False Claims in Construction, Update of NCHRP 20-06 Study Topic 16-03

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, 2010 Eric M. Kerness, Esq.Kerness Consulting 518-347-2778

2. Is there Fraud in Public Construction?

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

4. Working equipment ?

5. False Claims In Construction • Federal : Daewoo Engineering V. USA 73 Fed Cl. 547 (Ct Cl 2006), 557 F.3d 1332,(2009)

6. Why Bother with False Claims? • Public Trust • FCA Recoveries • Accountability and Transparency • “Waste, Fraud & Abuse”

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

8. Background of Study Topic 16-03 • Allison Engine and Totten decisions • NCHRP Research Project • ARRA • Fraud Enforcement Recovery Act “FERA” • New Federal Initiatives

9. FalseClaim 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

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

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

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 falsityand fails to disclose it in reasonable time FALSE CLAIMS

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

14. Remedies • Treble Damages • Costs / Attorney’s Fees • Civil Penalties of up to $11,000 for each False Claim • Other Consequences FALSE CLAIMS

15. Qui-Tam Actions • Qui Tam Relator - “ whistleblower” • Recovery • Portion of the proceeds, settlement, plus attorney fees, costs • Process FALSE CLAIMS

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

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

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

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

20. Overcharging for Changer Ordersor for claims

21. False Claim Study Research Process • Survey • In depth phone interviews • Personal Visits • Discussion with Knowledgeable experts

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

23. Knowledgeable Experts

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

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

26. Questions Eric Kerness. Esq. Kerness Consulting 518 -347 2778 518 928 9433 ( mobile) Eric@Kerness.com