Paying workers as independent contractors instead of as employees may land a former executive in jail for criminal wire fraud. On June 12, 2019, the former operations manager and vice president of a Florida-based mail transportation contractor pled guilty to two counts of wire fraud related to such treatment. The Government’s case was based on

The Supreme Court’s decision in Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, No. 12-1497 (U.S. May 26, 2015) [pdf], holds that the Wartime Suspension of Limitations Act applies only to criminal offenses. It also holds that the first-to-file bar in the False Claims Act applies only when an earlier-filed action remains “pending.” BALAD AIR BASE, Iraq.  Staff Sgt. Gary Messer, 332nd Expeditionary Aerospace Medical Squadron bioenvironmental engineer, transfers a sample of tap water to a tube before performing tests to confirm that the water is free from bacteria. March 13, 2008. (U.S. Air Force photo / Senior Airman Julianne Showalter.)The unanimous opinion, written by Justice Alito, takes a plain-meaning approach to both of the questions presented.

The Wartime Suspension of Limitations Act

Citing dictionary definitions of the word “offense” and the appearance of the WSLA in Title 18 of the U.S. Code, the Court inferred that Congress intended to toll the applicable statutes of limitations only in criminal cases. As to the removal of the phrase “now indictable” from the text of the WSLA in 1944, the Court found that such a subtle change does not prove that Congress intended to expand the tolling effect of the WSLA beyond criminal cases. “[T]he removal of the ‘now indictable’ provision was more plausibly driven by Congress’ intent to apply the WSLA prospectively, not by any desire to expand the WSLA’s reach to civil suits.”

Carter reverses the Fourth Circuit’s holding in United States ex rel. Carter v. Halliburton Co., 710 F.3d 171 (4th Cir. 2013) as to the scope of the WSLA.
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Cover of OIG Sept 18 2013 report.jpgDe-regulation of the U.S. Postal Service’s purchasing policies has stymied the prosecution of defective pricing fraud cases, according to a September 18, 2013 report issued by the USPS Office of Inspector General (OIG).  U.S. Attorney’s offices have thus declined to criminally prosecute suppliers for submitting defective cost or pricing data in procurement actions valued at $36 million. The OIG therefore recommends that the Postal Service require suppliers to certify that cost or pricing data are accurate, complete, and current. USPS management, however, disagrees. The Postal Service believes its interests are already fully protected and the disadvantages of imposing a new certification requirement would outweigh any benefits.


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Yet another U.S. Postal Service manager has pled guilty to fraud and corruption charges relating to USPS transportation contracts. In March 2012, the former USPS Manager of Postal Vehicle Service Operations for the Bay Valley District in Oakland, CA was indicted in a $4.4 million fraudulent billing scheme. Last year, five Postal Service officials at the Detroit, MI Vehicle Maintenance Facility were charged with similar crimes. One might well wonder how many more such episodes need to be uncovered before the Postal Service issues binding procurement regulations and institutes effective protest procedures. Here’s what happened in the most recent case.


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As part of the much-publicized $26 billion mortgage foreclosure settlement between the five largest mortgage lenders, 49 states attorneys general, and the United States, Bank of America has agreed to pay $1 billion to resolve False Claims Act allegations relating to its mortgage lending practices. According to the press release issued by United States Attorney for the Eastern District of New York Loretta E. Lynch, federal prosecutors had been investigating Bank of America since 2009.


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The U.S. District Court for the District of Columbia has issued a decision that may have a far-reaching impact on actions brought by the federal government under the False Claims Act. In United States v. First Choice Armor & Equipment, Inc., No. 09-1458 (D.D.C. Aug. 29, 2011) [pdf], the government asserted claims for fraudulent conveyances under the Federal Debt Collection Procedures Act in addition to its FCA and common law claims.  The court’s August 29 decision allows these claims to survive a motion to dismiss.


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The Commission on Wartime Contracting’s final report [pdf] asserts that upwards of $60 billion in U.S. tax dollars have been lost to fraud, waste, and abuse in Iraq and Afghanistan over the past decade. The independent Commission was created in 2008 to assess contingency contracting for logistics, security, and reconstruction, as well as to make recommendations to Congress in order to improve contracting practices. The Commission’s final report blames the staggering losses on a lack of oversight, poor planning, and corruption. 


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Contractors beware: the U.S. Postal Service Office of Inspector General (OIG) thinks that $1 out of every $20 spent by USPS on its contractors is fraudulent, and OIG is itching to find it. According to a July 18, 2011 OIG blog article, “conservative business estimates project up to 5 percent of contracted dollars are lost to fraud, meaning $1.45 billion of Postal Service funds are potentially at risk.” While these numbers are fanciful, there is no doubt that the OIG is taking this seriously. Read on for more details.
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Secrecy is not often associated with fairness in the American system of justice. One law that requires secrecy is the False Claims Act, which encourages and rewards private citizens who bring actions against those whom they believe have defrauded the government. Because these cases must be filed under seal, the defendant remains blind to the allegations until a government investigation is well underway. Even before the government is notified of alleged fraudulent behavior, the whistleblower or “qui tam relator” can obtain documentation and information necessary to investigate and file suit without going through a formal discovery process. Whistleblowers and their attorneys may even use a “ringer” to obtain evidence and avoid alerting a contractor of the potential suit.
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More legislation to address the recent high-profile abuses of the SBA contracting system is in the works. A bipartisan group led by Senator Olympia Snowe (R-ME) has introduced legislation called the Small Business Contracting Fraud Prevention Act of 2011 [pdf]. Among other things, the bill would amend the provisions of the Small Business Act relating to misrepresentations as to the status of companies as small business concerns, including HUBZone, 8(a), woman-owned, and service-disabled veteran-owned small businesses.
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