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False Claims Act and Other Enforcement Tools Presented by Leigh Manasevit, Esq. Brustein & Manasevit, PLLC Spring.

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Presentation on theme: "False Claims Act and Other Enforcement Tools Presented by Leigh Manasevit, Esq. Brustein & Manasevit, PLLC Spring."— Presentation transcript:

1 False Claims Act and Other Enforcement Tools Presented by Leigh Manasevit, Esq. Brustein & Manasevit, PLLC Spring Forum Brustein & Manasevit, PLLC

2 The False Claims Act, 31 U.S.C. §§ (as amended) Liability of person, entity, or local or state government who: (1) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval, or (2) who knowingly makes, uses or causes to be made or used, a false or fraudulent claim. 31 U.S.C. §§ 3729 (a) (1) (A)-(B) Under the FCA, knowingly means: 1) Actual knowledge of the information, or 2) Deliberate ignorance of the truth or falsity of the information, or 3) Reckless disregard of the truth or falsity of the information, and 4) No proof of specific intent to defraud is required. 2 Brustein & Manasevit, PLLC

3 The False Claims Act, 31 U.S.C.§§ (as amended) A claim is any request or demand, whether under and contract or otherwise, for money or property…that is presented to an officer, employee, or agent of the United States, or is made to a contractor, grantee, or other recipient, if the money or property is to be spent or used on the Governments behalf or to advance a Government program or interest… 3 Brustein & Manasevit, PLLC

4 Types of Claims Draw downs on a grant Draws on a letter of credit Submission of vouchers Submission of counts of eligible recipients 4 Brustein & Manasevit, PLLC

5 Types of Claims Unlike an audit where auditee must prove allowability – U.S. must prove – Preponderance of the evidence – Means more than 51% 5 Brustein & Manasevit, PLLC

6 Penalties Treble Damages x Actual Harm AND Penalty $5,500 to $11,000 Per Claim 6 Brustein & Manasevit, PLLC

7 Example 1 Grantee receives a $1,000,000 competitive grant Program has a match requirement Match information is falsified by the person responsible for the grant 7 Brustein & Manasevit, PLLC

8 Penalty: To Agency Irrelevant that agency unaware of the falsehood 3 times amount of grant 3 x $1,000,000 = $3,000,000 Grantee drew down funds in 10 equal installments of $100,000 Each draw = 1 claim at $5,500 to $11,000 Range $55,000 to $110,000 Total Penalty: $3,000,000 $3,000,000 55,000 to 110,000 $3,055,000 $3,110,000 8 Brustein & Manasevit, PLLC

9 Example 2 Grantee runs a migrant program Employees of grantee falsify eligibility statements Head of migrant program aware of irregularities 0 students eligible Higher level officials not aware of 0 eligibility but have ignored irregularities Penalty – – Total Grant x 3 plus – Total Draws x $5,500 to $11,000 9 Brustein & Manasevit, PLLC

10 Example 3 District has unemployment and workers comp insurance Charges are allowable to federal programs in proportion to salary/employees in the fed programs (allocability) District receives discount on policies District internally continues to use higher percentage rates to charge federal programs, giving discount benefit to local programs cost to non-federal Damages overcharges x 3 Plus penalty for each draw 10 Brustein & Manasevit, PLLC

11 Example 3 (cont…) Self discovery and self reporting – No defense, although better settlement possibility Self discovery and self reporting within 30 days of discovery can lower penalty from 3x to 2x 11 Brustein & Manasevit, PLLC

12 GEPA EDGAR NCLB enforcement provisions Administrative Enforcement Tools: 12 Brustein & Manasevit, PLLC

13 GEPA: General Education Provisions Act Part D – Enforcement (Sections ) Establishes: – Office of Administrative Law Judges (OALJ) – Rules for Recovery of Funds, Measure of Recovery, Remedies, Withholding, Compliance Agreements, Judicial Review, and Use of Recovered Funds 13 Brustein & Manasevit, PLLC

14 GEPA - continued Recovery of Funds: to return funds that were not allowable, not accounted for properly PDD/PDL: may be based on audit report, investigative report, monitoring report, or other evidence Once PDD/PDL issues, statute of limitations is tolled. 60 days to submit application for review. Establishes appeal and procedural rules 14 Brustein & Manasevit, PLLC

