Transcript No Slide Title

False Claims in Construction,
Update of NCHRP 20-06
Study Topic 16-03
Identification, Prevention & Remedies
for False Claims in Highway
Improvement Contracting
AASHTO SUBMCOMMITTEE ON
CONSTRUCTION
Burlington, Vermont
August 17, 2010
Kerness Consulting
Eric M. Kerness, Esq.
Kerness Consulting
518-347-2778
Is there Fraud in Public
Construction?
Kerness Consulting
False claims in construction?
California experience:
Oved & Associates
Tutor- Saliba-Perini v. LAMTA
New York – Suffern Interchange
• 96 Million Reconstruction
• Pile Driving fraud discovered
• Defective Piles-false reporting
Florida – White Construction
Allegations of False Statements
False Claims
Kerness Consulting
Working equipment ?
Kerness Consulting
False Claims In Construction
• Federal : Daewoo Engineering V. USA
73 Fed Cl. 547 (Ct Cl 2006), 557 F.3d
1332,(2009)
Kerness Consulting
Why Bother with False Claims?
• Public Trust
• FCA Recoveries
• Accountability and Transparency
• “Waste, Fraud & Abuse”
Kerness Consulting
History and Purpose of Civil
False Claims Act
Federal: 31 USC 3729
• Background
• Penalties
• Recoveries
State: False Claims Laws
• Absent State Law: Jurisdiction
• US Attorney
FALSE CLAIMS
Kerness Consulting
Background of Study Topic 16-03
• Allison Engine and Totten decisions
• NCHRP Research Project
• ARRA
• Fraud Enforcement Recovery Act “FERA”
• New Federal Initiatives
Kerness Consulting
False Claim State Statutes
• Expanding list of state FCA’s 26 state
including:California(1987), Florida, Illinois,
Tennessee, Louisiana, Hawaii, Delaware,
Nevada, Massachusetts, Virginia …
• Municipalities: Chicago, NY City, Wash DC
• State FCAs- allows local authorities to
prosecute
Kerness Consulting
False Claim Act:
Prohibited Conduct and
Liability
The following acts give rise to liability:
1. Knowingly presents or causes to be presented a false
or fraudulent claim for payment or approval.
2. Knowingly makes or uses a false record or statement
material to a false or fraudulent claim .
3. Conspiring to commit a violation of the other six
sections 3729 (a)(1)(A),(B),(C),(E).)(F), or (G).
FALSE CLAIMS
Kerness Consulting
False Claim Act:
Liability Requirements
4. Knowingly delivers “less property” to the Government
than all of that money or property.
5. Making a delivery to the Government for property
“without knowing that the information on the receipt is
true” with intent to defraud.
FALSE CLAIMS
Kerness Consulting
False Claim Act:
Liability Requirements
6. Knowingly obtaining public property from a
Government employee who may not lawfully sell or
pledge the property.
7. Knowingly makes or uses a false record or
statement to conceal, avoid or decrease an
obligation to pay or transmit money to the
Government.-Reverse false claims
8. California-Beneficiary of inadvertent FC submission
who discovers its falsity and fails to disclose it in
reasonable time
FALSE CLAIMS
Kerness Consulting
What is “Knowingly”
The FCA definition of “Knowingly” means a
person who:
•
Has actual knowledge of falsity of information
•
Acts in deliberate ignorance of the truth or falsity of
information; or
•
Acts in reckless disregard of the truth or falsity of
information
FALSE CLAIMS
Kerness Consulting
Remedies
• Treble Damages
• Costs / Attorney’s Fees
• Civil Penalties of up to $11,000 for each
False Claim
• Other Consequences
FALSE CLAIMS
Kerness Consulting
Qui-Tam Actions
• Qui Tam Relator - “ whistleblower”
• Recovery
• Portion of the proceeds, settlement, plus
attorney fees, costs
• Process
FALSE CLAIMS
Kerness Consulting
Statute of Limitations
A civil action may not be brought:
• More than 6 years after the date of violation
Or
• More than 3 years after the facts known or
should be known - but no later than 10
years from date of violation, whichever
occurs last
FALSE CLAIMS
Kerness Consulting
Examples of potential False
Claims:
False certifications:
•
•
•
•
•
Payment
Prevailing Wages-Davis Bacon
Buy America Provisions
Work Done –Amount due
Payment to Subcontractors
FALSE CLAIMS
Kerness Consulting
How false claims may arise:
• False certification of compliance with contract
•
•
•
•
specifications
DBE Record and requirements
Falsifying Construction Inspection and Testing
Credentials
False Invoices or vouchers
Claims based on false contractor’s
interpretations
Kerness Consulting
How false claims may arise
•
•
•
•
•
•
Subcontractor claims
Claims for Equitable Contract Adjustments
Falsified schedules - delay analysis
Inflated progress billings
Lack of proper credits-Double billing
Bait and Switch -Substitutions of materials
with inferior product
FALSE CLAIMS
Kerness Consulting
Overcharging for Changer Orders
or for claims
Kerness Consulting
False Claim Study Research
Process
• Survey
• In depth phone interviews
• Personal Visits
• Discussion with Knowledgeable experts
Kerness Consulting
Survey information
• New measures or programs to detect false
claims
• Use of certification
• Methods to id False claims
• Disclosure at pre and post qualification.
• Use of set off provisions
• Use of contractor compliance programs
Kerness Consulting
Knowledgeable Experts
Kerness Consulting
Legal Digest Will Address
•
•
•
•
•
•
•
•
Brief history of FCA
FERA changes to FCA
New federal initiatives & regulations
Examples of FCA
Persons Who can be sued
Damages
FCA Statue of Limitation
Public Disclosure bar
Kerness Consulting
Legal Digest Will Address
• Qui Tam Provisions
• Other Applicable Federal Statutes
• State False Claim Statutes
• Results of Survey
• Results of In depth Interviews
• Ideas for Consideration
• Red Flag lists
Kerness Consulting
Questions
Eric Kerness. Esq.
Kerness Consulting
518 -347 2778
518 928 9433 ( mobile)
[email protected]
Kerness Consulting