The False Claims Act (“FCA”) is a powerful enforcement tool for the U.S. Government. The FCA prohibits any person from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment to the federal government. The FCA also prohibits any person from knowingly making, using, or causing to be made or used, a false record or statement material to a false or fraudulent claim. FCA settlements are widely reported because the settlements often involve a large settlement amount due to the penalty structure of the FCA. Under the FCA, violators are liable for civil penalties of over $23,000 per claim, plus treble damages. For healthcare providers who submit large numbers of claims, the FCA’s penalty structure often results in exceptionally large – newsworthy – settlements. For this reason, it is common for some people to incorrectly believe that FCA cases are limited to the healthcare industry. However, the U.S. Department of Justice (“DOJ”) uses the FCA as an enforcement tool in other industries, like finance, education, and military contracting. Such was the case according to a recent DOJ press release.
On September 10, 2021, the DOJ reported that two Georgia defense contractors, Southeastern Equipment Co., Inc. and SECO Parts and Equipment Co., and their owners (“SECO”) agreed to pay $900k to resolve FCA allegations. Like many FCA settlements, the SECO settlement resolves a qui tam lawsuit. Under the FCA’s qui tam provisions, whistleblowers – known as relators – are granted financial incentives and procedural mechanisms to bring FCA cases on behalf of the government. Whistleblowers are entitled to 15% to 30% of the money the government recovers, based on several factors.
The SECO settlement involves allegations that SECO knowingly supplied substitute parts through the U.S. Army’s Simplified Nonstandard Acquisition Program (SNAP) that were unapproved. SECO also faced allegations it violated the Buy American Act by supplying parts manufactured in a country that did not qualify under the Buy American Act. This case serves as a stark reminder that any entity doing business with the federal government – in any industry – must follow contractual obligations to avoid running afoul of fraud, waste, and abuse laws like the FCA.
The attorneys at Chilivis Grubman represent both companies and individuals in connection with government investigations, both criminal and civil, and in False Claims Act litigation. If you have any questions related to such matters, please contact us today.