false claims act and other enforcement tools presented by leigh manasevit, esq....

False Claims Act and Other Enforcement

Tools

Presented by

Leigh Manasevit, Esq.

[email protected]

Brustein & Manasevit, PLLC

www.bruman.com

Spring Forum 2013

1 Brustein & Manasevit, PLLC

The False Claims Act, 31 U.S.C. §§ 3729-3733 (as amended)

Liability of person, entity, or local or state government who: (1) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval, or (2) who knowingly makes, uses or causes to be made or used, a false or fraudulent claim. 31 U.S.C. §§ 3729 (a) (1) (A)-(B)

Under the FCA, “knowingly” means:

1) Actual knowledge of the information, or

2) Deliberate ignorance of the truth or falsity of the information, or

3) Reckless disregard of the truth or falsity of the information, and

4) No proof of specific intent to defraud is required.


The False Claims Act, 31 U.S.C.§§ 3729-3733 (as amended)

A “claim” is “any request or demand, whether under and contract or otherwise, for money or property…that is presented to an officer, employee, or agent of the United States, or is made to a contractor, grantee, or other recipient, if the money or property is to be spent or used on the Government’s behalf or to advance a Government program or interest…”


Types of Claims

Draw downs on a grant Draws on a letter of credit Submission of vouchers Submission of counts of eligible recipients


Types of Claims

Unlike an audit where auditee must prove allowability –

U.S. must prove– Preponderance of the evidence– Means more than 51%


Penalties

Treble Damages x Actual Harm

AND

Penalty $5,500 to $11,000 Per Claim


Example 1

Grantee receives a $1,000,000 competitive grant

Program has a match requirement Match information is falsified by the person

responsible for the grant


Penalty: To Agency

Irrelevant that agency unaware of the falsehood 3 times amount of grant 3 x $1,000,000 =

$3,000,000 Grantee drew down funds in 10 equal

installments of $100,000 Each draw = 1 claim at $5,500 to $11,000 Range $55,000 to $110,000 Total Penalty: $3,000,000 $3,000,000

55,000 to 110,000 $3,055,000 $3,110,000


Example 2

Grantee runs a migrant program Employees of grantee falsify eligibility

statements Head of migrant program aware of irregularities 0 students eligible Higher level officials not aware of 0 eligibility but

have ignored irregularities Penalty –

– Total Grant x 3 plus– Total Draws x $5,500 to $11,000


Example 3

District has unemployment and workers comp insurance

Charges are allowable to federal programs in proportion to salary/employees in the fed programs (allocability)

District receives discount on policies District internally continues to use higher percentage

rates to charge federal programs, giving discount benefit to local programs cost to non-federal

Damages overcharges x 3 Plus penalty for each draw


Example 3 (cont…)

Self discovery and self reporting – No defense, although better settlement possibility

Self discovery and self reporting within 30 days of discovery can lower penalty from 3x to 2x


GEPAEDGARNCLB enforcement provisions

Administrative Enforcement Tools:


GEPA:General Education Provisions Act

Part D – Enforcement (Sections 451-460) Establishes:

– Office of Administrative Law Judges (OALJ)– Rules for Recovery of Funds, Measure of

Recovery, Remedies, Withholding, Compliance Agreements, Judicial Review, and Use of Recovered Funds


GEPA - continued

Recovery of Funds: to return funds that were not allowable, not accounted for properly

PDD/PDL: may be based on audit report, investigative report, monitoring report, or other evidence

Once PDD/PDL issues, statute of limitations is tolled. 60 days to submit application for review.

Establishes appeal and procedural rules


GEPA - continued

Measure of Recovery: – Harm to the Federal Interest (proportionate

recovery)– Critical protection


Example 1

Grantee begins obligating funds one day before approval

Obligations violate EDGAR rules on timing only

Obligations would have been allowable one day later

No harm to the federal interest


Example 2

Migrant Program Funds spent on ineligible students – i.e., not meeting definition of migrant

Automatic harm to the federal interest


Example 3

Expenditure requires prior approval of grantor agency

Grantee did not get prior approval Critical – prior approval would have been

granted, i.e. allowable expenditure No harm to the federal interest


Mitigating Circumstances

Erroneous written guidance from ED– Specific written request– Guidance from authorized ED official– Actual reliance– Reliance reasonable


Mitigating Circumstances

Failure to provide timely guidance– Written request – Address provided by ED– Request describes practice– Includes necessary facts– Certification: Chief Legal Officer

State: Legal Under Federal and State Law

No response within 90 days


GEPA - continued

Remedies for Existing Violations:– Withhold payments– Cease and desist order– Compliance Agreement– “Any other action” authorized by law

Can always seek to recover funds for misexpenditures in addition to above


GEPA - continued

Withholding: Secretary may withhold from a recipient, in whole or in part, further payments (including payments for administrative costs) under an applicable programs

Before withholding, ED must notify in writing:– Intent to withhold– Factual and legal basis for belief of failure to

substantially comply– Opportunity for a hearing


GEPA - continued

Cease and desist orders– Written notification– Opportunity for hearing– Can enforce final order by withholding– Can certify facts to AG


GEPA - continued

Compliance AgreementsPurpose: To bring recipient into compliance with requirements

as soon as feasible (not longer than 3 years) – Public hearing before entering into agreement– Publish findings of hearings and substance of compliance

agreement in Federal Register – Failure to comply with terms of compliance agreement

can determine agreement is no longer in effect – can take any other action


Compliance Agreements

USDE has been using as enforcement tool

Scope can vary greatly (discrete issues vs. multiple ED programs)

Program, Administrative or Both



Several states currently in compliance agreements



Can be used with other remedies

Jan 19 letter: if system not approved– use compliance agreement, in addition to

withholding or mandatory oversight status

Will generally lead to more favorable treatment by ED


EDGAR: Education Department General Administrative Regulations

• Contains state administered program rules

• Uniform administrative requirements – pre- and post-award requirements, state plans, financial management standards, etc.


