Presentation on theme: "Federal Audit Executive Council Annual Conference, September 26, 2013"— Presentation transcript:
1 Complimentary Administrative Remedies The Program Fraud Civil Remedies Act Suspension and Debarment Federal Audit Executive Council Annual Conference, September 26, 2013Glenn P. Harris, Counsel to the SBA IGTravis J. Farris, Assistant Counsel to the SBA IGGlenn Introduction.
2 Goals of this TrainingFamiliarize Participants with the Program Fraud Civil Remedies Act (PFCRA), Suspension and DebarmentDiscuss Recent CIGIE EffortsProvide structure forincorporating these remediesinto audit planningGlenn
3 What We Will Cover The Program Fraud Civil Remedies Act Suspension & DebarmentCIGIE Activity Supporting These RemediesGlenn
4 The Program Fraud Civil Remedies Act of 1986 “PFCRA” 31 U.S.C. § 3801 et seqOr, the Baby False Claims Act.Transition from Glenn to Travis
5 What You Need to KnowPFCRA is an administrative remedy designed to reach frauds not selected for False Claims Act cases.Agencies litigate PFCRA cases in front of Administrative Law Judges (ALJs).PFCRA provides liability for both false claims and false statements.Travis
6 History and Intent of PFCRA PFCRA was enacted in 1986 to deal with lower dollar value cases DOJ was not litigating.PFCRA ensures Federal agencies have redress for false statements and smaller false claims not selected for enforcement litigation by the Department of Justice.Travis
7 Statutory Elements Impose civil penalties and assessments for: Persons whoMake, Submit or Present or,Cause to Be Made, Submitted or PresentedFalse Fictitious or FraudulentClaims or,StatementsThey Knew or Had Reason to Know were FalseTo Federal Authorities or their agents.6 Year Statute of Limitations (stops running when ALJ sends the scheduling order).PFCRA actions may be prosecuted in concert with, or in lieu of, debarment.Travis
8 SBA Office of Inspector General KnowledgeKey SlideUnlike criminal cases, the Act provides that “no proof of specific intent to defraud” is required.Liability can be based on:Actual knowledge of the informationActing in deliberate ignorance of the truth or falsity of the informationActing in reckless disregard of the truth or falsity of the matter.SBA Office of Inspector General
9 SBA Office of Inspector General Knowledge - continuedWhat is “Reckless Disregard”?Legislative history -- persons making claims for payment to the Government must make “at least some inquiry,” to be reasonably certain they are entitled to be paid.Inquiry can be limited, but should be “reasonable and prudent under the circumstances.”Congress was addressing “the ‘ostrich’ type of situation where an individual has ‘buried his head in the sand’ and failed to make simple inquiries.”There must be at least a minimal review to avoid a finding of reckless disregard.SBA Office of Inspector General
10 SBA Office of Inspector General Knowledge - continuedWhat is “Reckless Disregard”?Mere negligence probably not enough.“Reckless disregard may be considered the equivalent of aggravated form of gross negligence, or gross negligence-plus.” [False Claims Act law is often applied to interpret the PFCRA.]“A defendant's good faith interpretation of a regulation does not give rise to liability.”SBA Office of Inspector General
11 SBA Office of Inspector General Knowledge - continuedA key to showing that there was no reckless disregard is the level of due diligence that was exercised:Quality Controls in placeReview of Underlying Documents/Internal ProceduresEmployment Practices for Hiring, Assigning, Training and Retaining Personnel involved in claim creation or submissionKeep in mind – This does not require a “no stone unturned” review. A limited review that is reasonable and prudent under the circumstances is needed.SBA Office of Inspector General
12 PFCRA Cases are Based Upon Claims or Statements Request or other submissionMade to an Agency or a third party handling Federal fundsFor Property or services. Could also be a reduction in amount owed to the Federal Government.A writingMade with respect to a claim or program eligibilityFalse because it asserts or omits a material factTravis
13 Remedies for False Claims Civil Penalty of up to $5,000 for each false claim (unless adjusted)Assessment of double the amount of paid claimRecovery limited to claims of $150,000 or lessTravis
14 Remedies for False Statements Civil Penalty of $5,000 for each false statement (unless adjusted)Travis
15 SBA Office of Inspector General Vicarious LiabilityWhen is an employer liable for the false claims submitted by an employee?Courts have employed several tests:Majority – If the employee was acting within the scope of his or her authority, the employer is vicariously liable.Minority – Employee’s actions must also have benefitted the employer.Minority – Alternate approach – did employer have constructive knowledge (i.e., should the employer have known).SBA Office of Inspector General
16 ProcedureThere must be an investigative report referred by the Office of Inspector General.OIG report is submitted to the Reviewing Official (usually the General Counsel or designee).Department of Justice must approve all PFCRA actions.Cases are adjudicated in front of Administrative Law Judges.Travis
17 OIG ReportPresents findings and conclusions of investigation to Reviewing OfficialShould contain all evidence necessary to assess the proposed actionShould contain contact information for an investigating agentTravis
18 Reviewing OfficialAssesses whether the evidence and Report of Investigation support a finding of liability under the PFCRAIf appropriate, drafts a request for authorization from DOJ so the Agency might proceed with a PFCRADetermines whether there is a reasonable prospect of collecting an appropriate amount of penalties and assessmentsTravis
20 What You Need to KnowSuspension and Debarment is The Government’s Way of Making a Business Decision.Suspension and Debarment may not be used for punishment.These remedies are prospective only.Travis
21 Two Federal Suspension and Debarment Systems Exist: Nonprocurement and Procurement Travis
22 Nonprocurement and Procurement Suspension and Debarment Rules: Essentially the same effect – no participation in procurement or nonprocurement transactions irrespective of which system caused the suspension or debarment.Similar terminology and procedure.Travis
23 Key Differences Nonprocurement (NCR) No automatic exclusion for proposed debarment.Focus is on Grants, guarantees, insurance etc.Found in Title 2 of the Code of Federal Regulations, Part 180, and in agency pieces.No debarment for delinquent tax debt (yet).Procurement (FAR)Automatic exclusion upon proposed debarment.Focus is on goods and services the Government purchases.Found in Title 48 of the C.F.R., Subpart 9.4, and in some agency pieces.May debar for delinquent tax debt in excess of $3,000.The tax debt issue should be resolved under statutory mandate. The different treatment was current as of January 30, Cf., 2 C.F.R (c)(3) with 48 C.F.R (b)(1)(v).
