Investigations & Enforcement

Johnny, rosin up your bow and play your fiddle hard
’Cause Hell’s broke loose in Georgia and the Devil deals the cards
And if you win, you get this shiny fiddle made of gold
But if you lose the Devil gets your soul
~ The Charlie Daniels Band

Some might say there’s little difference between dealing with the devil and being a federal contractor. And for the unwary or unprepared, that may not be far off. Federal contracting comes with a litany of “fine print” that would make “Old Scratch” proud. However, as most savvy contractors recognize, it’s all hiding in plain sight, with the devil in the details. Take, for example, the cybersecurity requirements found in the Federal Acquisition Regulations (FAR) at 52.204-21 and the Department of Defense (DoD) FAR Supplement (DFARS) at 252.204-7012, -7019, and -7020. These requirements have been the topic of countless articles, trainings, webinars, whole conferences, etc., so it is surprising while simultaneously not surprising that they form the basis of a federal False Claims Act (FCA) claim the Department of Justice (DOJ) recently filed in its complaint in intervention.

Continue Reading DOJ Went Down to Georgia: Lessons Learned from Recent Cybersecurity Enforcement Actions

On August 1, 2024, the US Department of Justice (DOJ) Criminal Division introduced its Corporate Whistleblower Awards Pilot Program (Program), which, like a modern-day Western posse, aims to bring justice to the wild frontier of corporate America. The DOJ is enticing anyone willing to saddle up and provide information on corporate outlaws—i.e., those involved in corruption, financial crimes, foreign corruption, bribery, and/or healthcare fraud. In sum, the Program closes the gaps left by existing whistleblower programs and bolsters the DOJ’s efforts to combat corporate crime. For those who decide to ride with it, the DOJ is promising substantial financial rewards—up to 30 percent of the loot recovered from those outlaws—to insiders, whistleblowers, and relators who come forward with information leading to significant criminal or civil forfeiture actions. As the Program unfolds over its three-year pilot period, it will—or should—be closely watched by False Claims Act defense counsel, plaintiff’s counsel, corporate leaders, and potential whistleblowers alike. If successful, it could permanently expand whistleblower incentives and further embolden an already aggressive DOJ (as if more encouragement were needed), signaling a new frontier in corporate governance and accountability in the United States.

Continue Reading A New Frontier in Corporate Accountability: The DOJ’s Corporate Whistleblower Awards Pilot Program

On April 22, 2024, the Department of Health and Human Services (HHS) announced a Final Rule titled HIPAA Privacy Rule to Support Reproductive Health Care Privacy. The Final Rule strengthens the Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule by prohibiting disclosure of protected health information (PHI) related to lawful reproductive health care under…

Parties litigating False Claims Act (FCA) cases have long struggled with a thorny question around the essential element of scienter (the defendant’s intent, or state of mind): What/how much does a contractor need to know when submitting an invoice for payment for the related claim to be considered knowingly false when made? When that question arises in FCA litigation, a court’s determination of that essential element of scienter/knowledge often pivots on what the judge believes matters more:

(A) The defendant’s subjective belief at the time a claim is made; or

(B) An objective textual reading of what a person may have known or believed when a claim is made.

Continue Reading The False Claims Act’s Fuzzy Scienter Element Brought into Sharp Focus

Most experienced contractors have a healthy fear of the various types of fraud claims: False Claims Act, federal and state wire and mail fraud, common law fraud, etc. They know that enforcement authorities are always looking for ways to swing the hammer against a contractor they suspect is fleecing the government. Fraud claims arise when a victim (sometimes the government) contends that the defendant lied about the goods or services offered in order to induce the victim to voluntarily transfer property to the defendant in an exchange. Where the victim parts with much for nothing in return, the fraud analysis is easy—the defendant’s intent to wrongfully steal property or to inflict a pecuniary loss is obvious. But in cases where the victim receives from the defendant goods or services of real value, whether the defendant intended to harm the victim or deprive them of their property becomes a more difficult question.

Continue Reading No Harm, No Fraud: The Supreme Court Narrows the Application of the Wire Fraud Statute and Unanimously Overrules the “Right to Control” Theory

Scenario 1: A pharmacy chain hires a value consultant to review its Medicare and Medicaid billing practices for ways to optimize the coding of drug reimbursements to maximize profits. Drugs that had historically been charged for government reimbursement at $1/pill as the “usual and customary price” are now getting coded for reimbursement at $3/pill—a 200% markup that represents a pure profit windfall to the pharmacy chain. Is this a violation of the False Claims Act (FCA)?

