Managing Risks of Potential Government Contract False Claims

2. Greg Bingham & Richard Rector, The Kenrich Group, LLC Managing Risks of Potential Government Contract False Claims Thursday, November 20 2:10 – 3:10 pm

3. Q: Evolution in the actions/inactions alleged to be false claims? Topics & Questions

4. Mischarging Labor such as Falsifying of Timecard Hours or Otherwise Overstating of Labor Hours or Wage Rates Defective Pricing and Providing False Estimates Charging Commercial Costs To Government Contracts or Mischarging Fixed-Price Work to Cost-Type Contracts Billing For Expressly Unallowable Costs or Overstating Overhead Rates Premature Progress Billings or Advance Billings Performing and Charging for Unauthorized Work Overstating Equipment Charges and Rental Rates Double Billing For the Same Work or Submitting Invoices for Work not Performed Common Allegations 15 Years Ago

5. Newer Allegations • Overstating Claims And Requests For Equitable Adjustment • Environmental Non-Compliance and Falsifying Safety Reports • Falsifying Original Bid Information or Intentional Underbidding • Falsely Representing Planned Performance of Work or Planned Rates • Improperly Claiming Feasibility of Design and Construction • Inflating Disadvantaged Business Participation Figures • Passing Through Fraudulent Costs of Subcontractor • Violating Buy American and Trade Agreements Act Requirements • Falsely Certifying Compliance With Organizational Conflict of Interest (OCI) Requirements

6. Topics & Questions (continued) Q: Use of false claims statutes to deny or reduce claims? • Recent Trend: Claims Forfeited by Contractors Due to Fraud • E.g., Long Island Savings Bank case: $435-million claim eliminated Q: When does a breach of contract or regulatory violation reach the level of a false claim? • False Statement: knowing and willful action • False Claim: knowing presentation or reckless disregard or deliberate ignorance

7. Q: Ideas to protect a contractor from passing subcontract false claims through to government agencies Due diligence regarding subcontractor ethics and Code of Conduct Clear invoicing terms and flowdowns Thorough payment/claims review process Broad indemnity from subcontractor for false claims/defective pricing Topics & Questions (continued)

8. Topics & Questions (continued) Q: Techniques to help avoid false claims allegations • Fostering an environment of integrity and ethics, • Documenting rationale for decisions and actions, • Providing appropriate training, • Discussing with employees the current legal environment relating to the potential for false claims allegations, • Communicating timely and appropriately with government agencies, • Documenting responses to employee concerns, • Assuring that employees understand the requirements of the contract and of relevant regulations and • Performing independent reviews of claims and substantial change orders.

9. Topics & Questions (continued) Q: Can a contractor’s bid be the basis of an FCA action? For example, can it be argued that false information in a bid affected the Government’s decision to pay? • Yes. Knowing misrepresentations in proposal can create FCA liability. • False Statements Act also covers proposal statements. • Recent Case: U.S. v. United Technologies Corp. (S.D. Ohio 2008) (false statements in negotiations led to FCA liability, even though statements did not represent “defective pricing”)

10. Topics & Questions (continued) Q: Techniques to reduce the exposure after a false claim has been alleged • Prompt involvement of counsel – protect privileged information • Thorough, but speedy, investigation • Careful coordination with witnesses • Careful documentation of issues and resolutions • No retaliation against “whistleblower” • Timely coordination with Government (mandatory vs. voluntary reporting) • Cooperation with Government (restitution, disciplinary action, remedial measures, revised ethics/training procedures, management commitment)

11. Q: Are mediators using false claims counter claims as a stick to drive settlement of contractor claims? Q: Are false claims matters going to trial more often? Which types? Q: False claim circumstances which lead to Large verdicts or settlements? Low or no verdicts or settlements? Topics & Questions (continued)

