Breakout Session # 1004 Alan M. Grayson, Esq. Grayson, Kubli & Hoffman, P.C.

1. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

2. The False Claims Act:A Practical Primer Breakout Session #1004 Alan M. Grayson, Esq. Grayson, Kubli & Hoffman, P.C. grayson@graysonlaw.net April 26, 2004 4:30 pm – 5:30 pm NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

3. The False Claims Act (FCA) • The federal government may collect a penalty of up to $11,000 for each false claim, and three times the amount of actual damages. • “Whistleblowers” may file “qui tam” actions on behalf of the government and collect a portion of the amount recovered. • An FCA violation may result in debarment for contractor, or exclusion from participation in Medicare for a healthcare provider. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

4. Recoveries under the FCA include . . . • More than $10 billion in damages and penalties for federal government since 1986; • $1.7 billion from HCA alone for Medicare fraud; and • $191 million from Northrop Grumman in 2003. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

5. Provisions of FCA One is liable to the Government for civil penalties under the FCA if one . . . • Knowingly presents, or causes to be presented, to an officer or employee of the Government or a member of the Armed Forces a false or fraudulent claim for payment or approval; • Knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government; or • Performs other illegal acts set forth under FCA 3729(a). NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

6. Provisions of FCA FCA also prohibits retaliation against an employee, and provides relief including: • Reinstatement • Two times amount of back pay • Attorneys fees compensation NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

7. False Claim Violations The most common violations are violations of Section 3729(a)(1), the knowing presentation of a “false or fraudulent claim for payment or approval.” For example; • Charging the contract price for goods that do not meet contract standards, and • Charging for work not performed. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

8. The Knowledge Requirement The FCA punishes one who “knowingly presents, or causes to be presented” a false claim. “Knowing” and “knowingly” mean that a contractor: • has actual knowledge of the information; • Acts in deliberate ignorance of the truth or falsity of the information; or • Acts in reckless disregard of the truth or falsity of the information, and no proof of specific intent to defraud is required. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

9. What’s a Contractor to Do? Active measures should be taken to prevent submission of false claims. • Claims to the Government should be reviewed by one who knows relevant regulations and contract provisions. • Do not file claims that are known to be false. • Do not submit claims that are not in consonance with contract language. • If an employee uncovers false claims, correct the process as quickly as possible, and refund overpayments. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

10. What’s a Contractor to Do? • Do not retaliate against employees who uncover false claims. • Make the investigation of false claims part of your internal audit function. • Conduct exit interviews with departing employees. • Conduct mandatory training sessions on the FCA for your employees. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”