For The Defense, October 2010 - DRI Today

G O V E R N M E N T E N F O R C E M E N T A N D C O R P O R AT E C O M P L I A N C EThe Affect ofGovernment AwarenessBy Matthew L. Bevilleand Winifred M. WeitsenImplied Certificationand the FalseClaims ActCompanies should beaware that they maybe able to use theiralleged civil or criminalliability to defeat arelated FCA claim.Fueled primarily by aggressive qui tam relators, FalseClaims Act (FCA) liability continues to evolve to addressnovel allegations of fraud and falsity. While courts havelargely settled the standards of liability for typical falseclaims violations—such as claims for goodsor services that were never delivered, claimsfor worthless goods or services, or claimsthat overbill the government—recent trendsin FCA litigation impose, or attempt to impose,liability far outside of these traditionalviolations. This article addresses the intersectionof two of these trends: the impliedcertification doctrine, which deems someclaims false if they are associated with statutoryor regulatory violations, and what affect,if any, the government’s awareness ofthe underlying regulatory violation has ona defendant’s liability.Though the case law is less than clear,companies and individuals facing FCA liabilityfor allegedly violating an applicablestatute or regulation may have at leasta partial defense to liability if the governmentwas aware of the alleged violation—even if the government was independentlyinvestigating or prosecuting it. This is particularlyimportant as companies can nowexpect that a qui tam suit will routinely followcivil or criminal government enforcementactions. Indeed, while nearly everycriminal pharmaceutical case involves anFCA component, relators have alleged thatdrug recalls or even Food and Drug Administrationwarning letters are sufficientto establish FCA liability. However, the lawsuggests that companies should not be subjectto FCA liability when the governmentaccepts payment for claims with full knowledgeof the alleged falsity, especially if theexistence of an undisclosed violation is thesole reason the claim is allegedly false. Thisarticle first provides a short summary of theFCA and the implied certification doctrine,followed by an analysis of how the government’sknowledge could, in some instances,effectively bar FCA liability.The False Claims ActThe FCA prohibits knowingly submittingfalse or fraudulent claims to the government,as well as using false or fraudulentstatements material to a claim submittedby a third party; however, the statute isnot designed to “reach every kind of fraudpracticed on the government” or police“technical compliance with administra-■ Matthew L. Beville is an associate and Winifred M. Weitsen is a senior associate in Venable LLP’s Washington,D.C., office and members of the firm’s SEC and White Collar Defense Group. Both authors are membersof DRI and its Government Enforcement and Corporate Integrity Committee.For The Defense n October 2010 n 69