GOVERNMENT CONTRACTING LAW

Transcription

1 AN A.S. PRATT PUBLICATION APRIL 2016 VOL. 2 NO. 4 PRATT S GOVERNMENT CONTRACTING LAW REPORT EDITOR S NOTE: A CURIOUS CASE Victoria Prussen Spears IT S GOOD TO BE THE KING: THE CURIOUS CASE OF UNITED STATES V. JAAAT TECHNICAL SERVICES J. Andrew Howard, Breana Ware, and Janille C. Corbett UNDERSTANDING WHEN AN OVERPAYMENT CAN RESULT IN FALSE CLAIMS LIABILITY AND WHY CURRENT COURT PRECEDENT AND REGULATORY GUIDANCE IS MISTAKEN PART II Robert S. Salcido U.S. FEDERAL CONTRACTORS: ARE YOU UP TO DATE ON ALL NEW REQUIREMENTS? Meghan E. Hill, Christina A. Pate, Jill S. Kirila, and Susan M. DiMickele TWO MORE YEARS: DOD GIVES DEFENSE CONTRACTORS UNTIL DECEMBER 31, 2017 TO COMPLY WITH BASELINE ADEQUATE CYBERSECURITY REQUIREMENTS Ronald D. Lee, Charles A. Blanchard, and Tom McSorley 2015 DOJ FALSE CLAIMS ACT STATISTICS REVEAL TREND SHIFTS AND INCREASING ENFORCEMENT FOR 2016 Suzanne Jaffe Bloom and Benjamin Sokoly

2 PRATT S GOVERNMENT CONTRACTING LAW REPORT VOLUME 2 NUMBER 4 APRIL 2016 Editor s Note: A Curious Case Victoria Prussen Spears 113 It s Good to be The King: The Curious Case of United States v. JAAAT Technical Services J. Andrew Howard, Breana Ware, and Janille C. Corbett 115 Understanding When an Overpayment Can Result in False Claims Liability and Why Current Court Precedent and Regulatory Guidance is Mistaken Part II Robert S. Salcido DOJ False Claims Act Statistics Reveal Trend Shifts and Increasing Enforcement for 2016 Suzanne Jaffe Bloom and Benjamin Sokoly 135 U.S. Federal Contractors: Are You Up to Date on All New Requirements? Meghan E. Hill, Christina A. Pate, Jill S. Kirila, and Susan M. DiMickele 140 Two More Years: DoD Gives Defense Contractors Until December 31, 2017 to Comply With Baseline Adequate Cybersecurity Requirements Ronald D. Lee, Charles A. Blanchard, and Tom McSorley 145

3 QUESTIONS ABOUT THIS PUBLICATION? For questions about the Editorial Content appearing in these volumes or reprint permission, please call: Heidi A. Litman at For assistance with replacement pages, shipments, billing or other customer service matters, please call: Customer Services Department at (800) Outside the United States and Canada, please call (518) Fax Number (518) Customer Service Web site For information on other Matthew Bender publications, please call Your account manager or (800) Outside the United States and Canada, please call (518) Library of Congress Card Number: ISBN: (print) Cite this publication as: [author name], [article title], [vol. no.] PRATT S GOVERNMENT CONTRACTING LAW REPORT [page number] (LexisNexis A.S. Pratt); Michelle E. Litteken, GAO Holds NASA Exceeded Its Discretion in Protest of FSS Task Order, 1 PRATT S GOVERNMENT CONTRACTING LAW REPORT 30 (LexisNexis A.S. Pratt) Because the section you are citing may be revised in a later release, you may wish to photocopy or print out the section for convenient future reference. This publication is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought. LexisNexis and the Knowledge Burst logo are registered trademarks of Reed Elsevier Properties Inc., used under license. A.S. Pratt is a registered trademark of Reed Elsevier Properties SA, used under license. Copyright 2016 Reed Elsevier Properties SA, used under license by Matthew Bender & Company, Inc. All Rights Reserved. No copyright is claimed by LexisNexis, Matthew Bender & Company, Inc., or Reed Elsevier Properties SA, in the text of statutes, regulations, and excerpts from court opinions quoted within this work. Permission to copy material may be licensed for a fee from the Copyright Clearance Center, 222 Rosewood Drive, Danvers, Mass , telephone (978) An A.S. Pratt Publication Editorial Office 630 Central Ave., New Providence, NJ (908) (2016 Pub.4938)

