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Former Second Chance Body Armor President Settles False Claims Act Case Related to Defective Bullet Proof Vests
Richard C. Davis, the former head of Michigan-based Second Chance Body Armor, has agreed to resolve FCA claims about the sale of defective Zylon bullet-proof vests for use by law enforcement agencies, by relinquishing $1.325 million in additional and previously frozen assets.
Second Chance sold body armor to federal, state, local, and tribal law enforcement agencies, paid for by the Department of Justice or under federal GSA contracts. The vests deteriorated rapidly when exposed to heat and humidity, and tests revealed a greater than 50 percent failure rate in stopping the type of bullets for which the vests were certified. Davis was allegedly aware of the problems with the vest material by 2001.
Furthermore, rather than using a $6 million payment from the manufacturer of the Zylon fiber to fix the problem, Second Chance allegedly pocketed the money and began efforts to sell the company. These efforts stopped after a Pennsylvania police officer was shot through his Second Chance vest in 2003, and the company filed for bankruptcy in 2004.
The settlement resolves, in part, allegations filed in a lawsuit by a former employee of Second Chance, under the whistleblower provisions of the FCA. It is also part of a larger investigation of the body armor industry’s use of Zylon.
District Court Dismisses Original Source’s FCA Claims as Barred by Government’s Pursuit of Penalty in Bankruptcy Proceeding
The government action bar provides that a relator may not bring a False Claims Act lawsuit “based upon allegations or transactions which are the subject of a civil suit or an administrative civil money penalty proceeding in which the Government is already a party.” Recently, in Schagrin v. LDR Industries, LLC, No. 14 C 9125, 2018 WL 2332252 (N.D. Ill. May 23, 2018), a district court held that the relators’ lawsuit was barred by the “government action bar” because LDR Industries had already been subject to administrative penalties by U.S. Customs for the same alleged conduct.
It is no secret that the False Claims Act is the government’s primary anti-fraud tool and that recoveries under the statute have hit record highs in recent years. However, DOJ continues to send a positive message that companies which act as good corporate citizens by conducting their businesses ethically and in good faith, pursuant to established compliance systems, and which promptly disclose any potential issues to the government will enjoy the benefits of those practices, and that meritless cases should not be used to extract millions of dollars from responsible contractors.
In a new blog post, Covington & Burling evaluate the likely impact of the government’s increased focus on domestic preference requirements. They cite examples of the White House’s formal policy and action plan for agencies to “scrupulously monitor, enforce, and comply” with so-called “Buy American Laws,” and Congress’s proposed legislation to make certain Buy American requirements more robust. Contractors should not be surprised if there is a corresponding increase in related False Claims Act activity. Notwithstanding that increased scrutiny, based on a review of recent FCA decisions, they have found that courts generally have been skeptical of attempts by relators to allege FCA liability regarding a purported Buy American Act or Trade Agreements Act violation.
United States Reaches $1.53 Million Dollar Settlement with Defense Contractor to Resolve Contract Claim
CACI Technologies LLC has agreed to pay $1,531,928.77 to settle an allegation that it breached its contract with the National Security Agency by billing and accepting payment from the NSA for work performed by certain CACI employees who did not…