Not hard to run afoul of False Claims Act.

• Author: Moorhouse, Richard L.
• Position: Ethics Corner

* Violating the False Claims Act may be easier than one thinks. It can be violated without any intent to lie to or to defraud the government.

Under the "reckless disregard" standard, a contractor can violate the act by not paying attention to the truth or dishonest information provided to the government in a manner that can be characterized as "reckless."

"Reckless disregard" is not "deliberate," but this invariably is a threshold inquiry whenever a government official finds the inaccuracy of information provided to be inexcusable. And reckless disregard can be found even in instances in which an attorney acts on behalf of the contractor in submitting a claim. Even though the claim is based on erroneous legal advice or mistakes made by the attorney, contractors nonetheless can suffer consequences.

A recent Court of Federal Claims decision reinforces this point and provides guidance on the reckless disregard standard and potential liability stemming from actions of an attorney.

In Gulf Group General Enterprises Co. v. United States, the court recently ruled that a military contractor had acted in reckless disregard when it failed to make a minimal examination of records that were submitted in support of a claim for payment from the government. Ironically, this case initially was brought by a contractor seeking money contractually owed, but resulted in a government counterclaim for violation of the FCA.

The contractor's initial suit challenged termination of contracts for items such as dumpsters and latrines for military bases in Kuwait and sought damages for delays when the contractor was forced to travel in military convoys to deliver bottled water. The government counterclaimed, charging the contractor with submitting inflated invoices, which had all been reviewed, signed and submitted by the contractor's attorney. They had also been signed by the contractor's owner.

Several errors exposed the contractor to liability. First, it was working under a blanket purchase agreement (BPA) contract, under which the government issues "calls"--essentially task orders. The government terminated one of the calls, which precipitated the $10 million claim. This was the total value of the BPA. Therefore, apart from total disregard for the avoided costs of delivering on the entire agreement, the court found no evidence that would support a contractor expectation of all possible calls. Thus, in addition to wrongly assuming 100 percent profit on the $10...