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Realtor Sufficiently Pled False Claims Act Violations

A motion to dismiss a qui tam complaint alleging False Claims Act violations was denied by the District Court for the Eastern District of Virginia because the relator sufficiently pled the existence of a material false statement or fraudulent course of conduct that was made with the requisite scienter and caused the government to pay out money. The relator was an employee of a contractor providing services to the military under a logistics support contract. The relator alleged the contractor defendants falsely billed the government for the salaries of several employees at two military bases. According to the relator, the employees did not perform water testing or purification at those locations and did not work the hours billed on their time cards. The FCA allows private parties to bring an action on behalf of the government against anyone who "knowingly presents, or causes to be presented, to ... the United States Government ... a false or fraudulent claim for payment or approval," (31 USC 3729(a)(1)) or "knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim" (31 USC 3729(a)(1)(B)). Under the FCA, the term "knowingly" means "a person, with respect to information-(1) has actual knowledge of the information; (2) acts in deliberate ignorance of the truth or falsity of the information; or (3) acts in reckless disregard of the truth or falsity of the information." The contractors moved to dismiss the complaint under Civil Rule of Procedure 12(b)(6), for failure to state a claim on which relief can be granted, and CRP 9(b), for failure to plead fraud with particularity.

Objectively False

The relator, however, complied with these rules in alleging the contractors submitted false claims for work that was not performed at the two identified locations. With regard to the submission of false statements and a fraudulent course of conduct, the relator alleged the contractors engaged in an ongoing scheme to submit reimbursement claims for salaries of employees who did not perform any work. According to the relator, the time sheets for those employees were objectively false because they included hours the employees did not work on contract functions. The relator also met the requirement for scienter by alleging specific contractor employees knew the water purification workers did not perform work required under the contract, but nevertheless charged the government for that work. Also, the relator established the contractors' actions were material to the government's decision to make payments under the logistics contract. The relator also alleged the invoices submitted by the contractors caused the government to pay out money. As a result, the government allegedly paid greater indirect costs and higher fees.

Heightened Requirements

In addition, the relator complied with the heightened pleading requirements of Rule 9(b), which requires a party alleging fraud to "state with particularity the circumstances constituting fraud." The purpose of the rule is to put a contractor on notice of the alleged fraudulent conduct. Here, the relator's complaint addressed the circumstances surrounding the allegedly fraudulent activities by specifying the "time, place, and contents of the false representations, as well as the identity of the person making the misrepresentation and what he obtained" as a result. The contractors argued the complaint still did not allege fraud with sufficient specificity as the relator could not "point to a single invoice or a particular timecard" showing time recorded for unperformed work. This argument lacked merit because the specific allegations requested by the contractors were not material to the relator's obligation to put the contractors on notice of the particular circumstances for which they would have to prepare a defense. (U.S., ex rel. Carter v. Halliburton Co., et al, DC ED Va, 53 CCF 79,155)



(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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