Over the last few weeks, the Department of Justice (“DOJ”) announced nearly $25 million in False Claims Act (“FCA”) settlements, with whistleblowers receiving at least $2.8 million in awards. The FCA’s qui tam provisions allow a private individual, who has inside knowledge of fraud resulting in a financial loss to the United States Government, to file an FCA lawsuit on behalf of the United States in federal court.
The government can choose to intervene and take over the primary litigation role in an FCA case or, if not, the whistleblower, known as a relator, may continue with the case on their own. Once the United States recovers any damages in the case, the relator is eligible for a reward of between 15-30% of the total amount recovered. The recently announced FCA settlements involve fraud against the government in several industries, including higher education, construction, disaster relief, and healthcare.
On May 22, the DOJ announced it had settled FCA allegations against the University of San Francisco (“USF”) for roughly $2.5 million, of which the qui tam whistleblower who initiated the case will receive a so-far undetermined award. USF allegedly submitted false claims under a federal grant program which was supposed to be used to subsidize USF teaching students who volunteered as teaching apprentices in high-needs schools in San Francisco. However, in order to meet certain grant requirements, the director of the USF program allegedly “falsified over 1,500 timesheets and falsely certified approximately 61 education awards during the 2014, 2015, and 2016 grant years” to fraudulently received “more than $1.7 million in federal grant funds.”
After it became aware of the allegations, USF voluntarily relinquished the grant money and cooperated fully with the investigation, which DOJ took into consideration when agreeing to the settlement amount. The Inspector General for the federal department in charge of the grants commended the relator in the case by saying, “[o]ne whistleblower stepped forward to expose a brazen fraud. Our thanks go to him . . . .”
Two separate FCA cases which involved construction contracts under federal set-aside contracting programs also settled. The federal government has multiple set-aside programs through which contracts for federal construction jobs are granted only to qualified contractors, such as minority-owned or women-owned contractors. In these two cases, the contracts at issue were set-aside for disadvantaged small businesses.
On May 27, the DOJ announced that Williams Brothers Construction Inc. (“WBCI”) had agreed to settle, for $1 million, allegations that it defrauded a Federal Aviation Administration (“FAA”) construction grant program. WBCI received federal grant money from the FAA to build a new terminal at the Peoria International Airport in Illinois. However, as part of the requirements to receive the grant, WBCI was supposed to subcontract work to a small disadvantaged business. Instead, WBCI allegedly made false representations that a small disadvantaged business performed window, glazing, and curtain wall work.
However, WBCI allegedly subcontracted that work to a non-qualified business and used the small business as a pass-through to hide its noncompliance. Second, on June 2, Ross Group Construction Corporation (“Ross Group”) of Tulsa, Oklahoma reached an agreement with the DOJ to pay $2.8 million to resolve an FCA case alleging that it obtained several small business set-aside contracts through fraudulent front companies. The whistleblower who originally brought this case will receive a whistleblower award of $520,000. Ross Group itself was not eligible to receive disadvantaged small business set-aside contracts under the United States Small Business Administration’s (“SBA”) criteria, so it allegedly created two front companies that could meet the requirements. However, since Ross Group allegedly maintained “operational control over the day-to-day and long-term management decisions” of these two companies, and hid this fact from the government, they were likewise ineligible to receive the set-aside contracts.
The next FCA settlement, announced by the DOJ on June 2 and worth $5 million, involved allegations against the Mississippi Department of Health Services for its role in administering the federal Supplemental Nutrition Assistance Program (“SNAP”), previously known as the Food Stamp program. Mississippi is the sixth state to settle similar FCA claims, which all stem from states contracting with Julie Osnes Consulting, LLC (“Osnes Consulting”), to “provide advice and recommendations designed to lower [their] SNAP quality control error rate[s].” However, when implemented by Mississippi, the recommendations of Osnes Consulting, which also previously settled FCA allegations, allegedly “injected bias into quality control process,” which eventually led to Mississippi submitting false claims containing the tainted data.
The false data in these claims allowed Mississippi to receive undeserved SNAP performance bonuses from the federal government. All told, $41 million has been recovered by the United States so far in FCA settlements regarding this scheme.
Finally, the United States agreed to intervene in an FCA case against the Californian architecture and engineering firm AECOM and several disaster relief applicants alleging they submitted false claims to the Federal Emergency Management Agency (“FEMA”) for the repair of facilities after Hurricane Katrina. FEMA provided federal funds to schools and universities to repair facilities damaged by Hurricane Katrina, and AECOM worked as a technical assistance contractor in support of FEMA.
AECOM was “responsible for conducting site evaluations and preparing and reviewing damage and repair estimates used to determine whether applicants were eligible for” FEMA funds. However, the FCA lawsuit alleges that AECOM, who received over $300 million of such funds from FEMA, knowingly submitted false claims on behalf of the schools and universities, which included “inflated repair estimates and other false information that improperly increased funding for applicants.” AECOM allegedly became aware of the systematic fraud which was occurring but did not inform the government. Alongside its announcement to intervene, the DOJ announced a $12 million settlement with one of the defendants, Xavier University of Louisiana, which repaired its facilities using the funds.
Robert Romero, an AECOM Project Specialist and the whistleblower who filed the qui tam FCA case will receive $2.3 million of the Xavier University of Louisiana settlement as an award. The case against AECOM and the remaining defendants will continue with the United States taking over the primary litigation role from Mr. Romero.