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Industry groups widen fight to reform False Claims Act processes

The Professional Services Council and the Coalition for Government Procurement have filed a second brief urging the Supreme Court to hear a case related to the False Claims Act.

In the latest amicus brief filing, the two industry groups are asking the court to take up a case involving AT&T. A lower court let a False Claims Act lawsuit against AT&T continue even though there are no specific allegations leveled at the company.

Click here to go to PSC’s website to download a copy of the brief.

The lower court is ignoring the rules that govern false claims cases, PSC and the coalition are claiming in their filing.

The case involves AT&T’s management of the E-Rate program where funds are collected via phone bills. The money goes into a pool, which is then used to pay for telecommunications projects at underfunded schools and libraries.

AT&T is being accused by Todd Heath, a Wisconsin man who conducted audits of telecommunications spending for school districts. He claims he found problems with the way AT&T handled the E-Rate funds it collected.

He filed his False Claims Act lawsuit in 2011. In 2012, the Justice Department and several states declined to join his lawsuit and launch their investigations because they found no evidence of wrongdoing. In June 2014, the U.S. District Court for Washington, D.C. dismissed Heath’s lawsuit.

But the appeals court overturned the U.S. District court’s decision and reinstated the lawsuit.

And that is the decision that AT&T is asking the Supreme Court to hear.

PSC and the coalition want the Supreme Court to reject the lower court’s position because Heath hasn’t presented any specific evidence of wrongdoing, which is a requirement for a False Claims Act lawsuit to move forward.

The False Claims Act lawsuits are an important issue to industry because contractors could owe up to triple the alleged damages if found guilty.

“With so much at stake, lax enforcement of the pleading rules governing these cases would hurt the federal procurement system,” said PSC Executive Vice President and Counsel Alan Chvotkin.

PSC has seen the number of False Claims Act lawsuits increase over the last decade, he said.

This is the second amicus brief PSC and the coalition have filed in recent months. In July, they filed a brief urging the Supreme Court to hear a case involving Triple Canopy, which was accused by a former employee of billing the government for security guards who allegedly did not meet firearm qualifications.

The issue there is inconsistency among the lower courts with a legal concept, known as “implied certification,” and whether something is a condition for payment. If it isn’t a condition of payment, then there are other means to resolve the problem. That’s the argument with Triple Canopy – is the firearms qualifications a condition for payment?

I’ll admit, I’m not the best at explaining legal arguments, but both cases point to growing issues with the False Claims Act.

It shouldn’t be surprising if you consider how much government contracting has grown in the past 10 years. The downside of the growth is that there are more opportunities for mistakes and more opportunities for lawsuits.

No word yet on whether the Supreme Court will accept the cases, but it seems that if the court doesn't step in now, it won’t be long until it does.

Posted by Nick Wakeman on Oct 21, 2015 at 12:55 PM


Reader Comments

Thu, Oct 22, 2015

"The downside of the growth is that there are more opportunities for mistakes and more opportunities for lawsuits." True, sir, but also many more possible corrupt or incompetent managers who want to defraud the government; FCA cases don't arise from mistakes. Read the press releases about "settlements" the companies make, even tho they are rarely required to admit fault. The alleged frauds are obviously willful, not accidental. Virtually all of the successful contractors, such as SAIC and some of the accounting firms, have been sued and "settled" with the USG regarding fraud charges. The particulars are usually pretty damning. With growth, the difficult truth is there are probably (numerically) a lot more of them, compared with brave whistleblowers and relators who get the goods on apparently provable fraud. The proof needs to be pretty good to get the DOJ involved, and DOJ wins around 9 of 10 cases it brings, often taking over for the whistleblower. That said, there is no reason to believe that gov con has a higher rate of fraud and bad actors than other industries, such as banking. False Claims Act charges are among the very worst fears of companies, in part because they often never know until the suits are unsealed that someone with access to data has made a pretty good case. Most dollar recoveries under the FCA are from the healthcare and pharma companies. Gov con has been under-represented, but that is bound to change.

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