24 SuspensionUsed when you have adequate evidence of a violation that may merit debarment and immediate action is necessary to protect the Government’s interest.Lasts for up to one year (with a possible six month extension) or until legal proceedings, such as a criminal case or debarment action, have concluded.Effective Immediately.Travis
25 DebarmentUsed when cause for debarment exists by a preponderance of the evidence and the debarment is in the public interest.Debarment is intended to protect the Government, not punish the respondent.Travis
26 Cause for Debarment Four General Categories: Conviction of, or civil judgment for, certain offenses;Violation of the terms of a public agreement so serious as to affect the integrity of an agency program;Certain eligibility issues; and,Anything else so serious or compelling it affects the respondent’s present responsibility.Travis
27 Conviction or Civil Judgment Fraud or criminal offense in connection with public or private agreementAntitrust violationsFinancial crimes (e.g., embezzlement, theft forgery, bribery, falsification of records, destruction of records, tax evasion false claims or obstruction of justice)Any other offense indicating a lack of business integrity (e.g. criminal contempt)Travis
28 Violation of Terms of a Public Agreement Affecting Integrity Willful failure to perform in accordance with terms of one or more agreementsHistory of performance failure in public agreementsWillful violation of statute, regulation or other requirement pertaining to a public agreementTravis
29 Eligibility Issues Knowingly doing business with an ineligible person Substantial Federal Debt either uncontested or with appeals exhausted (tax debt actionable under the FAR, but not the NCR – this should change soon)Violation of a Voluntary Exclusion AgreementDrug-Free Workplace Act of 1988 ViolationsTravis
30 Other Issues Affecting Present Responsibility Failure to cooperate with the IG’s office, without an Obstruction of Justice convictionFailure to file tax returns without a criminal convictionMisrepresentationsTravis
31 Suspension and/or debarment protects the Government more than program termination alone. Only suspension and/or debarment stop future violations in other programs.Travis
32 Effect of Suspension or Debarment Prospective Remedy Only.May Not Be a Participant in a Covered Transaction.May Not Be a Principal in a Covered Transaction.May Not Be an Agent or Representative in a Covered Transaction.Reciprocity Between Procurement and Nonprocurement Systems.Travis
33 Participants MAY, however: Continue covered transactions in existence at the time the Agency excluded the participant.Continue to use the services of an excluded principal when the principal was on a transaction in existence at the time the principal was excluded.Bid on a contract if award will happen after the exclusion expires.Travis
34 Unless an Exception has been granted, Agency Officials MAY NOT: Enter into a covered transaction with a suspended or debarred partyRenew or extend covered transactions with a suspended or debarred party. (No-cost time extensions are acceptable)Enter into a covered transaction with a participant using a suspended or debarred principalApprove the use of an excluded party in a covered transactionTravis
36 Issue Spotting Be aware of systemic implications Individual abusing Federal programs rarely limit themselves to one transaction.Failure of the Government to respond or to meaningfully address fraud may embolden contractorsYour knowledge of how programs work is crucial to program integrity attorneys.MaterialityLikelihood of ErrorReasonabilityTransition from Adam to Christina
38 Program Fraud Civil Remedies Act Working Group Commissioned in November 2012First Met in January 2013Projects include:Practitioner’s GuideContemplated Usage Survey (to compliment GAO survey work)Legislative Recommendations
39 Suspension and Debarment Working Group Tasked with raising awareness of suspension and debarmentSeveral Annual ConferencesSurveyed use of Suspension and Debarment in 2010 and 2012Don’t Let the Toolbox Rust Paper:
40 CIGIE Training Institute Audit, Inspection and Evaluation Academy Course on Suspension and Debarment emphasizing team approach between Auditors, Inspectors, Evaluators and Counsel.
41 Incorporating PFCRA, Suspension and Debarment into IG Processes and Procedures
42 PFCRA Convert Reports of Investigation into PFCRA IG Report DeclinationsConvictionsAudit Recommendations may be recast as PFCRA IG ReportsAudits can mention assessment of contemporaneous IG PFCRA referral.
43 Suspension and Debarment Assess internal controls and risksActions indicating a lack of present responsibility should go to the Suspending and Debarring OfficialWork on referral structureAudit RecommendationsDeclined CasesJudicial actions such as warrants, indictments, information and convictions.