The US Court of Appeals for the First Circuit has added its voice to the split among circuit courts regarding the appropriate standard for deciding government motions to dismiss qui tam False Claims Act (FCA) actions after it has declined to intervene. In affirming the district court’s grant of the government’s motion to dismiss in
Procurement Fraud/False Claims Act
Procurement Collusion Strike Force Issues Its First Indictment
By Patrick Linehan & Rachel Peck on
A little over a year after its creation the Procurement Collusion Strike Force has announced its first public indictments. The Strike Force was created to focus on rooting out collusion and related schemes aimed at impeding competition in public contracting. As DOJ made clear when the Strike Force was created, DOJ views price-fixing in government contracting as a particularly harmful since it directly harms U.S. taxpayers. The Strike Force includes prosecutors from both the DOJ Antitrust Division and United States Attorney’s offices, the FBI, and Inspectors General from the Department of Defense, the U.S. Postal Service, and the General Services Administration.
A federal grand jury in North Carolina indicted Contech Engineered Solutions LLC and Brent Brewbaker, a former executive at the company for their roles in a nearly decade-long conspiracy to rig bids for aluminum structure projects funded by the United States and the North Carolina Department of Transportation (NCDOT). Contech and Brewbaker were also charged with mail and wire fraud arising from acts in furtherance of the conspiracy. The case is part of a larger ongoing investigation into the aluminum structures industry.…
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Whistleblowing and Internal Investigations
In May 2020, the U.K. Financial Conduct Authority, the authority charged with regulating financial firms and maintaining the integrity of the financial markets in the United Kingdom, reported that whistleblowing reports to the Financial Conduct Authority on workplace culture issues in 2019 had increased by 35%. There is also evidence of an increase in whistleblowing reports made during the COVID-19 lockdown, with WhistleB, the Swedish-European provider of whistleblowing solutions, reporting an increase of 40% in the number of concerns raised by whistleblowers in Europe from January to May 2020. Similarly, in the United States, the Securities and Exchange Commission (SEC) reported a 35% increase in the number of whistleblower tips, complaints and referrals between mid-March and mid-May 2020. And although the filing of whistleblower complaints (also known as “qui tam” complaints) are reported to be down compared to the same time last year, the recent distribution of billions of dollars in federal money to companies (discussed further below) is sure to reverse that trend.
In addition, there have been a number of high-profile press reports of investigations and enforcement actions which were prompted by whistleblower reports, with perhaps the most significant recent example being that of Wirecard AG, the German payment processor and financial services provider at the center of a financial scandal in Germany. In June 2020, the company reported €1.9 billion in missing cash. It is reported that Germany’s financial watchdog (BaFin) received a tip-off from a whistleblower about alleged irregularities at Wirecard.
In the wake of the COVID-19 pandemic, a wave of whistleblower reports alleging misconduct in key areas is likely to be inevitable. Whether they come via a regulator, a government authority, the media or directly to the company, companies must be prepared properly to tackle these cases as and when they arise, as a failure to do so could prove fatal to companies that are already fighting to recover from the detrimental economic impact caused by COVID-19. This will undoubtedly be made more difficult as those who usually investigate the reports are not in the office physically to gather all of the facts and evidence using established procedures. Perhaps more than ever, companies should understand the risks posed to their businesses and be ready for the inevitable emergence of whistleblower reports.
We consider below some of the main areas where whistleblowing reports are predicted to increase, as well as how companies can prepare to ensure that they are in the best position to handle any future claims.…
Senator Grassley May Seek Limits on DOJ’s Authority to Dismiss Qui Tam FCA Complaints
In a speech on the Senate floor last week, Senator Chuck Grassley (R-IA) announced that he plans to introduce legislation aimed at limiting the scope of the Department of Justice’s False Claims Act dismissal authority. Specifically, Sen. Grassley’s anticipated legislation would require DOJ to state its reasons and provide whistleblowers who bring the cases an opportunity to be heard by the court whenever DOJ moves to dismiss a qui tam False Claims Act case.
Sen. Grassley, the author of the 1986 amendments to the FCA, described DOJ’s practice of dismissing charges in many of the FCA cases brought by whistleblowers as “especially ironic,” given the “massive increase” in government funding related to the COVID-19 response that has “created new opportunities for fraudsters trying to cheat the government.” According to Sen. Grassley, “[if] there are serious allegations of fraud against the government, the Attorney General should have to state the legitimate reasons for deciding not to pursue them in court.” Courts have been split on the justification DOJ must provide in moving to dismiss a case, with some courts ruling that DOJ has “virtually unfettered discretion” to dismiss qui tam suits, while other holding that DOJ must provide a “legitimate reason” for dismissal. Courts falling in the latter camp have set forth varying standards for how thorough DOJ must be in justifying a motion to dismiss a qui tam case. Sen. Grassley indicated that his proposed legislation would clarify these ambiguities and rein in DOJ’s dismissal authority.…
Higher Education Under the Prosecutorial Microscope
By Patrick Linehan, Michelle Levin, Brittany Prelogar, Ed Krauland, Caitlin Conroy, Evan Abrams, David Hirsch & James Hobbs on
Institutions of Higher Education are increasingly finding themselves in the crosshairs of high-profile criminal enforcement efforts. Recent headlines have highlighted a number of investigations and prosecutions that have achieved literal celebrity status:
- The indictments and convictions of wealthy parents of college applicants in the Varsity Blues investigation, who are alleged to have paid bribes in
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Key Investigation and Compliance Take-Aways from May 20, 2020 DOJ, SEC, and FBI Joint Town Hall Discussing FCPA and Healthcare Fraud Enforcement Efforts During COVID-19 Emergency
By Brittany Prelogar & Elizabeth Arkell on
On May 20, 2020, panelists from the DOJ, SEC, and FBI participated in a virtual town hall to discuss the state of play of FCPA and healthcare fraud enforcement as the United States and the rest of the world navigate the wide-ranging challenges wrought by the COVID-19 pandemic.
Government panelists included:
- Robert Zink (Chief of the Fraud Section, Criminal Division, DOJ);
- Daniel Kahn (current Senior Deputy Chief of the Fraud Section, and former FCPA Unit Chief, DOJ);
- Joe Beemsterboer (current Senior Deputy Chief of the Fraud Section, and former Chief of the Health Care Fraud Unit, DOJ);
- Charles Cain (Chief of the FCPA Unit of the SEC’s Division of Enforcement); and
- Leslie Bakschies (Unit Chief at the FBI).