Private Attorneys General v. "war Profiteers": Applying the False Claims Act to Private Security Contractors in Iraq
Jurisdiction | United States,Federal |
Citation | Vol. 30 No. 03 |
Publication year | 2007 |
I. Introduction
What is the effect and reach of American law in a war zone such as Iraq? A recent case,
Custer Battles was formed in 1989 and "provide[s] support services to the United States and other governments engaged in wars and conflicts around the globe."(fn6) The company is an "international business risk consultancy" that "provides objective risk management and security consulting services of the highest quality and within an ethical framework."(fn7) According to its website, Custer Battles offers an array of security services, including security details and convoys, as well as explosive detection services.(fn8) The problem in this case, however, is that Custer Battles engaged in fraudulent conduct that cost the CPA millions of dollars for work that was never done.(fn9) With respect to one of its contracts, for example, Custer Battles used shell companies to falsely charge the CPA for costs never incurred; in another, Custer Battles was accused of fraudulently receiving payment for "services and facilities . . . [that were] never provided to the CPA."(fn10)
Prior to trial, where the jury found the defendants liable on one of the two contracts at issue,(fn11) the
Second, even if the CPA were subject to the FCA, must the funds used by the CPA to pay contractors have their origin specifically from the American public fisc for the FCA to apply? This Note focuses on the court's answer to the second question: FCA liability is limited to those circumstances in which the U.S. government
In applying that holding, the
This Note will explore both the reasoning and ramifications of the court's opinion to base liability under the FCA solely on a traditionally-defined ownership interest of the U.S. government. The court used a formalistic interpretation of precedent to define what represents a claim under the FCA that developed in cases with highly dissimilar factual scenarios to the facts and context of the
In this unusual case, the court should have looked beyond judicial interpretations of the statutory claim developed from factually dissimilar cases and instead contemplated the policies behind the qui tam provisions of the FCA. The court should have also acknowledged the implications of privatization in the realm of federal agencies and the consequent need for legal accountability in the government's use of private contractors-especially under the chaotic circumstances in Iraq in which government oversight of private contractors is particularly difficult.(fn21) If the
The effect of the court's reasoning is to attach FCA liability in these circumstances only on the pure chance that the CPA happened to use specifically American funds to pay a fraudulent actor, regardless of the CPA's broad possessory discretion to simultaneously and freely spend so-called Iraqi funds.(fn22) The court's approach ignores the reality that Custer Battles' fraudulent activity substantially harmed American military and political objectives in Iraq.(fn23) Further, the court's holding undercuts some policy justifications put forward by proponents of privatization because a central justification for the government's delegation of power to private entities assumes a final accountability by government officials for all forms of government-sponsored action, whether actually performed by public or private entities.(fn24) If the court had applied a broader interpretation, then perhaps other legitimate American interests (for example, government accountability for the actions of private contractors) would allow the FCA to be used to prevent waste and fraud.
In order to provide context for the
II. Qui Tam Provisions Under the FCA and Privatization in the Defense Department
The limited scope of this Note does not allow for a full exposition of the development of the various policies and rationales for the use of private contractors by the U.S. Armed Forces. However, to give some context to the
Qui tam actions allow an individual or private entity, called a relator, to sue on behalf of the U.S. government in order to help deter fraud perpetrated against the government.(fn27) Generally, relators provide information to the government without which a contractor's fraudulent claim might not have been detected or successfully prosecuted. Under the FCA, treble damages(fn28) are available from a contractor who is found to have defrauded the government, and the government and the relator each share in a percentage of those damages.(fn29) Thus, relators function as private attorneys general, in that they help civilly prosecute fraudulent activity which the Justice Department may not have the information or resources to combat.(fn30) In the
Qui tam...
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