4 Editor-in-Chief, Editor & Board of Editors EDITOR-IN-CHIEF STEVEN A. MEYEROWITZ President, Meyerowitz Communications Inc. EDITOR VICTORIA PRUSSEN SPEARS Senior Vice President, Meyerowitz Communications Inc. BOARD OF EDITORS MARY BETH BOSCO Partner, Holland & Knight LLP DARWIN A. HINDMAN III Shareholder, Baker, Donelson, Bearman, Caldwell & Berkowitz, PC J. ANDREW HOWARD Partner, Alston & Bird LLP KYLE R. JEFCOAT Counsel, Latham & Watkins LLP JOHN E. JENSEN Partner, Pillsbury Winthrop Shaw Pittman LLP DISMAS LOCARIA Partner, Venable LLP MARCIA G. MADSEN Partner, Mayer Brown LLP KEVIN P. MULLEN Partner, Jenner & Block VINCENT J. NAPOLEON Partner, Nixon Peabody LLP STUART W. TURNER Counsel, Arnold & Porter LLP WALTER A.I. WILSON Senior Partner, Polsinelli PC iii

5 PRATT S GOVERNMENT CONTRACTING LAW REPORT is published twelve times a year by Matthew Bender & Company, Inc. Copyright 2016 Reed Elsevier Properties SA., used under license by Matthew Bender & Company, Inc. All rights reserved. No part of this journal may be reproduced in any form by microfilm, xerography, or otherwise or incorporated into any information retrieval system without the written permission of the copyright owner. For permission to photocopy or use material electronically from Pratt s Government Contracting Law Report, please access or contact the Copyright Clearance Center, Inc. (CCC), 222 Rosewood Drive, Danvers, MA 01923, CCC is a not-for-profit organization that provides licenses and registration for a variety of users. For subscription information and customer service, call Direct any editorial inquires and send any material for publication to Steven A. Meyerowitz, Editor-in-Chief, Meyerowitz Communications Inc., Grand Central Parkway Suite 18R, Floral Park, New York 11005, smeyerowitz@meyerowitzcommunications.com, Material for publication is welcomed articles, decisions, or other items of interest to government contractors, attorneys and law firms, in-house counsel, government lawyers, and senior business executives. This publication is designed to be accurate and authoritative, but neither the publisher nor the authors are rendering legal, accounting, or other professional services in this publication. If legal or other expert advice is desired, retain the services of an appropriate professional. The articles and columns reflect only the present considerations and views of the authors and do not necessarily reflect those of the firms or organizations with which they are affiliated, any of the former or present clients of the authors or their firms or organizations, or the editors or publisher. POSTMASTER: Send address changes to Pratt s Government Contracting Law Report, LexisNexis Matthew Bender, 630 Central Avenue, New Providence, NJ iv

