A good internal investigation gives equal scrutiny to people and processes. It may be easier to replace or reprimand the “bad apple” employee than to overhaul a system with which employees are familiar and has become ingrained in the operational culture. Nevertheless, it is increasingly vital that companies take a hard look at systems, structures, and processes. A recent opinion from the D.C. Circuit indicates that these organizational elements will be the next battleground in False Claims Act (“FCA”) litigation.
In United States v. Science Applications International Corporation, SAIC entered into a contract with the Nuclear Regulatory Commission (“NRC”) to provide technical assistance and expert analysis. The contract included strict provisions on conflicts of interest, including a requirement that SAIC seek NRC’s prior written approval if it had reason to believe that a proposed arrangement may raise a conflict of interest. SAIC subsequently entered into two contracts that potentially conflicted with its NRC work. SAIC had a computerized compliance system, but it did not capture all of SAIC’s business relationships and did not adequately associate keywords with descriptions of work. The descriptions were also incomplete. SAIC did not disclose the new contracts to the NRC. The NRC eventually learned about SAIC’s other work from a member of the public and terminated SAIC’s contract. The government then sued SAIC under the False Claims Act.
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