In fiscal year 2012, the Justice Department recovered nearly $5
billion in False Claims Act (FCA) settlements and judgments, a
single-year high, and the second straight year DOJ set a new
record. If you are a government contractor, receive payments
from the federal government, or operate a government program (or
one with the government's imprimatur), you are subject to
DOJ's greatly enhanced civil fraud recovery program on every
Perhaps of most importance to the private sector is that $3.3
billion of the $5 billion came from a record 647 whistleblower (or
qui tam) suits brought by private citizens. The lesson to be
drawn from this is that a company subject to fraud claims actions
by the federal government should consider every one of its
employees as a potential agent of the U.S. Government.
Remember, the whistleblower receives up to 30% of the
government's recovery. A company should order its
internal controls accordingly and take all reasonable steps to
ensure that it meets the government's accounting and auditing
As Acting Associate Attorney General Tony West said on Tuesday,
December 4, 2012, in the four years ending September 30, 2012,
Justice obtained $13.3 billion through FCA cases, the largest four
year total in the Department's history. With this
announcement also came the clear statement that DOJ will continue
to support the Civil Division's Fraud Unit and expand its
partnerships with U.S. attorneys and other agencies of government
across the country. On this point, Principal Deputy Assistant
Attorney General Stuart Delery emphasized that civil fraud cases
have a very human face; the Department is committed to protecting
seniors, children, homeowners, parents, patients, and "our men
and women in uniform."
With the government on the hunt for cost reductions,
"fraud, waste, and abuse" campaigns are standard.
The two largest areas of recovery in FY 2012, health care and
housing and mortgage fraud, demonstrate this. For the first
time in one year, health care fraud recoveries were over $3 billion
and housing fraud added $1.4 billion to the total.
In private sector terms, the return on investment in riding the
coattails of private whistleblower suits is clearly
worthwhile. We will see increasing efforts in FY 2013 in
health care as greater attention is focused on those costs through
the "fiscal cliff" negotiations, mortgage fraud as the
Consumer Financial Protection Bureau gets its feet under it, and
government contracts, particularly as the contract apparatus in
Afghanistan shifts from "getting it done" to
"getting it done absolutely right."
In short, as the government fiscal year begins and the calendar
year winds down, now is the time to review your company's
internal controls to protect yourself from inquiries, particularly
those that begin from within.
Is your company FAR Compliant?
What steps are you taking to ensure that you are complying with
all of the terms, conditions and requirements of your
Are you certain that all certifications made to the government
(e.g., cost and pricing data, size representations, etc.) are
What would your contracting agency's IG auditors (or DCAA,
or your independent auditor) say if they saw your books?
Is your Code of Conduct up to standard? Are reviews of
the Code and compliance with it part of your internal audit
Do your company policies and procedures encourage internal
reporting of compliance concerns?
Employees generally prefer to report concerns internally,
studies show. However, if they fear reprisal or that their
concerns are not taken seriously, they may be driven to seek qui
tam counsel or go directly to government investigators.
Employees want to be part of a company that takes pride in
doing the job right. Fostering effective internal
communications encourages better compliance and pays dividends in
every aspect of the company's operations.
As every contractor knows, when a disaffected employee files a
whistleblower action and IG or DCAA representatives knock on the
door, it is too late to ask these questions.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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As our readers know, federal and state departments of labor have intensified their scrutiny of independent contractor arrangements and are coordinating with the federal and state taxing authorities when misclassifications are found.
Courts often conclude that absent appropriate disclaimer language and statements in employee handbooks are "promises" to employees, binding employers to abide by these promises in their dealings with employees.
Employers sometimes rely on equitable arguments, such as "unclean hands" (which asserts that it would not be fair to hold an employer liable when the employee’s actions caused or contributed to his own injury or damages).