6 2015 DOJ FALSE CLAIMS ACT STATISTICS 2015 DOJ False Claims Act Statistics Reveal Trend Shifts and Increasing Enforcement for 2016 By Suzanne Jaffe Bloom and Benjamin Sokoly * In this article, the authors discuss the U.S. Department of Justice s 2015 False Claims Act recoveries and related statistics. The U.S. Department of Justice ( DOJ ) announced that it secured in fiscal year 2015 more than $3.5 billion in settlements and judgments from civil cases involving fraud and false claims against the government brought under the False Claims Act. 1 Although this amount is lower than last year s record $5.7 billion recovered by the DOJ in such actions, it marks the fourth consecutive year that recoveries have exceed $3.5 billion (and sixth consecutive year exceeding $3 billion). The $3.5 billion recovered in fiscal year 2015 brings the total amount that the federal government has recovered to over $26 billion, dating back to the 2009 amendment of the False Claims Act through the Fraud Enforcement and Recovery Act. For the sixth consecutive year, over 700 new False Claims Act matters were docketed in fiscal year 2015, with more than 600 of those matters filed under the Act s whistleblower, or qui tam, provisions that allow individual whistleblowers, known as relators, to file lawsuits alleging false claims on behalf of the government and share in any recovery. Although this marked a slight decline from the over 800 new False Claims Act matters filed in fiscal year 2014, fiscal year 2015 saw a record $1.1 billion recovered in qui tam cases in which the government declined to intervene and a record of over $597 million received by relators. INDUSTRIES TARGETED Health Care Industry Of the $3.5 billion recovered by the federal government in fiscal year 2015, * Suzanne Jaffe Bloom is a litigation partner at Winston & Strawn LLP and co-chair of the firm s hiring committee. Benjamin Sokoly is of counsel in the firm s litigation practice group. Resident in the firm s New York office, the authors may be contacted at sbloom@winston.com and bsokoly@winston.com, respectively. 1 See DOJ Press Release, Justice Department Recovers Over $3.5 Billion From False Claims Act Cases in Fiscal Year 2015 (Dec. 3, 2015), available at see also DOJ Fraud Statistics (Nov. 23, 2015), available at 135

7 GOVERNMENT CONTRACTING LAW REPORT the largest portion $1.9 billion was recovered from companies and individuals in the health care industry accused of various wrongdoing, including for allegedly paying kickbacks to health care providers to induce the use of certain goods or services reimbursed by the government; providing unnecessary or inadequate care; or overcharging for goods or services reimbursed by governmental health care programs. In many of these cases, substantial additional amounts were recovered for consumers and state treasuries. After having fallen behind recoveries from banks and other financial institutions in 2014, the health care industry returned to its traditional position as the leading industry targeted for False Claims Act enforcement in fiscal year Since January 2009, the DOJ has recovered nearly $16.5 billion in health care fraud matters. A significant portion of the $1.9 billion total recovered from the health care industry came from two settlements with DaVita Healthcare Partners, Inc., a leading provider of dialysis services. In October 2014, the DOJ announced that DaVita agreed to pay $350 million to resolve claims that it violated the False Claims Act by paying kickbacks to induce the referral of patients to its dialysis clinics. That settlement was followed in June 2015 with the announcement that DaVita agreed to pay $450 million to settle claims that it violated the False Claims Act by knowingly creating unnecessary waste in administering two drugs to dialysis patients and then billing the government for that avoidable waste. Also significantly contributing to the $1.9 billion recovered was the announcement in October 2015 of 70 settlements involving 457 hospitals in 43 states for more than $250 million (a portion of which appears to have been included in the 2015 reported figures) related to cardiac devices implanted in Medicare patients in violation of Medicare coverage requirements. Settlements and recoveries from the pharmaceutical industry also contributed $96 million to the $1.9 billion recovered. Government Contracts Government contracts and federal procurement represented the secondlargest sector for recoveries, accounting for $1.1 billion in fraud settlements and judgments in fiscal year Significant settlements in this area included: a $146 million settlement for alleged false claims submitted to the Department of Defense for fuel and transporting cargo to American soldiers in Afghanistan; a $75.5 million settlement resolving allegations of violation of the False Claims Act by misrepresenting commercial pricing practices and overcharging the government on software products and services; a $44.5 million settlement resolving allegations of overcharging federal agencies for record storage activities under General Services Adminis- 136