EDGAR

Authority for designating grantee as “high-risk”

34 CFR 80.12


High-Risk Grantees

1) History of unsatisfactory performance

2) Not financially stable

3) Management system does not meet standards

4) Has not conformed to terms of previous awards

5) Is otherwise not responsible

can place special conditions or restrictions30 Brustein & Manasevit, PLLC

High-Risk Grantees: Special Conditions

Special conditions may include:– Payment on reimbursement basis– Withholding authority to proceed until acceptable

performance– Requiring more detailed financial reports– Additional project monitoring– Requiring additional TA or managerial assistance– Establishing additional prior approvals– Require an external third party to

a) Approve expenditures orb) Actually mange the funds31 Brustein & Manasevit, PLLC

Special Conditions

If special conditions, ED must notify in writing:– Nature of the special conditions – Reasons for imposing them– Corrective actions that must be taken

before removed and the time allowed for corrective actions

– Method of requesting reconsideration32 Brustein & Manasevit, PLLC

NCLB enforcement provisions

Throughout statute – most reference GEPA

USDE interprets some enforcement provisions, such as withholding of administrative funds, as outside of GEPA protections


How is non-compliance discovered?

Single Audits

OIG Audits

Program Monitoring

Disclosure/Reporting


Single Audits

Required if expend more than $500K

Pressure on ED to ensure high-quality single audits – See OIG Priorities for 2010-2011

Pressure on ED to monitor single audit findings more carefully


Single Audits

State to review and resolve if no resolution PDL from ED possible


Office of Inspector General – 2011 Workplan Priorities – Partial Listhttp://www2.ed.gov/about/offices/list/oig/misc/wp2011.pdf

Subrecipient use of Recovery Act Funds SEA award and monitoring of SIG grants RTT Investing in Innovation (i3) SFSF IDEA MOE


Office of Inspector General – 2011 Workplan Priorities – Partial Listhttp://www2.ed.gov/about/offices/list/oig/misc/wp2011.pdf

Competitive ESEA grants Charter School Program 21st CCLC High Risk Grantees Oversight of Single Auditors ED’s audit resolution process


OIG Audits - Structure

Entrance conference Audit work Exit conference

– Scope of audit can change– Document requests quite detailed


OIG Audits - Enforcement

Recommendations to ED– Disallow expenditures– Require supporting documentation


OIG - Investigations

Initiated where there is wrong doing suspected. Can be based on:– Tip (including hotline)– News article– Concern from ED program– Concern from other law enforcement– Serious audit findings



More formal than audit Far more serious May involve FBI and Grand Jury as well



May result in False Claims Act charges In most serious cases – may result in criminal

prosecution


Department of Education Program Monitoring

Streamlined Increasingly focused on accountability Less emphasis on technical assistance Uncertain how monitoring relates to single

audits – appears to be of different importance in different states/entities

Student Achievement and School Accountability Office (SASA)– Focus only on SIG this year44 Brustein & Manasevit, PLLC

Program Monitoring: Reengineered System

Focus: Accountability Instructional support Fiduciary responsibility


Monitoring Schedule

Three year cycle 17-18 states per year Cycle: 10/1 – 9/30 Will go out of cycle if compliance problems Draft monitoring plan developed by ED


Program Monitoring

Team: 5-6 SASA members On-site 4-5 days Interview SEA/LEA staff, principals, teachers,

parents, other stakeholders 2-3 follow-up conference calls


Monitoring Feedback

Report for internal use Monitoring report within 30 business days SEA response


US ED SASA Monitoring – Top Ten Findings in Frequency

1. Private Schools– consultation– failure to evaluate– failure to maintain

control– contracting– student selection

(not based on poverty!!!)

2. Parental Involvement

– 95% of reservation to schools

– equitable participation

3. Parental Involvement

– Choice/SES notifications

– teacher qualifications49 Brustein & Manasevit, PLLC

Top Ten Findings (cont…)

4. Fiscal– comparability– supplanting– time and effort

5. District Report Cards– missing elements

6. Choice– options not on website

7. State Report Cards– missing elements


State Monitoring

“Overarching requirement” – SEA subrecipient monitoring


State Monitoring

Process varies Should:

– Risk based resolution process


QUESTIONS


This presentation is intended solely to provide general information and does not constitute legal advice. Attendance at the

presentation or later review of these printed materials does not create an attorney-client relationship with Brustein & Manasevit,

PLLC. You should not take any action based upon any information in this presentation without first consulting legal counsel familiar

with your particular circumstances.


Disclaimer

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