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Evidence Was Sufficient to Find Contractor Failed to Disclose OCIs

A contractor's motion for judgment as a matter of law, or in the alternative for a new trial, was denied by the District Court for the District of Columbia because the evidence was sufficient for a reasonable jury to find the contractor violated the False Claims Act by failing to disclose organizational conflicts of interest, and there was no error that would require a new trial. The dispute arose from two contracts to provide regulatory assistance on the recycling of nuclear materials. Given the consulting nature of the contracts, both agreements stated the contractor's neutrality would be compromised by any OCI that raised the appearance of bias in its rulemaking recommendations. Accordingly, the contractor promised to forgo entering into any contractual arrangements with any organization that could create a conflict of interest. In its complaint, the government alleged the contractor's failure to disclose OCIs amounted to a false claim under the FCA (31 USC 3729). At trial, the jury found the contractor liable under 31 USC 3729(a)(1) and (a)(2) for knowingly presenting fraudulent claims that caused the government to pay above what it would have paid had the contractor presented proper claims and made truthful statements. The contractor then moved for judgment as a matter of law or for a new trial, arguing the government failed to carry its burden of proof and numerous errors were committed during the trial. The contractor's arguments, however, lacked merit.


The contractor failed to show a "reasonable, good faith understanding of the [government]'s OCI regulations preclude[d] any finding of "knowledge" under the FCA." Also, the contractor did not show the jury instructions addressing the knowledge element were erroneous and warranted a new trial. The contractor further argued the government improperly relied on a "collective knowledge" theory to establish the contractor's scienter or in the alternative the judge should have instructed the jury on the government's collective knowledge theory. However, a contractor's fraudulent intent may be inferred from a corporation's collective knowledge, and similarly, the jury could have properly inferred the contractor's fraudulent intent from its collective knowledge. Moreover, the contractor failed to establish the evidence at trial was legally insufficient to support a jury finding of knowledge under a "reckless disregard or deliberate ignorance" theory. Trial testimony indicated the contractor's OCI compliance system was inadequate for failing to include some of the contractor's business relationships.

Objective Falsehoods

The trial evidence also showed the contractor had a business relationship with entities that were subject to the regulations the contractor helped the government formulate. The jury could have reasonably concluded the contractor's relationships placed it in a conflicting role where its judgment may have been biased. In addition, the government carried its burden to prove the contractor's withholding of information that should have been disclosed under its OCI obligations constituted the submission of false claims for payment under the implied certification theory. Also, there was sufficient evidence for the jury to conclude the contractor's statements regarding actual and potential OCIs were made for the purpose of having its claims paid. Finally, the jury received proper instructions on the government's damages and on the law to apply with respect to the contractor's OCI disclosure obligations. (U.S. v. Science Applications Int'l Corp., DC DofC, 53 CCF 79,175)




(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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