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Four Democratic and independent senators have asked the inspector general of the Department of Homeland Security to broaden an ongoing investigation into contracting and hurricane relief problems in Puerto Rico, which is still rebuilding more than a year after Hurricane Maria.
The FEMA program Tu Hogar Renace (“Your Home Rebuilt”) was allocated $1.2 billion to provide quick relief for temporary repairs to damaged roofs, windows, and water heaters. However, news reports have spotlighted high overhead costs and steep markups of supplies, limiting the reach of the dollars.
Housing construction in Puerto Rico is loosely permitted and poorly documented, leaving many homeowners unable to qualify for aid under FEMA rules. The senators also want greater scrutiny of FEMA’s contracting, which has included well-publicized cases of inexperienced contractors winning large and critical contracts.
The letter was signed by Elizabeth Warren (D-MA), Richard Blumenthal (D-CT), Bernie Sanders (I-VT), and Dick Durbin (D-IL).
Few would describe the False Claims Act as a model of clarity. Among its ambiguous provisions is the statute of limitations. A three-way circuit split has developed on how to read the provision, and the Supreme Court has agreed to resolve the question. An FCA plaintiff will always have at least six years to bring a claim, but never more than 10 years. How to get from six to ten years is where the ambiguity arises.
Over seven months ago, the Supreme Court asked the Solicitor General for the views of the United States in Gilead Sciences, Inc. v. United States ex rel. Campie, an important False Claims Act case. Last Friday evening, the Solicitor General responded by asking the Court to deny certiorari. But what appeared to be a major setback for the Petitioner, Gilead Sciences, Inc., actually offered an unexpected route to victory. The Solicitor General agreed with the relators’ (and the Ninth Circuit’s) position that the Government’s continued payment did not necessarily undermine the materiality of the alleged violations. But the Solicitor General told the Court that, were the case remanded to the district court, the United States would dismiss the case to avoid burdensome litigation costs and other litigation-related interference with government operations. That surprising announcement sheds further light on the DOJ’s FCA-enforcement priorities, consistent with its recent amendments to the Yates Memo. Those developments provide valuable insight for companies facing qui tam FCA actions.
The Causation Trend in Anti-Kickback False Claim Cases: Courts’ Rejection of Relators’ Taint Theory Should “Cause” Them Concern at the Summary Judgment Stage of Qui Tam Litigation.
J. Matthew Kroplin writes about use of the “taint” theory of causation to address an ambiguity in the 2010 amendment of the Anti-Kickback Statute. The argument that all reimbursement claims made after falsely certifying compliance with the AKS are therefore “tainted”, is used to compensate for the failure to define what it means for a claim to “result from” a violation of the AKS.
He explains that “the growing trend of courts is to require relators to produce evidence at the summary judgment stage of the lawsuit establishing an actual causal link between the alleged kickback scheme and the submission of false claims to the government. Merely asserting that all claims were ‘tainted’ by kickbacks will not suffice.”
During remarks at the American Conference Institute’s 35th International Conference on the Foreign Corrupt Practices Act, Deputy Attorney General Rod Rosenstein announced changes to the department’s policy on personal accountability in corporate corruption cases. “Under our revised policy, pursuing individuals responsible for wrongdoing will be a top priority in every corporate investigation,” Rosenstein said. While corporate enforcement will remain a priority, Rosenstein noted that “the deterrent impact on the individual people responsible for wrongdoing is sometimes attenuated in corporate prosecutions.”
“Corporate cases often penalize innocent employees and shareholders without effectively punishing the human beings responsible for making corrupt decisions,” Rosenstein continued. “The most effective deterrent to corporate criminal misconduct is identifying and punishing the people who committed the crimes.”
The revised policy clarifies that absent extraordinary circumstances, a corporate resolution should not protect individuals from criminal liability, and provides that any company seeking cooperation credit in criminal cases must identify every individual who was substantially involved in or responsible for the criminal conduct. However, Rosenstein noted that investigations should not be delayed merely to collect information about individuals whose involvement was not substantial, and who are not likely to be prosecuted. Instead, prosecutors should focus on who authorized misconduct and what they knew about it. “Our civil litigators simply cannot take the time to pursue civil cases against every individual employee who may be liable for misconduct, and we cannot afford to delay corporate resolutions because a bureaucratic rule suggests that companies need to continue investigating until they identify all involved employees and reach an agreement with the government about their roles,” he explained.
Rosenstein also noted that the “all or nothing” approach to corporate cooperation in civil cases had proven counterproductive. “When criminal liability is not at issue, our attorneys need flexibility to accept settlements that remedy the harm and deter future violations, so they can move on to other important cases,” Rosenstein remarked. “The most important aspect of our policy is that a company must identify all wrongdoing by senior officials, including members of senior management or the board of directors, if it wants to earn any credit for cooperating in a civil case.”
Other policy changes return discretion to civil lawyers to resolve each case consistent with relevant facts and circumstances. Department attorneys are permitted to negotiate civil releases for individuals who do not warrant additional investigation in corporate civil settlement agreements, again with appropriate supervisory approval. DOJ attorneys are also permitted to consider an individual’s ability to pay when deciding whether to pursue a civil judgment.