15 GEPA - continued Measure of Recovery: – Harm to the Federal Interest (proportionate recovery) – Critical protection 15 Brustein & Manasevit, PLLC

16 Example 1 Grantee begins obligating funds one day before approval Obligations violate EDGAR rules on timing only Obligations would have been allowable one day later No harm to the federal interest 16 Brustein & Manasevit, PLLC

17 Example 2 Migrant Program Funds spent on ineligible students – i.e., not meeting definition of migrant Automatic harm to the federal interest 17 Brustein & Manasevit, PLLC

18 Example 3 Expenditure requires prior approval of grantor agency Grantee did not get prior approval Critical – prior approval would have been granted, i.e. allowable expenditure No harm to the federal interest 18 Brustein & Manasevit, PLLC

19 Mitigating Circumstances Erroneous written guidance from ED – Specific written request – Guidance from authorized ED official – Actual reliance – Reliance reasonable 19 Brustein & Manasevit, PLLC

20 Mitigating Circumstances Failure to provide timely guidance – Written request – Address provided by ED – Request describes practice – Includes necessary facts – Certification: Chief Legal Officer State: Legal Under Federal and State Law No response within 90 days 20 Brustein & Manasevit, PLLC

21 GEPA - continued Remedies for Existing Violations: – Withhold payments – Cease and desist order – Compliance Agreement – Any other action authorized by law Can always seek to recover funds for misexpenditures in addition to above 21 Brustein & Manasevit, PLLC

22 GEPA - continued Withholding: Secretary may withhold from a recipient, in whole or in part, further payments (including payments for administrative costs) under an applicable programs Before withholding, ED must notify in writing: – Intent to withhold – Factual and legal basis for belief of failure to substantially comply – Opportunity for a hearing 22 Brustein & Manasevit, PLLC

23 GEPA - continued Cease and desist orders – Written notification – Opportunity for hearing – Can enforce final order by withholding – Can certify facts to AG 23 Brustein & Manasevit, PLLC

24 GEPA - continued Compliance Agreements Purpose: To bring recipient into compliance with requirements as soon as feasible (not longer than 3 years) – Public hearing before entering into agreement – Publish findings of hearings and substance of compliance agreement in Federal Register – Failure to comply with terms of compliance agreement can determine agreement is no longer in effect – can take any other action 24 Brustein & Manasevit, PLLC

25 Compliance Agreements USDE has been using as enforcement tool Scope can vary greatly (discrete issues vs. multiple ED programs) Program, Administrative or Both 25 Brustein & Manasevit, PLLC

26 Compliance Agreements Several states currently in compliance agreements 26 Brustein & Manasevit, PLLC

27 Compliance Agreements Can be used with other remedies Jan 19 letter: if system not approved – use compliance agreement, in addition to withholding or mandatory oversight status Will generally lead to more favorable treatment by ED 27 Brustein & Manasevit, PLLC

28 EDGAR: Education Department General Administrative Regulations Contains state administered program rules Uniform administrative requirements – pre- and post-award requirements, state plans, financial management standards, etc. 28 Brustein & Manasevit, PLLC

29 EDGAR Authority for designating grantee as high- risk 34 CFR Brustein & Manasevit, PLLC

30 High-Risk Grantees 1) History of unsatisfactory performance 2) Not financially stable 3) Management system does not meet standards 4) Has not conformed to terms of previous awards 5) Is otherwise not responsible can place special conditions or restrictions 30 Brustein & Manasevit, PLLC

31 High-Risk Grantees: Special Conditions Special conditions may include: – Payment on reimbursement basis – Withholding authority to proceed until acceptable performance – Requiring more detailed financial reports – Additional project monitoring – Requiring additional TA or managerial assistance – Establishing additional prior approvals – Require an external third party to a) Approve expenditures or b) Actually mange the funds 31 Brustein & Manasevit, PLLC

32 Special Conditions If special conditions, ED must notify in writing: – Nature of the special conditions – Reasons for imposing them – Corrective actions that must be taken before removed and the time allowed for corrective actions – Method of requesting reconsideration 32 Brustein & Manasevit, PLLC

