admin, Author at Nichols Liu

One Step Closer to Building on Escobar

admin on April 24, 2018

The Supreme Court recently asked for the views of the Solicitor General in Gilead Sciences, Inc. v. U.S. ex rel. Campie, No. 17-936 (pet. filed Dec. 26, 2017). The case presents an opportunity for the Court to affirm the prevailing reading of Escobar: that the government’s continued approval and acceptance of goods or services, after learning of the alleged falsity, renders that falsity immaterial and precludes an FCA claim absent countervailing evidence. In 2008 and 2009, the federal government spent more than $5 billion on three HIV treatments marketed by Gilead Sciences: Atripla, Truvada, and Emtriva. The government predicated its purchases (through Medicare, Medicaid, TRICARE, and the FEHB) on approval by the Food & Drug Administration. The FDA may continue to approve of a drug even if it has been adulterated, misbranded, or if it departs from manufacturing guidelines. By contrast, the FDA must withdraw approval upon learning that “the [drug manufacturer’s] application contains any untrue statement of material fact.” U.S.C. § 355(e). The relators in Gilead alleged that some batches of emtricitabine—the active ingredient in Gilead’s three drugs—were produced by an unregistered source, and that Gilead concealed that source through record manipulation, faulty certificates, and misleading labeling. The undisputed facts on appeal are that the government knew, through a variety of means, about Gilead’s relationship with the unregistered source. Not with standing FDA’s monitoring of Gilead’s production and even “warning letters” outlining potential regulatory violations, FDA never rescinded its approval of Gilead’s medicines. The case was filed in 2010 and amended in 2015— including an allegation that Gilead “continues to incorporate” the illicitly obtained ingredient. The Department of Justice never intervened (though it did file briefs in the district and appellate courts).

Co-Authors: Andy Liu, Jason C. Lynch.

West Year In Review – Fraud Debarment and Suspension,” Thomson-Reuters West Year-In-Review Conference Briefs

admin on January 5, 2017

FEDERAL FALSE CLAIMS ACT

Co-Authors: Robert Rhoad, W. Stanfield Johnson.

West Year In Review – Fraud Debarment and Suspension,” Thomson-Reuters West Year-In-Review Conference Briefs

admin on December 21, 2015

FEDERAL FALSE CLAIMS ACT

1. Statistics – Fiscal Year 2014
FY 2015 FY 2014
Total Settlements & Judgments $3.58 Billion $5.69 Billion
Qui Tam Settlements & Judgments $2.8 Billion $2.99 Billion
New Qui Tam Matters 632 713
All New Matters 737 804
Recovery in Procurement Fraud $1.1 Billion $65 Million
Recovery in Nonintervened Cases $1.1 Billion $80 Million

The Justice Department reached 70 settlements involving 457 hospitals in 43 states for more than $250 million related to cardiac devices that were implanted in Medicare patients in violation of Medicare coverage requirements. The settlement stemmed from a qui tam suit brought by a cardiac nurse and a health care reimbursement consultant. DaVita Healthcare Partners, Inc. The country’s largest provider of dialysis services agreed to pay $450 million to resolve claims that it violated the FCA by knowingly creating unnecessary waste in administering the drugs Zemplar® and Venofer® to dialysis patients, and then billing the federal government for such avoidable waste. The government had elected not to intervene in the lawsuit despite two years of investigating. c. MetLife Home Loans LLC. MetLife has agreed to pay $123.5 million to resolve allegations that MetLife Bank violated the FCA by knowingly originating and underwriting mortgage loans insured by the Federal Housing Administration that did not meet applicable requirements. d. UFC Aerospace. The aerospace supply chain company and its former president agreed to pay $20 million to resolve a suit alleging that the company fraudulently said it was a women-owned small business in order to procure $48 million in government contract

Co-Authors: Robert Rhoad, W. Stanfield Johnson.

