Even before the assistant U.S. Attorney for
eastern Virginia spoke at the Fairfax County, Va., Chamber of Commerce event
Tuesday morning, the news was sobering for contractors.
Gerard
Mene is the coordinator of the Affirmative Civil
Enforcement program in the U.S. Attorney’s office that covers half of
Virginia, including Northern Virginia, Richmond and Norfolk. It goes without
saying that he sees a lot of cases involving contractors and False Claims Act
allegations.
He
offered insights into how the act is working, and into the rise of Qui Tam
cases, a.k.a. whistleblower cases, as part of a panel on compliance trends at
the chamber’s
annual government contractor symposium.
One
thing was clear: Whistleblowers always go to their companies first, looking to
report their fraud or other wrongdoing they’ve seen.
“There
either was no one to tell, or they told and the company didn’t do anything,”
Mene said.
John
Brownlee, a partner with the law firm Holland & Knight, laid the ground
work for why whistleblower lawsuits are a growing concern for contractors.
The
numbers don’t lie: In 2009, there were 433 Qui Tam cases. In 2012, the number
was 782. Of non-Qui Tam cases, the number was 132 in 2009, compared to 135 in
2012.
The
dollars also should raise fears: $2 billion in Qui Tam settlements in 2009;
$3.4 billion in 2012.
The
takeaway from the panel, which also included executives from CACI
International, Grant Thornton and Booz Allen Hamilton, was that contractors need
robust compliance programs.
Hearing
Mene talk, you could tell he loves whistleblower cases. “They lead to the
largest settlements,” he said.
They
also are strong cases because the whistleblower usually is either is an eyewitness
to the wrongdoing, or participated in some way, he said.
While
Mene said he doesn’t focus on a compliance program, companies are better served
if they can show they investigated the allegation on their own, and will share
that result. “The dialogue can be much different,” he said.
But,
for him, the focus is how much did the government pay under false pretenses?
“It’s all about the money,” he said.
False
Claims actions aren’t the only compliance issue. There are Defense Contract
Audit Agency audits, which right now are mired down by a backlog. Currently,
they closing out contract audits from 2006, panelists said.
A
big focus is on checking whether the contractor employees that are doing the
work actually have the qualification described in the contractor’s proposal.
DCAA
is moving toward a more risk-based approach for deciding how deep of an audit
to conduct, which again points to the need for having a strong compliance
program.
The
current philosophy for working with DCAA is to be as cooperative and helpful as
possible, said Julian Rosenberg, director of government contract services for
the accounting firm Grant Thornton.
“If
you have internal audit reports share them. Include your corrective action
plan. Show them the actions you’ve taken,” he said. There is no reason not to.
But
whether it is to fight off a Qui Tam suit or a DCAA audit, compliance and
ethics start at the top of a company, but have to quickly move down to middle
management, said Douglas Manya, vice president, deputy general counsel and secretary
at Booz Allen.
“Your
managers have to walk the walk,” he said. “That’s where the rubber meets the road.”
One
example he described was to have new employees sign a certification that they
will not bring proprietary information from their former employer, whether it
is the government or another contractor.
“Your
manager has to look them in the eye and say, ‘We don’t want information from your
former employer,’” he said.
The
current environment between contractors and government regulators is
“unfortunately one of mutual suspicion and distrust,” Manya said.
But
the lesson from Manya and the other panelists is that contractors can take
steps to mitigate the risk from such an environment.
As
he said, the focus of a compliance program should be on communication, controls
and collaboration.