33 NCLB enforcement provisions Throughout statute – most reference GEPA USDE interprets some enforcement provisions, such as withholding of administrative funds, as outside of GEPA protections 33 Brustein & Manasevit, PLLC

34 How is non-compliance discovered? Single Audits OIG Audits Program Monitoring Disclosure/Reporting 34 Brustein & Manasevit, PLLC

35 Single Audits Required if expend more than $500K Pressure on ED to ensure high-quality single audits – See OIG Priorities for Pressure on ED to monitor single audit findings more carefully 35 Brustein & Manasevit, PLLC

36 Single Audits State to review and resolve if no resolution PDL from ED possible 36 Brustein & Manasevit, PLLC

37 Office of Inspector General – 2011 Workplan Priorities – Partial List Subrecipient use of Recovery Act Funds SEA award and monitoring of SIG grants RTT Investing in Innovation (i3) SFSF IDEA MOE 37 Brustein & Manasevit, PLLC

38 Office of Inspector General – 2011 Workplan Priorities – Partial List Competitive ESEA grants Charter School Program 21 st CCLC High Risk Grantees Oversight of Single Auditors EDs audit resolution process 38 Brustein & Manasevit, PLLC

39 OIG Audits - Structure Entrance conference Audit work Exit conference – Scope of audit can change – Document requests quite detailed 39 Brustein & Manasevit, PLLC

40 OIG Audits - Enforcement Recommendations to ED – Disallow expenditures – Require supporting documentation 40 Brustein & Manasevit, PLLC

41 OIG - Investigations Initiated where there is wrong doing suspected. Can be based on: – Tip (including hotline) – News article – Concern from ED program – Concern from other law enforcement – Serious audit findings 41 Brustein & Manasevit, PLLC

42 OIG - Investigations More formal than audit Far more serious May involve FBI and Grand Jury as well 42 Brustein & Manasevit, PLLC

43 OIG - Investigations May result in False Claims Act charges In most serious cases – may result in criminal prosecution 43 Brustein & Manasevit, PLLC

44 Department of Education Program Monitoring Streamlined Increasingly focused on accountability Less emphasis on technical assistance Uncertain how monitoring relates to single audits – appears to be of different importance in different states/entities Student Achievement and School Accountability Office (SASA) – Focus only on SIG this year 44 Brustein & Manasevit, PLLC

45 Program Monitoring: Reengineered System Focus: Accountability Instructional support Fiduciary responsibility 45 Brustein & Manasevit, PLLC

46 Monitoring Schedule Three year cycle states per year Cycle: 10/1 – 9/30 Will go out of cycle if compliance problems Draft monitoring plan developed by ED 46 Brustein & Manasevit, PLLC

47 Program Monitoring Team: 5-6 SASA members On-site 4-5 days Interview SEA/LEA staff, principals, teachers, parents, other stakeholders 2-3 follow-up conference calls 47 Brustein & Manasevit, PLLC

48 Monitoring Feedback Report for internal use Monitoring report within 30 business days SEA response 48 Brustein & Manasevit, PLLC

49 US ED SASA Monitoring – Top Ten Findings in Frequency 1. Private Schools – consultation – failure to evaluate – failure to maintain control – contracting – student selection (not based on poverty!!!) 2. Parental Involvement – 95% of reservation to schools – equitable participation 3. Parental Involvement – Choice/SES notifications – teacher qualifications 49 Brustein & Manasevit, PLLC

50 Top Ten Findings (cont…) 4. Fiscal – comparability – supplanting – time and effort 5. District Report Cards – missing elements 6. Choice – options not on website 7. State Report Cards – missing elements 50 Brustein & Manasevit, PLLC

51 State Monitoring Overarching requirement – SEA subrecipient monitoring 51 Brustein & Manasevit, PLLC

52 State Monitoring Process varies Should: – Risk based resolution process 52 Brustein & Manasevit, PLLC

53 QUESTIONS 53 Brustein & Manasevit, PLLC

54 This presentation is intended solely to provide general information and does not constitute legal advice. Attendance at the presentation or later review of these printed materials does not create an attorney-client relationship with Brustein & Manasevit, PLLC. You should not take any action based upon any information in this presentation without first consulting legal counsel familiar with your particular circumstances. 54 Brustein & Manasevit, PLLC Disclaimer

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