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New Tech, Old Rules: 6 Tips For Tech Cos. Managing FCA Risk
Law360, New York (March 22, 2016, 2:59 PM ET) --
When it was first enacted in 1863, the original purpose of the False Claims
Act was to prosecute war profiteers who were selling sick mules and broken
muzzle-loaded rifles to the Union Army. In recent years, its use has expanded
to reach a broader scope of market participants — including the upstream
suppliers and manufacturers of products that ultimately get purchased with
federal dollars. Because the government uses technology products and
services, this naturally includes tech companies. Consequently, device
manufacturers, software developers and technology service providers who
do not think of themselves as traditional government contractors have found
themselves facing the potential for liability under the False Claims Act.
The Reach of the False Claims Act
The False Claims Act imposes civil liability when false or fraudulent “claims
for payment” are presented to the government. It can reach anyone who
presents a false claim to the government, as well as anyone who “causes”
another company to present a false claim. It also applies to anyone who
makes “a false record or statement” that is likely to influence a claim to the
government, regardless of who submits that claim. Those who are held liable
under the statute could face treble damages, as well as cumulative civil
penalties that can reach as high as $11,000 per claim.[1] This had led to
sizable recoveries: The U.S. Department of Justice recently reported
recovering $3.5 billion during 2015 alone. Since 2009, it has recovered over
$26.4 billion through settlements and judgments. Beyond monetary
damages, a company could also face suspension and debarment from
federal contracting in some circumstances.
One unique feature of the False Claims Act is that it authorizes both the
attorney general and, with certain restrictions, private relators to bring civil
actions. Most suits brought against tech companies are initiated by current
or former employees, who file suit as relators. When a claim raised by a
relator results in a settlement or a successful prosecution, the relator is
entitled to a share of the government’s recovery.[2]
Stacey M. Sprenkel
Nicholas S. Napolitan
Ian K. Bausback
