Identification, Prevention, and Remedies for False Claims in Highway Improvement Contracting (2011)

Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

30 might on its face be considered consequential damages and thus barred by the FCA, but the court in that case labeled them alternate damages and permitted recovery. D. Civil Penalties Without Damages The government need not establish that it actually suffered any damages at all as a result of a false claim to recover the statutory civil penalty. Penalties also can be recovered in situations where a contractor submits a false claim but the Government never pays the claim and therefore does not sustain any damages. In Commercial General, the court only awarded the civil penalty and no damages for defective concrete testing, since the government failed to prove that the quality control violations affected the structural integrity of the flood channel.208 Government may incur significant costs to investi- gate and detect false claims, and some courts have permitted recovery of investigative costs as part of the Government's damages.209 Other courts, however, have disallowed recovery for such costs based on the theory that investigative costs are intended to be covered by the treble damage provisions.210 The statute also provides for recovery of reasonable investigative costs and attorney fees. The FCA also provides that where a defendant pre- vails, fees and expenses are governed by the provi- sions of 28 U.S.C.A. 2412(d).211 Reasonable qui tam rela- tor attorney fees are recoverable, but the FCA does not address whether the U.S. Government can recover at- torneys' fees if it prevails. It should be noted that potential liability may ex- tend beyond the damages and penalties in the FCA statute, and may involve civil forfeitures as well. As discussed in Section I of this digest, the Court of Federal Claims ordered the contractor to pay a $50.6 million forfeiture under the Contracts Dispute Act in the false claims case of Daewoo Engineering and Construction v. United States. Similarly, the Court of Federal Claims imposed a $53.5 million forfeiture of contract claims in Morse Diesel International Inc. v. United States because of inflated progress payments in viola- tion of the Anti-Kickback Act involving kickbacks of several hundred thousand dollars.212 SECTION IX. THE FCA STATUTE OF LIMITATIONS The FCA provides two statute-of-limitation provisions that govern when the U.S. Government or a qui tam relator must initiate an action under the Act. 208 See Commercial General, 154 F.3d 1357. 209 See Wilkens, 173 F. Supp. 2d 601. 210 See United States v. Peters, 927 F. Supp. 363 (D. Neb. 1996). 211 31 U.S.C.A. § 3730(g). 212 Morse Diesel Int’l Inc. v. United States, 74 Fed. Cl. 601, 606–20 (2007). One of these provisions, 31 U.S.C. § 3731(b)(1), pro- vides that the action must be brought within 6 years after the date on which the violation was commit- ted.213 Courts have indicated that the statute of limi- tation begins to run when the false claim is submitted to the Government214 or, if the claim is paid, on the date of the payment.215 In 1986, Congress amended the FCA to provide a toll- ing provision to deal with cases involving concealed misconduct, 31 U.S.C. § 3731(b)(2), that requires an ac- tion be brought within 3 years after the date when facts material to the right of action are known or rea- sonably should have been known by the official of the United State charged with the responsibility to act in the circumstances, but in no event more than 10 years after the date on which the violation is committed, whichever occurs last. Based upon the legislative his- tory surrounding the 1986 amendments, courts have interpreted the statutory "official charged with the responsibility to act" language to mean an officer of the DOJ.216 The tolling provision of 31 U.S.C. § 3731(b)(2) pro- vides that the government gets 3 years from the date "when facts material to the right of action are known or reasonably should have been known" of the viola- tion. The stature does not provide guidance as to when "facts material to the right of action" are known. Sev- eral court cases have dealt with this issue. In United States v. Village of Island Park,217 which involved the misuse of federal funds in connection with a block grant housing program, the court noted that the De- partment of Housing and Urban Development (HUD) had received complaints about municipal administra- tion of the program, had investigated the allegations of misconduct, and had issued an audit report that was widely disseminated throughout HUD. The government argued that the claim was timely, since it was brought within 3 years of the time that lawyers at the DOJ first happened upon an account of the events in a newspaper article. The court interpreted the “reasonably should have known" standard, and held that, in this case, the officials of the DOJ should have known of the misdeeds when they were raised in the audit report. The District Court ruled that the Government's FCA claim was time barred because the common knowledge of the Island Park affair, which existed at all levels of the U.S. gov- ernment including HUD's Office of IG, could reasona- bly be attributable to the DOJ.218 213 31 U.S.C.A. § 3731(b)(1) (2003). 214 For a detailed discussion of the case law on this pro- vision, see SYLVIA, supra note 7, at 564, nn. 1 and 2. 215 See, e.g., United States v. Tech Refrigeration, 143 F. Supp. 2d 1006, 1009 (N.D. Ill. 2001); and see Sylvia, supra note 7, at 565. 216 United States v. Incorp. Village of Island Park, 791 F. Supp. 354, 362–64 (E.D.N.Y. 1992), and see Sylvia, supra note 7, at 568–71. 217 791 F. Supp. 354. 218 Id. at 363, 364.