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COVID-19 and the False Claims Act: Recipients of Federal Funds Need to Be Vigilant About Compliance

March 24, 2020

Federal funds

Households and businesses across the country continue to take safety precautions in response to the COVID-19 pandemic. At the same time, the federal government is preparing an unprecedented federal response to the health, safety and economic challenges. In the coming weeks, we expect a wide variety of private businesses to partner with federal agencies and receive funds to address the health crisis. Federal funds will flow to businesses involved in the manufacture and delivery of medical equipment, the construction of temporary health care facilities, the provision of household goods to overcome supply chain interruptions, and the manufacture of sanitizers, soaps, and masks, to name just a few. Additionally, the federal government may seek to stabilize the economy by providing direct assistance in the form of loans or cash payments to affected businesses.

As businesses consider opportunities to partner with the federal government in its relief efforts, they should be mindful of the importance to provide accurate information. There are potentially serious consequences for making a false statement to obtain a government contract or to obtain payment under a federal program. The False Claims Act prohibits, among other things, presenting a false claim for payment; using a false record in connection with a federal claim; and falsely certifying the type or amount of property provided to the federal government. As a result, any materially false statement or record provided in applying for a government contract or program; in submitting a claim for payment; or in certifying the amount or condition of goods creates jeopardy. It is important to keep in mind that employees who raise questions or concerns about the accuracy of information provided in connection with a federal contract may qualify as whistleblowers. Companies may violate the Act by retaliating against employees who call attention to perceived problems.

Once the country moves past the immediate crisis, the government will take a hard look at emergency payments. In the aftermath of past disasters, DOJ has created task forces to prosecute cases of waste, fraud and abuse in federal programs. In addition to False Claims Act liability, parties contracting with the government may face criminal penalties under 18 U.S.C. 1040, which prohibits fraud in connection with a major disaster or provision of emergency benefits. The maintenance of a vigorous compliance program is essential to address questions that arise about applications for federal programs or use of federal funds. Likewise, if your operations involve the use of third-party suppliers, it is important to assess and upgrade your due diligence programs.

Dykema attorneys are fully versed in the False Claims Act, and are prepared to advise clients about the FCA and practical ways to fulfill due diligence obligations and review compliance programs. If you have concerns about participating in federal programs, please contact Jonathan Feld (312-627-5680 or jfeld@dykema.com), Jason Ross (214-462-6417 or jross@dykema.com), John Dulske (210-554-5505 or jdulske@dykema.com), or your Dykema relationship attorney.

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