Scenario 2: A construction company that has years of experience in federal procurement contracting had never charged the government for reimbursement of several cost items, because the company’s previous CFO did not feel such reimbursement would meet the “reasonableness” requirements of FAR Part 31 (e.g., FAR 31.201-2(a)(1) and 31.201-3). But the company’s new CFO, holding a different interpretation of the reasonableness standards and Cost Accounting Standards (CAS), instructs his program leads to start charging those items for reimbursement in all new and existing contracts. Is this a violation of the FCA?

Continue Reading Knowing IS the Battle: Supreme Court to Address the FCA’s Scienter Standard

The U.S. Department of Justice (DOJ) Procurement Collusion Strike Force (PCSF, or Strike Force) celebrates its third anniversary this month. Formed in November 2019 as an interagency partnership consisting of DOJ’s antitrust prosecutors, lawyers in 13 U.S. attorneys’ offices, and investigators from the FBI and federal Offices of Inspector General, the Department of Defense, the General Services Administration, and the U.S. Postal Service, the Strike Force leverages joint resources to investigate public procurement crimes, employ complementary enforcement and prosecution strategies, eliminate anticompetitive collusion and fraud, and promote the integrity of government procurement. Employing education and state-level liaising, the Strike Force has been remarkably omnipresent and successful in that short time, despite numerous pandemic-related interruptions/delays in the courts. The pace of the Strike Force’s enforcement activity has quickened dramatically in 2022—and shows no signs of slowing in 2023.
Continue Reading DOJ’s Procurement Collusion Strike Force: Widening Its Stride on Its Third Anniversary

According to the Office of Federal Contract Compliance Programs (OFCCP), since 2019, Will Evans, a reporter for the Center for Investigative Reporting, has sought the Employment Information Report (EEO-1) data of federal contractors through a Freedom of Information Act (FOIA) request to OFCCP. Mr. Evans amended his FOIA request on June 2, 2022, and now seeks the Type 2 Consolidated EEO-1 Report demographic data of federal prime contractors and first-tier subcontractors for 2016–2020. OFCCP estimates that this impacts approximately 15,000 contractors and first-tier subcontractors.

What does this mean? Absent an objection, OFCCP could disclose your company’s Type 2 Consolidated EEO-1 Reports Component 1 data for 2016–2020 in response to Mr. Evans’s FOIA request.

What is an EEO-1 Report? The EEO-1 Report is the form used annually by the Equal Employment Opportunity Commission and OFCCP to collect a summary of an employer’s workforce data.Continue Reading Attention Federal Contractors and First-Tier Subcontractors: Your EEO-1 Reports May Be Responsive to an OFCCP FOIA Request, and You Have Only until September 19, 2022, to Object.

As COVID-19 antibodies begin flooding the immune systems of most Americans, it is important to remember the important role that hygiene has played over the past fifteen months. For many, the risks and dangers of the pandemic were kept at bay by hand washing, masking, and sanitizing after every new touch. That same kind of attention to hygiene is something federal contractors should retain as they are permitted to reenter a world filled with supply chain enforcement risk.
Continue Reading Prevention v. Cure: Supply Chain Hygiene Is the Key to Defending Enforcement

“Now, the next part is very important…”

As scrutiny of domestic preference requirements increases in the wake of the Biden Administration’s Executive Order on Ensuring the Future Is Made in All of America by All of America’s Workers, the time is now for contractors to brush up on those requirements, examine supply chains to identify non-domestic content, and implement internal policies and procedures to ensure they are compliant with the domestic preference rules applicable to their contracts. On May 20, 2021, the US Attorney’s Office for the Eastern District of Pennsylvania announced a settlement under which a contractor agreed to pay $54,983 and implement “enhanced compliance measures” to resolve claims arising from its use of Chinese-made parts during a fire alarm installation and renovation project at Amtrak’s 30th Street Station in Philadelphia, PA. While the settlement amount is relatively minimal, the settlement is remarkable in that it telegraphs that funding agencies, along with the Department of Justice (DOJ), are willing to go to great lengths to be a nightmare for suppliers that do not adhere to the “Buy America” statutes and regulations.Continue Reading I Will Find You: DOJ Uses Its Particular Set of Skills to Enforce Domestic Preference Rules