12. Greg Bingham • Greg Bingham is a Vice President with The Kenrich Group, LLC. He has over 22 years of experience in the fields of business and litigation consulting. He specializes in providing consulting and testimony services to clients in connection with financial, economic, accounting and damages issues. Mr. Bingham’s assistance to clients has included presenting findings and conclusions in negotiations, alternate dispute resolution proceedings, deposition and at trial. • Professional Experience • Mr. Bingham has assisted clients on Government Contract matters including: 1) regulatory consulting on allowable costs issues arising from the Cost Principles found at Part 31 of the Federal Acquisition Regulation (“FAR”) as well as allocation of cost issues associated with the Cost Accounting Standards (“CAS”), 2) consulting on matters involving allegations of defective pricing, false claims, mischarges and other improper billings to the Government, 3) the Earned Value Management Systems requirements of Department of Defense regulation 5000.2-R (April 5, 2002), 4) financial statement and special purpose auditing, 5) management consulting and 6) Foreign Military Sales issues and foreign sales issues. This experience has provided him with substantial knowledge of the program management, financial and accounting records and systems maintained by companies who sell to the Federal Government. • Greg has assisted contractors with various issues relating to Multiple Award Schedule contracting including the impact of the General Services Administration (“GSA”) contract Price Reduction clause. His work has included the quantification of cost impacts and negotiation with Government auditors and oversight personnel. Greg has planned and performed reviews of various defense contractors’ systems including material management, accounting, inventory and internal policies and procedures along with the evaluation of operating inefficiencies and internal control deficiencies. • Education and Certifications • M.B.A., University of Texas at Austin and B.S. in Electrical Engineering, University of Kentucky • Professional Affiliations • • American Bar Association - Public Contract and Litigation Sections • National Contract Management Association • National Defense Industrial Association • Association of Certified Fraud Examiners

13. Rich Rector Rich Rector chairs the Government Contracts practice of DLA Piper LLP (US), a global law firm with 3,700 lawyers located in 28 countries and 67 offices throughout Asia, Europe, the Middle East and the US. Mr. Rector focuses his practice on federal, state, and local procurement issues. He has litigated contract actions and bid protests before the Court of Appeals for the Federal Circuit, the Court of Federal Claims, federal district courts, state and federal boards of contract appeals, and the US Government Accountability Office. He also has represented prime contractors and subcontractors in breach-of-contract and protest actions in state and federal courts, as well as prepared contract claims and requests for equitable adjustment. Mr. Rector also counsels clients on a broad range of federal and state procurement matters, including IT contracts and transactions, infrastructure projects, state procurement laws and issues, terminations for convenience, defective pricing, federal leasing contracts, US Postal Service procurement, and compliance with procurement integrity and ethics laws. The respected English research firm Chambers & Partners cites Mr. Rector in Chambers USA: America's Leading Lawyers for Business. In 2007, it termed him a "strategic thinker" and commented that "clients dubbed him 'as good as a crystal ball'"; in 2008, it noted his "numerous successes" and called him "knowledgeable and highly proficient.“ In 2007 and 2008, Mr. Rector was named to Washington SmartCEO's Legal Elite. Mr. Rector lectures and writes regularly on federal and state procurement issues, including a regular column entitled “InfoTech & the Law” for Washington Technology.Memberships Board of Governors, U.S. Court of Federal Claims Bar Association (2005-2007) Council Member, ABA Section of Public Contract Law (2004-2007) Vice Chair, Task Force on Homeland Security, ABA Section of Public Contract Law (August 2002-present) Co-Chair, Emerging Issues Committee, ABA Section of Public Contract Law (2003-2004) Chair, Regulatory Coordinating Committee, ABA Section of Public Contract Law (2000-2003) Co-Chair, Fall Program – “Homeland Security: Challenges, Changes, and Emerging Issues,” ABA Section of Public Contract Law (November 2002) Co-Chair, Contract Claims and Disputes Resolution Committee, ABA Section of Public Contract Law (1997-2000) Managing Editor, Public Contract Law Journal (1994-1997)