What The DC Circ.’s KBR Decision Means For Compliance,” Law360

admin on July 7, 2014

Almost every major regulatory regime relies on a basic principle of law enforcement policy that, by creating incentives for self-policing, companies are more likely to adopt effective compliance. This notion inexorably depends upon the certainty that the protections afforded by the attorney-client privilege and related privileges are available. In Barko, U.S. District Court Judge James Gwin recently issued an alarming order granting a motion to compel that threatened to destabilize the bedrock principles of privilege.[1] Fortunately, however, the D.C. Circuit has now vacated Judge Gwin’s opinion, restoring — at least temporarily — stability to corporate compliance programs.[2] The tenet that protecting privilege encourages corporate compliance has been widely recognized, from the U.S. Department of Justice,[3] to the United States Supreme Court in Upjohn Co. v. United States, 449 U.S. 383 (1981). It was the principles underlying the Supreme Court’s decision in Upjohn that were threatened by the D.C. district court’s recent decision in Barko. Although the D.C. Circuit has now vacated Judge Gwin’s opinion, counsel for the relator in Barko has made it clear that he will appeal the circuit court’s decision. This article addresses the unintended consequences that will likely result if the relator is successful and the D.C. Circuit’s decision in Barko is reversed by the circuit en banc. Barko is a False Claims Act case alleging, among other things, that the KBR Inc. defendants overcharged the U.S. Army for services performed in Iraq under the Logistics Civil Augmentation Program (“LOGCAP III”) contract. Specifically, Barko, the relator, alleged that KBR incurred excessive and fraudulent costs on work performed by its subcontractor, Dauod and Partners (“D&P”), which it then passed on to the Army. The government declined to intervene in the case, and the relator proceeded to pursue the case under the FCA’s qui tam provisions.

Co-Authors: Andy Liu, Brian Miller.

View From Crowell & Moring: The False Claims Act—Varied Approaches in Applying the Public Disclosure Bar,” Bloomberg BNA Federal Contracts Report

admin on May 24, 2014

Recent cases have highlighted differing approaches as to how to apply the False Claims Act’s public disclosure bar in light of its amendment in 2010, and leave open several questions as to whether the amended bar will be applied in a given case and how that affects defense strategy. The FCA’s ‘‘public disclosure bar’’ precludes whistle blowers from bringing allegations that have already been made public unless they are an ‘‘original source.’’ The bar was substantially amended in March 2010, narrowing the circumstances in which it applies, while also appearing to grant the government the power to ‘‘veto’’ the bar’s application in a case altogether. But where a complaint filed today alleges conduct that took place in 2009 or earlier, should the old version of the bar apply? Because the amendments were not expressly made retroactive by Congress, it would appear that a court would need to analyze whether applying the amended bar to conduct predating its enactment would have an impermissible retrospective effect.

Co-Authors: Andy Liu, Brian T. McLaughlin, Jason C. Lynch.

Cybersecurity for Government Contractors

admin on April 14, 2014

By Robert Nichols, Susan Booth Cassidy, Anuj Vohra, Kayleigh Scalzo, and Catlin Meade

President Obama has identified “cyber threats” as “one of the gravest national security dangers that the United States faces.”1 Indeed, U.S. federal agency computer systems are subject to billions of cyber attacks every month.2 The U.S. Government does not publish statistics regarding cyber attacks on its contractors. But without a doubt, contractors face a similar proliferation of attempted breaches to their information systems. The U.S. Government and its contractors are frequent cyber targets in part because the Government “is the largest single producer, collector, consumer, and disseminator of information in the United States and perhaps the world.”3 This repository of information includes highly classified national security secrets, details on the operations and security systems of the nation’s critical infrastructure, public- and private-sector intellectual property, and the personal information of private individuals. Such data are often stored on or flow through contractor systems, which increasingly are tied to Government information technology (IT) networks. The Legislative and Executive Branches have responded by issuing various laws, regulations, policies, and guidance that apply to federal agencies and, increasingly, to contractors.

FEATURE COMMENT: How to Protect Internal Investigation Materials from Disclosure,” The Government Contractor, Vol. 56, No. 14

admin on April 9, 2014

A bizarre and unexpected event occurred, as frequently happens, in our nation’s capital: A Federal court ordered defense contractor Kellogg Brown and Root Inc. (KBR) to produce internal investigative reports from its law department. Although the reports were prepared at the direction and supervision of counsel, initiated in response to employee complaints of contracting fraud, and kept under lock and key in a legal department file cabinet, the court concluded that they were not privileged and had to be produced to the relator in a qui tam False Claims Act case. Although the court in Barko may have misinterpreted the law, and the ruling may ultimately be vacated, the decision should be carefully considered, as changes may be necessary to the way in which companies—and not just Government contractors—conduct internal investigations to avoid the same fate. With some strategic, practical changes recommended below, companies can lay the foundation for protecting their internal investigation materials, e.g., witness interview summaries, from compelled disclosure. Barko’s Case—This saga began in 2005 when Barko filed an FCA action alleging that KBR overcharged the U.S. Army for services performed in Iraq under the Logistics Civil Augmentation Program (LOGCAP III) contract. In short, Barko alleged that KBR incurred excessive and fraudulent subcontractor costs on work performed by its subcontractor, Daoud and Partners (D&P), and then knowingly passed those costs on to the Army. Barko alleged, inter alia, that D&P—which was based in Jordan and was retained to build and staff laundry facilities, build wells, and construct a dormitory—received favoritism in the procurement process, overcharged KBR, and performed poorly. After conducting its investigation, the Government declined to intervene, and the qui tam case was unsealed in 2009.

