The folks at the Department of Health and Human Services (Office of the Inspector General) unveiled this snazzy new interactive map this week.
Ever wonder how much federal money Kansas or New Mexico get for Medicaid? Well, here is your answer…
Introducing a Dynamic New Tool from HHS-OIG
Can Violations of the Davis-Bacon Act Trigger Liability Under the False Claims Act?
Today’s post is about the Davis-Bacon Act and whether the failure to pay Davis-Bacon wages triggers liability under the federal False Claims Act. This is in response to a conversation I had recently with a fellow Virginia lawyer who asked me whether (and when) the Davis-Bacon Act could trigger FCA liability. She was rather displeased, I think, with an answer that I felt was quite lawyerly. My lawyerly answer was “It depends.” An examination of the interplay between Davis-Bacon and the FCA serves as yet another opportunity to revisit my theme of FCA liability. When I size up a potential FCA case, I look for an “objective falsehood.” But I am jumping ahead of myself, and a little background will be helpful. As regular readers know, the big-ticket items in the federal budget are healthcare and military spending. I think it is a safe bet however that construction projects would be somewhere in the top five. Construction projects for the government are some of the most regulated projects in the modern world, and that is saying something. Among the more important laws and regulations governing federal construction projects is Davis-Bacon. In a nutshell, the Davis-Bacon Act of 1931 is a federal law requiring payment of prevailing wages on public works projects. All federal government construction contracts (and most contracts for federally assisted construction projects) worth a certain dollar threshold (which I believe is $2,000) must include provisions for paying construction workers on-site no less than the locally prevailing wages and benefits paid on similar projects. Davis-Bacon is an important priority of the United States Government. We know the importance of this statute because payments to construction companies doing federal work are expressly contingent upon a weekly certification of compliance with the Davis-Bacon Act. See, 40 U.S.C. § 3142. In addition to the certification of compliance, contractors and subcontractors must furnish weekly payroll certifications of wages paid to each employee for that week. The certification can either be submitted on a special Wage and Hour Division form known as a THE WILLFUL FALSIFICATION OF ANY OF THE ABOVE STATEMENTS MAY SUBJECT THE CONTRACTOR OR SUBCONTRACTOR TO CIVIL OR CRIMINAL PROSECUTION. SEE SECTION 1001 OF TITLE 18 AND SECTION 231 OF TITLE 31 OF THE UNITED STATES CODE. A further indicia of the importance of this statutory framework is the fact that the requirement “flows-down” in the parlance of government contracting, from the prime to the subs. In other words, the prime contractor is responsible for ensuring that all employees of all subcontractors are paid the applicable wage. Given all of the above, it is obvious that a Davis-Bacon violation can sometimes subject the contractor to liability for making a false claim to the government, but when and under what circumstances? As just two examples, if a contractor misrepresents the wages actually paid to its employees, or lies about the frequency with which they receive paychecks, the contractor has made an objectively false statement or claim and FCA liability will most likely attach. However, qui tam cases alleging that a contractor has misclassified employees under Davis-Bacon, for example, usually go the opposite way. A classic example is U.S. ex rel. Windsor v. DynCorp, Inc., 895 F. Supp. 844, 852-53 (E.D. Va. 1995). There, Windsor claimed that DynCorp’s classification of certain workers was erroneous. To determine that however it was necessary to look at complex Department of Labor regulations and make a determination regarding the application of the regulations. In other words the claim was not objectively false on its face. In order to show the falsity of the claim, it was first necessary to interpret lengthy regulations in a particular way. That is not to say that misclassification cases under DBA will never be viable. I dare say that if a qui tam relator could generate evidence showing that workers on a Davis-Bacon project were misclassified AND the relator could show evidence that the contractor misclassified those workers on purpose in order to avoid paying premium wages, an FCA action might be viable. So my answer to the question is “It depends on the existence of an objective falsehood.” 
The Department of Labor calculates these prevailing wages and benefits on a regular basis, and the specific rate is then included in the contract itself.
We know this because the regulations say: “[t]he prime contractor is responsible for the submission of copies of payrolls by all subcontractors,” 29 C.F.R. § 5.5(a)(3)(ii)(A). The regulations also say that “the prime contractor shall be responsible for the compliance by any subcontractor or lower tier subcontractor with all the contract clauses in 29 C.F.R. 5.5.”
A qui tam case based on a violation of Davis-Bacon is strongest when there is an objective falsehood on the face of the claim or invoice submitted to the Government. In other words, when the “falsity” of the false statement is apparent on the face of the document itself and is not dependent on anything else.
Review of the 2011 Taxpayers Against Fraud Education Fund Conference & Awards Dinner
It was also nice to see so many folks from various states attend. We were honored to have Indiana Attorney General Gregory Zoller in attendance. Also present were representatives of the Attorney Generals of Texas, North Carolina, Florida, New York and others. 
Last week was the Eleventh Annual Taxpayers Against Fraud Education Fund and it was, as usual, quite an /files/116785-109034/25_Years_of_False_Claims_Act1.pdf”>25 Years of the Modern False Claims Act.
It would be difficult to overstate the importance of the changes that occurred 25 years ago in 1986. Joyce Branda, who serves as Director of the Fraud Section of the Commercial Litigation Branch at DOJ, shared with us that about 20 qui tam cases were filed under the federal False Claims Act between 1863 and 1986. From 1986 through the first half of 2011, however, more than 7,200 cases were filed.
