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 Etive regulations.” United States v. McNinch,356 U.S. 595, 599 (1958); United States exrel. Lamers v. City of Green Bay, 168 F.3d1013, 1020 (7th Cir. 1999). Rather, “[t]hestatute attaches liability, not to the underlyingfraudulent activity or to the government’swrongful payment, but to the‘claim for payment.’” Harrison v. WestinghouseSavannah River Co., 176 F.3d 776,The court found that“withholding informationcritical to the decisionto pay” is the “essenceof a false claim.”785 (4th Cir. 1999) (quoting United Statesv. Rivera, 55 F.3d 703, 709 (1st Cir. 1995)).Thus, to succeed under the FCA, the governmentor relator must prove that the defendantknowingly made a false statementor engaged in a fraudulent conduct, whichwas material to the government’s decisionto pay money or to forfeit money due. SeeUnited States ex rel. Godfrey v. KBR, Inc.,360 Fed. App’x 407, 410 (4th Cir. 2010).For purposes of this article, we are primarilyconcerned with two provisions ofthe FCA. First, Section 3729(a)(1) of theFCA prohibits knowingly presenting, orcausing to be presented, false or fraudulentclaims for payment. While most courts findthat the “presentation” element requires“some degree of participation in the claimsprocess” to establish liability, others havefound that operating “under a policy thatcauses others to present false claims” is sufficient.See United States v. President & Fellowsof Harvard College, 323 F. Supp. 2d 151,186–87 (D. Mass. 2004).Second, Section 3729(a)(2) prohibitsknowingly making, or causing to be made,false records or statements material to afalse or fraudulent claim. Until recently,Section 3729(a)(2) prohibited knowinglymaking, using, or causing to be made orused, a false record or statement to get afalse or fraudulent claim paid or approvedby the government. Id. However, as this70 n For The Defense n October 2010previous version of section 3729(a)(2) prohibitedknowingly using “a false record orstatement to get a false or fraudulent claimpaid or approved by the government,” theSupreme Court unanimously held a defendantmust submit a false claim with theintention that it would be paid by the government.See Allison Engine v. United Statesex rel. Sanders, 128 S. Ct. 2123, 2129 (2008).In response, Congress eliminated the “toget” requirement. See Fraud Enforcementand Recovery Act of 2009, Pub. L. No. 111-21, §4, 123 Stat. §1617 (2009).The FCA also prohibits diverting governmentproperty; falsely certifying thatgoods were delivered to the government;knowingly buying or receiving governmentproperty from anyone who may notlawfully sell or pledge it; knowingly usinga false record or statement to decrease oravoid an obligation owed to the government,and conspiring to violate the FCA.31 U.S.C. §3729(a)(1). However, these subsectionsaddress fairly specific misconductand have not been as liberally interpretedas Subsections (a)(1) and (2).Implied CertificationFalsity is, of course, an essential element ofa FCA violation. Claims may be actionableif they are factually or legally false. A claimmay be factually false if it contains objectivelyfalse statements. This covers the typicalFCA claims, such as claims for goods orservices that were never provided, claimsthat were overbilled, or claims for worthlessgoods or services. However, courtshave found that a claim may be legallyfalse, even if factually accurate, if the defendantexpressly or impliedly certifiedthat it complied with applicable statutes orregulations. While this category typicallycovers instances where the defendant submittedclaims obtained through bribes orkickbacks, courts have extended the doctrineto a variety of other violations.The concept of legal falsity was developedin response to FCA claims allegingthat defendants obtained governmentfunds through submitting claims, whichwhile factually true, concealed fraudulentconduct that, if known, would havecaused the government to reject the claim.For instance, in the earliest case, a constructioncompany won a government contractby participating in the Small BusinessAdministration’s (“SBA”) minority- ownedenterprise program. See Ab-Tech Const.,Inc. v. United States, 31 Fed. Cl. 429, 431–33 (Fed. Cl. 1994). As part of the contract,the company was required to certify its“understanding of, and promised compliancewith, the program’s requirements forcontinuing eligibility,” including requiringSBA approval for any management agreementor other agreement that could affectthe company’s performance of the contact.Id. However, the company entered,and fraudulently concealed, a joint venturewith a non- minority- owned enterprise,rendering it ineligible to receive fundsunder the SBA contract. Id. Accordingly,the Court of Federal Claims found thatbecause the company fraudulently concealedthat it was ineligible to receive paymentunder the contract, its claims werefalse. Id. at 434. The court found that “withholdinginformation critical to the decisionto pay” is the “essence of a false claim.” Id.Several courts extended this reasoningto claims obtained in violation of the MedicareMedicaid Anti- Kickback Statute. E.g.,United States ex rel. Pogue v. Am. Healthcorp(Pogue I), 914 F. Supp. 1507, 1513 (M.D.Tenn. 1996); see also United States ex rel.Pogue v. Diabetes Treatment Ctrs. of Am.,Inc. (Pogue II), 238 F. Supp. 2d 258 (D.D.C.2002) (reviewing Pogue I after transfer ofvenue); 42 U.S.C. §1320-7b(b). In Pogue, therelator alleged the defendants engaged in animproper patient referral scheme. Pogue I,914 F. Supp. at 1508. In denying a motionto dismiss, the court found that the FCAprohibited “not only situations in which aclaimant makes a false statement or submitsa false record in order to receive payment,but also those situations in which the claimantengaged in fraudulent conduct in orderto receive payment.” Id. at 1511. Accordingly,the court found the complaint stateda claim, as the relator “alleged that the governmentwould not have paid the claimssubmitted… if it had been aware of the allegedkick-back and self- referral violations.”Id. at 1513. Though not expressly stated, thecourt agreed with the relator’s argumentthat by submitting claims, the defendants“implicitly stated they had complied withall statutes, rules, and regulations governingthe Medicare Act.” Id. at 1509.While Ab-Tech and Pogue I stated thedoctrine of legal falsity in broad terms,