8 tration contracts; and 2015 DOJ FALSE CLAIMS ACT STATISTICS a $27.5 million settlement resolving allegations of knowingly overbilling the government for work performed by employees who lacked required job qualifications. Banking and Other Financial Services The financial industry represented the third-largest sector for False Claims Act recoveries in fiscal year The DOJ announced that it recovered $365 million from banks and other financial institutions in matters involving alleged false claims in connection with federally insured mortgages and loans. This marks a significant decline from the $3.1 billion secured in fiscal year 2014, when recoveries from banks and financial institutions represented the majority of the nearly $5.7 billion recovered by the federal government in False Claims Act matters. The decline, however, was not unexpected, as the significant recoveries in 2014 primarily resulted from four large settlements stemming from the financial crisis. Despite the decline, companies and individuals operating in the financial sector are likely to face continued scrutiny under the False Claims Act. WHISTLEBLOWER ACTIONS In fiscal year 2015, 632 of the 737 new False Claims Act matters were filed under the Act s whistleblower, or qui tam, provisions. In such actions, the whistleblower, also known as the relator, receives up to 30 percent of any recovery. As in prior years, qui tam actions were a significant factor in False Claims Act recoveries in Of the $3.5 billion total recovered this past fiscal year, approximately $2.9 billion (over 81 percent) was received in connection with qui tam lawsuits filed in this and prior years. 2 A considerable portion of that amount over $1.1 billion was attributable to cases where the government declined to intervene, and the whistleblower pursued the action on his or her own. In 2015, whistleblowers received over $597 million in False Claims Act cases, a significant increase over the $444 million recovered in fiscal year Whistleblowers recoveries in 2015 marked the largest ever, topping the $559 million recovered in From January 2009 through the end of fiscal year 2015, the government has recovered $19.4 billion in settlements and judgments related to qui tam lawsuits 2 Amounts are from the underlying DOJ Fraud Statistics, available at gov/opa/file/796866/download. 137

9 GOVERNMENT CONTRACTING LAW REPORT and paid whistleblower awards of $3 billion. TAKEAWAYS The DOJ s summary of fiscal year 2015 False Claims Act recoveries and related statistics are noteworthy in several respects. First, the statistics suggest a far greater willingness by whistleblowers to proceed with their False Claims Act actions, even where the government has decided not to intervene in the action. Specifically, fiscal year 2015 marked a dramatic increase in recoveries in qui tam cases in which the government declined to intervene. As noted above, of the $2.91 billion recovered in qui tam actions, approximately $1.15 billion (or over 39 percent) was recovered in actions pursued by the whistleblowers without intervention by the government. This marked the greatest dollar amount recovered in non-intervened cases, dwarfing the $80 million recovered in such cases in 2014 and the previous high of $174 million recovered in The larger recoveries for whistleblowers in non-intervened cases will continue to embolden whistleblowers and the relators bar. Second, given that 2015 marked the sixth consecutive year that over 700 new False Claims Act matters were filed, it seems clear that the DOJ s focus on False Claims Act enforcement will continue. Prior to 2010, there was only one year in the history of the False Claims Act that the number of new matters filed topped 700. The consistently high number of qui tam suits filed in recent years may be explained, at least in part, by recent amendments to the False Claims Act. For example, the 2009 Fraud Enforcement and Recovery Act expanded the scope of False Claims Act liability by, among other things, loosening the intent requirement by effectively overturning the Supreme Court s decision in Allison Engine Co. v. U.S. ex rel. Sanders; 3 broadening reverse false claims liability by adding a provision that creates liability even where a defendant does not make a false record or statement; eliminating the direct presentment requirement; and broadening the anti-retaliation provision. Third, there likely will be increased government scrutiny of the conduct of individuals in False Claims Act matters. In fiscal year 2015, the government intervened in a number of False Claims Act matters naming individuals as defendants and also reached a number of settlements of $1 million or more with individuals. This increased scrutiny of individuals for False Claims Act enforcement will undoubtedly continue, especially in view of the September 9, 2015 Yates Memo announcing the DOJ s various initiatives designed to S.Ct (2008). 138

10 2015 DOJ FALSE CLAIMS ACT STATISTICS strengthen its pursuit of individual corporate wrongdoing and ensure that individuals are held accountable for corporate misdeeds, both criminally and civilly. 139