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Construction Law

: The South Carolina Construction Law Blog

Rights under the False Claims Act

By Ryan McCabe

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            Allison Engine Co. v. United States, 128 S.C. 2123 (2008)

            This appeal involved a claim under the False Claims Act (FCA). The government hired contractor to build Navy destroyers. The contractor entered in agreement with two subcontractors to manufacture and assemble generator sets. The subcontractors had to submit certificates of conformance (COC) certifying that the units were built according to the Navy specifications. Two employees of one of the subs brought a claim under the False Claims Act, which imposes liability on anyone who knowingly uses a ?false ? statement to get a false or fraudulent claim paid or approved by the Government.?

            At trial, plantiffs alleged that the subcontractors issued COCs that falsely stated the work was pursuant to the Navy specifications. The district court ruled for the subcontractors, stating that the Government had no proof that false claims were presented. The court of appeals held that the FCA only required proof of intent to get paid by a private entity using Government funds.

            The United States Supreme Court disagreed. The Supreme Court concluded that a plaintiff must prove that the defendant intended the false statement to be material to the Government?s decision to pay a false claim. The CFA requires that the defendant intend for the Government to eventually pay the claim, even if it is not submitted directly to the Government. This does not require that the false claim be submitted to the Government directly. It is enough that defendant submits the false statement to the contractor, intending that the contractor use that statement to get payment from the Government. But the FCA does not impose liability on a defendant who makes a false statement without intending for the Government to rely on it as a condition of payment.

            Lastly, as related to the two defendants, FCA requires that two conspirators intend to defraud the government. However, they only need to intend that the false statements have a material effect on the Government?s decision to pay, and not that the Government receive the false statements directly.

            This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek a competent attorney for advice on any legal matter.

Full post as published by The South Carolina Construction Law Blog on February 10, 2009 (boomark / email).