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Anti-Kickback Act Applied to "Downstream" Payments

A motion to dismiss claims under the Anti-Kickback Act was denied by the District Court for the Southern District of Texas because allegations of a scheme where subcontracts were awarded to obtain favorable treatment in government contracting stated a cause of action. The government alleged two contracting officer's technical representatives recommended contract awards to a roofing contractor and contract modifications proposed by the contractor in exchange for the contractor's award of contracts and subcontracts to a design/construction company owned by one of the COTRs. The modifications and subcontracted design work produced deficient results. The contractor argued the government failed to state claims under the AKA because, under the AKA, "kickbacks can only go in one direction: to the prime contractor from its subcontractor...."

Broad Language

However, the AKA prohibits "any person" from paying "any kickback" to "any ... subcontractor, or subcontractor employee for the purpose of improperly obtaining or rewarding favorable treatment in connection with a prime contract." The district court concluded the AKA's broad prohibition was not limited to payments going "up the contractual chain." The court also found no merit in the contractor's contention subcontracts could not constitute kickbacks. The AKA's broad definition of kickbacks as "thing[s] of value" includes subcontracts. (U.S. ex rel. Garrison, et al. v. Crown Roofing Services, Inc., et al., DC SD Tex, 55 CCF 79,545)




(The news featured above is a selection from the news covered in the Government Contracts Report Letter, which is published weekly and distributed to subscribers of the Government Contracts Reporter. )


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