1. 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, Eric M. Kerness, Esq. Kerness Consulting
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2. Is there Fraud in Public Construction?
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3. 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
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4. Working equipment ?
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5. False Claims In Construction
Federal : Daewoo Engineering V. USA
73 Fed Cl (Ct Cl 2006), 557 F.3d 1332,(2009)
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6. Why Bother with False Claims?
Public Trust
FCA Recoveries
Accountability and Transparency
“Waste, Fraud & Abuse”
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7. 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
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8. Background of Study Topic 16-03
Allison Engine and Totten decisions
NCHRP Research Project
ARRA
Fraud Enforcement Recovery Act “FERA”
New Federal Initiatives
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9. 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
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10. False Claim Act: Prohibited Conduct and Liability
The following acts give rise to liability:
Knowingly presents or causes to be presented a false or fraudulent claim for payment or approval.
Knowingly makes or uses a false record or statement material to a false or fraudulent claim .
Conspiring to commit a violation of the other six sections 3729 (a)(1)(A),(B),(C),(E).)(F), or (G).
FALSE CLAIMS
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11. False Claim Act: Liability Requirements
Knowingly delivers “less property” to the Government than all of that money or property.
Making a delivery to the Government for property “without knowing that the information on the receipt is true” with intent to defraud.
FALSE CLAIMS
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12. False Claim Act: Liability Requirements
Knowingly obtaining public property from a Government employee who may not lawfully sell or pledge the property.
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
California-Beneficiary of inadvertent FC submission who discovers its falsity and fails to disclose it in reasonable time
FALSE CLAIMS
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13. 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
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14. Remedies Treble Damages Costs / Attorney’s Fees
Civil Penalties of up to $11,000 for each False Claim
Other Consequences
FALSE CLAIMS
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15. Qui-Tam Actions Qui Tam Relator - “ whistleblower” Recovery
Portion of the proceeds, settlement, plus attorney fees, costs
Process
FALSE CLAIMS
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16. 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
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17. Examples of potential False Claims:
False certifications:
Payment
Prevailing Wages-Davis Bacon
Buy America Provisions
Work Done –Amount due
Payment to Subcontractors
FALSE CLAIMS
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18. 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
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19. 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
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20. Overcharging for Changer Orders or for claims
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21. False Claim Study Research Process
Survey
In depth phone interviews
Personal Visits
Discussion with Knowledgeable experts
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22. 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
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23. Knowledgeable Experts
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24. 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
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25. 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
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26. Questions Eric Kerness. Esq. Kerness Consulting 518 -347 2778
( mobile)
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