kerness consulting false claims in construction, update of nchrp 20-06 study topic 16-03...

Kerness ConsultingKerness Consulting

False Claims in Construction, Update of NCHRP 20-06 Study Topic 16-03Identification, Prevention & Remedies

for False Claims in Highway Improvement Contracting

AASHTO SUBMCOMMITTEE ON CONSTRUCTION

Burlington, Vermont August 17, 2010 August 17, 2010

Eric M. Kerness, Esq. Eric M. Kerness, Esq.Kerness ConsultingKerness Consulting

518-347-2778518-347-2778


Is there Fraud in Public Is there Fraud in Public Construction?Construction?


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


Working equipment ?Working equipment ?


False Claims In ConstructionFalse Claims In Construction

• Federal : Daewoo Engineering V. USA Federal : Daewoo Engineering V. USA

73 Fed Cl. 547 (Ct Cl 2006), 557 73 Fed Cl. 547 (Ct Cl 2006), 557 F.3d 1332,(2009)F.3d 1332,(2009)


Why Bother with False Why Bother with False Claims?Claims?

• Public TrustPublic Trust

• FCA RecoveriesFCA Recoveries

• Accountability and TransparencyAccountability and Transparency

• ““Waste, Fraud & Abuse”Waste, Fraud & Abuse”


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


Background of Study Topic 16-Background of Study Topic 16-0303

• Allison Engine and Totten decisionsAllison Engine and Totten decisions

• NCHRP Research ProjectNCHRP Research Project

• ARRAARRA

• Fraud Enforcement Recovery Act Fraud Enforcement Recovery Act “FERA”“FERA”

• New Federal InitiativesNew Federal Initiatives


FalseFalse Claim State StatutesClaim State Statutes

• Expanding list of state FCA’s 26 state Expanding list of state FCA’s 26 state including:California(1987), Florida, including:California(1987), Florida, Illinois, Tennessee, Louisiana, Hawaii, Illinois, Tennessee, Louisiana, Hawaii, Delaware, Nevada, Massachusetts, Delaware, Nevada, Massachusetts, Virginia …Virginia …

• Municipalities: Chicago, NY City, Wash Municipalities: Chicago, NY City, Wash DCDC

• State FCAs- allows local authorities to State FCAs- allows local authorities to prosecute prosecute


False Claim Act: False Claim Act: Prohibited Conduct and Prohibited Conduct and

LiabilityLiability The following acts give rise to liability:1. Knowingly presents or causes to be presented a false

or fraudulent claim for payment or approval.

2. Knowingly makes or uses a false record or statement material to a false or fraudulent claim .

3. Conspiring to commit a violation of the other six sections 3729 (a)(1)(A),(B),(C),(E).)(F), or (G).

FALSE CLAIMS


False Claim Act: False Claim Act: Liability RequirementsLiability Requirements

4. Knowingly delivers “less property” to the Government than all of that money or property.

5. Making a delivery to the Government for property “without knowing that the information on the receipt is true” with intent to defraud.

FALSE CLAIMS


False Claim Act: False Claim Act: Liability RequirementsLiability Requirements

6. Knowingly obtaining public property from a Government employee who may not lawfully sell or pledge the property.

7. 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

8. California-Beneficiary of inadvertent FC submission who discovers its falsity and fails to disclose it in reasonable time

FALSE CLAIMS


What is “Knowingly”What is “Knowingly”

• 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

The FCA definition of “Knowingly” means a person who:

FALSE CLAIMS


RemediesRemedies

• Treble Damages

• Costs / Attorney’s Fees

• Civil Penalties of up to $11,000 for each False Claim

• Other Consequences

FALSE CLAIMS


Qui-Tam ActionsQui-Tam Actions

• Qui Tam Relator - “ whistleblower”

• Recovery

• Portion of the proceeds, settlement, plus attorney fees, costs

• Process

FALSE CLAIMS


Statute of LimitationsStatute 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


Examples of potential False Claims:

False certifications:• Payment• Prevailing Wages-Davis Bacon• Buy America Provisions• Work Done –Amount due• Payment to Subcontractors

FALSE CLAIMS


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


How false claims may ariseHow 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


Overcharging for Changer Overcharging for Changer OrdersOrdersor for claimsor for claims


False Claim Study Research False Claim Study Research ProcessProcess

• SurveySurvey

• In depth phone interviewsIn depth phone interviews

• Personal VisitsPersonal Visits

• Discussion with Knowledgeable Discussion with Knowledgeable expertsexperts


Survey informationSurvey information

• New measures or programs to detect New measures or programs to detect false claimsfalse claims

• Use of certification Use of certification

• Methods to id False claimsMethods to id False claims

• Disclosure at pre and post qualification.Disclosure at pre and post qualification.

• Use of set off provisionsUse of set off provisions

• Use of contractor compliance programsUse of contractor compliance programs


Knowledgeable ExpertsKnowledgeable Experts


Legal Digest Will AddressLegal Digest Will Address

• Brief history of FCABrief history of FCA

• FERA changes to FCAFERA changes to FCA

• New federal initiatives & regulationsNew federal initiatives & regulations

• Examples of FCAExamples of FCA

• Persons Who can be suedPersons Who can be sued

• DamagesDamages

• FCA Statue of LimitationFCA Statue of Limitation

• Public Disclosure barPublic Disclosure bar


Legal Digest Will AddressLegal Digest Will Address

• Qui Tam ProvisionsQui Tam Provisions

• Other Applicable Federal StatutesOther Applicable Federal Statutes

• State False Claim StatutesState False Claim Statutes

• Results of SurveyResults of Survey

• Results of In depth InterviewsResults of In depth Interviews

• Ideas for Consideration Ideas for Consideration

• Red Flag listsRed Flag lists


QuestionsQuestions

Eric Kerness. Esq.Eric Kerness. Esq.


518 -347 2778 518 -347 2778

518 928 9433 ( mobile)518 928 9433 ( mobile)

[email protected]@Kerness.com

kerness consulting false claims in construction, update of nchrp 20-06 study topic 16-03...

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