s ruling that claims presented to the CPA were not claims submitted to the United States, and the Fourth Circuit agreed that the district court had erred. The plain language of the FCA states that a “claim” includes “any request or demand … for money or property which is made … to a grantee or other recipient if the United States Government provides any portion of the money or property which is requested or demanded … or if the Government will reimburse such Grantee … “.
The Fourth Circuit stated: “While we agree with the district court that § 3729(a)(1) requires that presentment be made to U.S. government personnel working in their official capacity, we conclude that the court erred in assuming that U.S. government personnel detailed to the Coalition Authority could not be working in their official capacities as U.S. government employees.” In fact, the circuit court pointed to evidence presented by the relators at trial, which showed that the U.S. military employees who contracted with the defendants were detailed to the CPA, but were always acting in their official capacities as employees of the United States, who were being paid by the U.S. Army and other U.S. agencies.
The Fourth Circuit also clarified that although § 3729(a)(1) imposes liability on those who make or use false statements or records to get false claims paid or approved “by the Government,” section (a)(1) does not contain the “by the Government” language. This distinction was significant to the circuit court, which held that “[s]ection 3729(a)(1) defines liability in terms of the person to whom the claim is presented, whereas § 3729(a)(2) defines liability in terms of the intended source of the payment or approval.”
It was at this point that the SCOTUS opinion in Allison Engine came into play; namely, the Fourth Circuit confirmed that while section (a)(1) contains a presentment requirement, section (a)(2) does not — neither explicitly nor implicitly. Based on these distinctions, the Fourth Circuit reversed the district court’s order granting the defendants motion for judgment as a matter of law, since the relators’ evidence was “sufficient for a reasonable jury to conclude that Custer Battles presented or caused to be presented fraudulently inflated invoices to persons acting in their official capacity as U.S. officials or employees.” However, the circuit court remanded to the district court the issues of whether the defendants’ claims were materially false, whether the United States suffered damages, and whether the individual defendants had sufficient knowledge of the alleged fraud to be liable.