14 Jun 2008 in Legal Perspective
Not long ago, I responded to a comment about fraud and misconduct not being reported, with reflections on the history of the defense industry and the Qui Tam amendments to the 1986 U.S. False Claims Act. This week, in ALLISON ENGINE COMPANY, INC., et al., PETITIONERS v. UNITED STATES ex rel. ROGER L. SANDERS and ROGER L. THACKER, the U.S. Supreme Court made news when it voted unanimously in favor of restricting the whistleblower provisions of the False Claims Act. The bottom-line appears to be that whistleblowers will not be rewarded, if they cannot prove the false claim was a key factor in the Government's decision to make payment.
Probably good law, but not good sense.
Not long ago, I responded to a comment about fraud and misconduct not being reported, with reflections on the history of the defense industry and the Qui Tam amendments to the 1986 U.S. False Claims Act. This week, in ALLISON ENGINE COMPANY, INC., et al., PETITIONERS v. UNITED STATES ex rel. ROGER L. SANDERS and ROGER L. THACKER, the U.S. Supreme Court made news when it voted unanimously in favor of restricting the whistleblower provisions of the False Claims Act. The bottom-line appears to be that whistleblowers will not be rewarded, if they cannot prove the false claim was a key factor in the Government's decision to make payment.
Probably good law, but not good sense.
From both sides now:
This decision goes to the heart of the problem with using the blunt instruments of law enforcement to regulate conduct in dynamic business environments. The whistle-blowers believed truth-telling should count in check-box compliance, when apparently everyone else knows untruths in compliance paperwork do not much matter.
Government contracting is an impossible morass and getting worse. Clearly, not all contract requirements are material, and modifications are often undocumented and made on the fly. The proverbial red-tape associated with government acquisitions, with a wink and a nod from officials desperate to get their jobs done, has made false statements on federal paperwork part of the DNA of federal contracting. The truth is that if all requirements were material, and all modification were documented, many critical projects would never be completed.
No wonder that Washington, in general, and federal contractors, in particular, are held in such low regard.
In ruling that a whistleblower must prove not only that the company made a false statement, but also that the false statement had a material effect on the Government’s decision to pay the fraudulent claim, the Supreme Court raised new barriers for whistleblowers motivated principally by financial gain. It remains to be seen how high a hurdle this materiality standard presents, but it may well reduce False Claims Act reporting, by reducing the likelihood of sharing in 15 to 30 percent of the government's recovery.
What is clear to this former federal official is that while, arguably, the ALLISON decision may be good law, because it is consistent with precedent and strict statutory construction, it is one more example of the judiciary being the wrong branch of government to solve complex policy problems.
That the degree of fiduciary duty due the American people by major government contractors should be more rigorous than the standards applied to just ‘anyone receiving federal financial assistance and supervision’ is common sense.
In ALLISON the Court relied upon the earlier decision in TANNER V. UNITED STATES, 483 U. S. 107 (1987), where the court held that a conspiracy to defraud a federally funded private entity does not constitute a “conspiracy to defraud the United States” under 18 U. S. C. §371. Id., at 129.) No doubt, the Government’s argument in TANNER -- that any recipient of federal financial assistance and the subject of federal supervision may itself be treated as “the United States” -- went too far.
Doesn't the American public have the right to expect and to require that major federal contractors, which conduct more and more of the government’s business, meet the highest ethical standards? Integrity cannot be determined or ensured by the legal parsing of increasingly complex regulatory requirements. The value of honesty and transparency has been lost among the multi-layers of inconsistent compliance and paperwork requirements.
Government contracting requirements and the host of existing whistleblower provisions require real reform. Truth should always be a material factor, facts matter but requirements also need to make sense. It is hard to conceive of a system less likely to produce ethical conduct than the current Rube Goldberg mess of sanction oriented requirements so very often honored in the breech.
What do you think?
GM