Co-Authors: Andy Liu, Gail D. Zirkelbach, Jonathan Cone.

Ten FCA Decisions From 2013 That Government Contractors Need To Know,” The Government Contractor, Vol. 56, No. 8

admin on February 26, 2014

FEATURE COMMENT: Ten FCA Decisions From 2013 That Government Contractors Need To Know While the U.S. Supreme Court did not issue a single decision addressing the False Claims Act, 2013 saw a flurry of activity in the lower courts, especially the Court of Appeals for the Fourth Circuit. Some of these decisions reined in attempts to broaden the FCA. The Fourth Circuit, for example, refused to relax the pleading requirements for a qui tam relator who could not identify even one allegedly false claim. And the Seventh Circuit rejected an approach to calculating damages favored by the Government that would have led to outsized jury awards and settlements. These were welcome cases for contractors. But many of the decisions—in no small part because of the recent amendments to the statute—effectively broaden the FCA’s reach, creating increased risk for Government contractors. In a decision that may soon be addressed by the Supreme Court, the Fourth Circuit held that the Wartime Suspension of Limitations Act (WSLA) extends to the FCA, effectively tolling its statute of limitations indefinitely. In another decision, the Fourth Circuit concluded that statutory penalties of $24 million on a contract worth slightly more than $3 million does not constitute an unconstitutional “excessive fine,” even though there was no finding that the Government had suffered any harm. And the Second Circuit left open the possibility that in-house counsel may be whistleblowers against their own clients using confidential information gained during their employment.

Co-Authors: Andy Liu, Jonathan Cone, Olivia Lynch.

Myth-Busting the LPTA Conundrum

admin on December 18, 2013

As fiscal pressures grow and agency budgets shrink, contractors are increasingly facing lowest-price, technically acceptable (LPTA) procurements. Yet the procurement community has not found common ground on when and how LPTA should be used. All too often, the contracting industry, outside legal counsel, and procuring agencies are in express conflict. Consider the following: Contractors. Industry-oriented letters and white papers criticize agencies for using LPTA to procure sophisticated, vaguely defined, missionessential supplies and services. E.g., “The Challenge of Applying the LPTA Process to the Procurement of Complex Services” (November 2012) (TASC White Paper); Letter from Stan Soloway, President and CEO, Prof’l Servs. Council, to Hon. Frank Kendall, Undersec’y of Def. (Acquisition, Technology and Logistics) (Sept. 26, 2012). Outside legal counsel. Representing frustrated contractors, outside counsel use bid protests to challenge LPTA methodologies—an adversarial tactic that can backfire, harming clients’ customer relations and setting bad precedent for the industry. E.g., Grant Thornton, LLP, Comp. Gen. Dec. B-408464, 2013 CPD 238; PDL Toll, Comp. Gen. Dec. B-402970, 2010 CPD 191; Crewzers Fire Crew Transport, Inc., Comp. Gen. Dec. B-402530, 2010 CPD 117. Procuring agencies. On the one hand, agencies might acknowledge that LPTA has limitations. E.g., “Implementation Directive for Better Buying Power 2.0—Achieving Greater Buying Efficiency and Productivity in Defense Spending,” Memorandum from Under Sec’y of Def. (AT&L) (April 24, 2013)

Contractor Responsibility: Toward an Integrated Approach to Legal Risk Management

admin on March 14, 2013

By Steven A. Shaw, Mike Wagner, and Robert Nichols

In this era of heightened Government demands for contractor responsibility, Government contractors face myriad risks. The authors of this Briefing Paper have been involved, in one capacity or another, in some of the largest Government enforcement actions facing contractors. They have prosecuted and defended criminal and civil actions against contractors, negotiated the resolution of civil actions involving substantial fines and penalties, and handled suspension and debarment actions with multi-billion dollar contracting implications. They have also seen shareholder suits against board members and executives and have witnessed c-suite executives lose their jobs (and a few companies go out of business) due to their failures to comprehend and manage the risks relating to contractor responsibility. This Briefing Paper is designed as a guide for Government contractors—including their boards of directors, c-suite executives, and legal counsel who bear fiduciary duties for managing corporate risks— for undertaking risk management strategies to avoid such problems. In the 1980s, “Operation Ill Wind” exposed widespread corruption by U.S. Government officials and defense contractors. The scandal, which resulted in the conviction of over 100 contractors and individuals, is often cited as the defining moment for increased contractor responsibility.