DC Circuit’s Civil False Claims Act Decision Provides Clarity for Government Contractors

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The DC Circuit’s December 3, 2010 opinion in United States v. Science Applications International Corporation (SAIC), provides some welcome guidance for government contractors hoping to understand their potential liability under the Federal Civil False Claims Act (FCA), 31 U.S.C. §§ 3729-33. The FCA, which has been significantly amended over the last two years, provides for civil penalties and treble damages in cases where a party receiving federal funds is found to have sought, received and/or improperly retained such funds through fraud or false statements. Since November 2008, government contractors have been obligated, whenever they have credible evidence of an FCA violation in connection with the award or performance of a government contract, to disclose this violation to the government. To fulfill this obligation, contractors obviously must know what conditions would potentially give rise to FCA liability. The SAIC opinion provides some helpful information to government contractors for assessing potential false claims issues.¹

FACTS

SAIC entered into contracts with the Nuclear Regulatory Commission (NRC) in 1992 and 1999 to provide technical services to the NRC that would help it develop uniform national standards for the disposal of nuclear waste. In connection with those contracts, the company certified not only that it had no organizational conflicts of interest (OCIs), but also that it would alert the government if any potential conflicts of interest arose during contract performance.

DC DISTRICT COURT DECISION

At trial, the jury determined that the company’s relationships with companies regulated by the NRC, and an SAIC executive’s position with a non-profit, which lobbied the NRC gave rise to undisclosed OCIs. The government argued that had it known of the company’s OCIs, it would not have paid anything for its technical advice. As a result, the jury found that the company made false claims and submitted false statements or records to obtain federal funds. It awarded $577,500 in civil penalties along with FCA damages of the full contract value due to the fact that the government would not have knowingly paid for the company’s OCI tainted advice. After trebling the damages, the total verdict was $6,499,096.83.

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