U.S. District Court Judge Royce C. Lamberth (U.S. District Court for the District of Columbia) spoke at the luncheon on Wednesday and shared his insights into the FCA. Ronald Machen, who is the newly appointed United States Attorney for the District of Columbia also spoke.
Attorney General Ken Cuccinelli Dedicates Resources to the Fight Against Fraud
At long last, the Virginia Fraud Against Taxpayers Act is starting to get some media attention…
Jim Nolan over the at Richmond Times Dispatch put together an excellent article this week about the Attorney General’s efforts to fight fraud.
Stay tuned folks, more to come…
A Look at the Marine Habitat and Waterways Improvement Fund and the Virginia Fraud Against Taxpayers Act
Today’s example concerns the Marine Habitat and Waterways Improvement Fund, which was established in the year 2000 by an act of the General Assembly. The statute is found at Virginia Code § 28.2-1204.2 et seq. The statute provides that “Moneys in the Fund shall be used solely for the purposes of improving marine habitat and waterways, including the removal of obstructions or hazardous property from state waters.” Interestingly enough, one of the major sources of revenue for this fund is permits for one of two purposes: (1) fees paid to the Treasurer of Virginia for a permit to “recover underwater historic property” and (2) permits to use “state owned bottom lands.” I take example (1) above to mean treasure hunters, archaeologists, etc., looking for old shipwrecks off the Virginia Coast. Example number (2), permits “to use state owned bottom lands” primarily means the mining of sand from the bottom of the Chesapeake Bay. The type of sand found at the bottom of the Chesapeake Bay is very different from the sand found on beaches or in a kid’s sandbox, and it is quite valuable. Among many other commercial applications, this sort of sand is used in the manufacture of concrete. For that reason, Virginia Code § 28.2- 1206(C) specifies that “When the activity or project for which a permit is requested will involve the removal of bottom material, the application shall indicate this fact. If granted, the permit shall specify a royalty of not less than $.20, nor more than $.60, per cubic yard of bottom material removed.” Such royalties for the sand removed are to be paid to the Treasurer of Virginia, and used for the improving Virginia’s marine habitats and waterways–in other words, for the public good and for the preservation of our precious natural resources. Virginia’s part of the Chesapeake Bay is not the only place in the country with this sort of sand–California’s San Francisco Bay also has quite a bit of it. Guess what happened there? You got it–numerous companies submitted false claims to the state by mining sand in areas of the Bay for which they had not been issued a permit, and by mining more sand than they reported to the state of California. I would say the odds of something similar happening here in the Chesapeake Bay are pretty high–if for no other reason that the value of the sand and the inherent weakness of human nature. 
One loyal reader recently pointed out that this blog might have unintentionally drifted from one of its stated goals–namely, to give practice examples of the myriad situations in which Virginia Fraud Against Taxpayers Act might be useful.
Also, both the California statute and Virginia Code § 28.2- 1206(C) set a range of prices to be paid to the state for one cubic yard of sand depending on the purpose for which it is mined. The sand is worth up to $12.50 per cubic yard when mined for commercial purposes, so it is easy to imagine that dishonest companies also lie about the purpose for which they are mining the sand (and in the process submitted false claims and made false records) in order to decrease the price owed to the state for each cubic yard of sand.
News This Week: New York State Applies a New Model to False Claims Act Enforcement
This week WSJ reporter Carrick Mollenkamp authored a first-rate piece on New York Attorney General Eric Schneiderman and his leadership in state false claims act prosecutions. In particular, Schneiderman appears to be leading the pack of state Attorney Generals investigating and/or prosecuting large custodial banks like Bank of New York Mellon and State Street for their foreign exchange practices.
Readers, stay tuned…
The Federal Government Gets Serious About Collecting Overpayments
Regular readers will recall past blog posts about government overpayments.
This week more attention was focused on this topic with the introduction of the 2011 Improper Payments Elimination and Recovery Improvement Act (S.1409).
As incredible as it may seem to the uninitiated, government overpayments are commonplace in the healthcare and defense procurement worlds, among others. As healthcare and defense together make up the majority of government expenses, government overpayments are commonplace in most federal spending.
In 2010 alone, improper payments or overpayments were estimated to be $125 billion dollars, according to a quote from the Office of Management and Budget. The quote can be found in an excellent article published this week on govexec.com.
Of course, the 2009 amendments to the federal False Claims Act (as well as the 2011 amendments to the Virginia Fraud Against Taxpayers Act) contain special provisions aimed specifically at this phenomenon. Simply put, the days of “finders keepers, losers weepers” are over.
Commonsense Steps State and Local Governments Can Take to Fight Fraud and Strengthen False Claims Act Enforcement, Part II—Funding a State Affirmative Civil Enforcement Unit
In an earlier post, I discussed a few basic common sense things that state and local governments can do to cut down on fraud. Among those suggestions was to have a state false claims act, and then to make sure that the state Attorney General has a special affirmative civil enforcement unit.
For the most part, the real bread and butter work of a state AG is defensive in nature. As a result, many state AGs are simply not set up to handle affirmative civil enforcement–or at least not affirmative civil enforcement of this nature. It is also true that some lawyers who excel at defense work can’t make the leap to plaintiff’s work.
So without a doubt, a special unit is needed to investigate and prosecute cases under the state claims Act.
In order for an AG’s office to set up a special unit to prosecute these cases it becomes necessary for the AG to find a new source of funding. Virginia does not have a special unit set up to handle affirmative civil enforcement of Virginia Fraud Against Taxpayers Act cases, although such a proposal is, I believe, on the table.
So how do other states fund their state qui tam units? California’s Mixx Delicious Digg Facebook Twitter