Malyszek & Malyszek
Gross Trebling vs. Net Trebling
What is Gross Trebling?
Gross Trebling is the Department of Justice’s preferred methodology for calculating treble damages under the False Claims Act. It involves first trebling ( tripling) the false claim amount and then deducting the value of the goods and services provided(aka “value of benefit conferred”). This methodology severely reduces the value of any value received by the government, reducing the impact of the defense of “benefit conferred”.
What is Net Trebling?
Net Trebling provides a more fair picture of the government’s actual damages by taking into account the actual damages sustained by the government due to the FCA violation by accounting for the value of benefit conferring prior to trebling.
What happened on March 21, 2013?
The Seventh Circuit rejected the Department of Justice’s preferred methodology of gross trebling, emphasizing that FCA damages should be calculated according to the net trebling methodology. See United States v. Anchor Mortgage Corp., No. 10-3122, 2013 WL 1150213 (7th Cir. 2013). The Seventh Circuit held that the Department of Justice’s choice of gross trebling is not sustained by policy or statutory language, and is relying on a misinterpretation of United States vs. Bornstein, 423 U.S. 303 (1976).
The Seventh district refused to follow the Ninth Circuit decision in United States v. Eghbal, 548 F.3d 1281 ( 9th Cir. 2008), citing the Ninth Circuits failure to address note 13 in Bornstein. Instead, the Seventh Circuit found support in numerous post- Bornstein appellate decisions, including the Second Circuit’s recent decision in United States ex rel. Feldman v. Van Gorp, 697 F.3d 78 (2d Cir. 2012), generally using a net trebling approach.
Intermountain Health Care Inc. is a non-profit health care organization and the principal health care provider in the state of Utah. On April 3, 2013, the Department of Justice announced that Intermountain agreed to pay the United States Government $25.5 million to settle allegations under both the False Claims Act and the Stark Statute. These violations were self-disclosed by Intermountain and involved fostering improper pecuniary relationships with referring physicians.
Fluor Hanford LLC is a contractor for the Department of Energy and performs management and engineering services at the DOE’s Hanford Nuclear Site in eastern Washington. Between 2005 and 2009, Fluor was contracted by the DOE to manage and operate the Hazardous Materials Management and Emergency Response (HAMMER) center. As of April 3, 2013, Fluor Hanford agreed to pay $1.1 million to settle allegations it had violated the False Claims Act by using federal funds for lobbying. The Department of Justice alleges that Fluor used federal funding to lobby Congress and other federal officials to increase funding for the HAMMER Center, violating both the false claims act and the Byrd Amendment, which prohibits the use of federal funds for lobbying. The allegations against Fluor were initiated by a whistleblower law suit filed under the False Claims Act by a former employee of Fluor, Loydene Rambo.
**Source: Department of Justice **
Carol Schroeder, former employee of CH2M Hill, filed a whistleblower lawsuit under the False Claims Act against his former employee – a lawsuit resulting in an $18.5 Million Settlement.
On March 7, 2013, the Department of Justice, along with the U.S. Attorney’s Office for the Eastern District of Washington, announced that Colorado-based CH2M hill Hanford Group Inc. ( CHG) and its parent company, CH2M Hill Companies Ltd (CH2M Hill) admitted to criminal and civil violations of the False Claims Act by practicing widespread time card fraud over a span of years.
In an effort to resolve civil and criminal liability, CH2M Hill will pay $18.5 million, assent to a corporate monitor, designate another $500,000 towards accountability systems, and continue to cooperate with the ongoing fraud investigation.
The agreed statement of facts provides that “ [c]ertain members of CHG’s upper management, certain direct supervisors of hourly employees, and other certain supervisory personnel, did not discipline, formally or informally, CHG hourly workers for routinely engaging in known time card fraud. In fact, certain of CHG’s direct supervisors of hourly workers engaged in patterns designed to avoid the detection of the routine time card fraud by law enforcement and internal auditors.” Given these admissions, CHC “ knowingly, willfully, and with intent to defraud, facilitated CHG’s hourly workers routinely getting paid for hours they did not work and combined, conspired, and agreed with CHG hourly workers to accomplish the same, all at the sole expense of the citizens of the United States.”
On March 7, 2013, The Department of Justice announced that Anixter International Inc., Corning Cable Systems LLC, and American Systems Corporation agreed to pay the United States $3 million to settle allegations that they violated the Anti-Kickback Act and the False Claims Act in bidding on a contract with the CIA.
This claim stems from a 2009 CIA contract to provide supplies and services, awarded to American Systems. American Systems teamed with Anixter to bid on the contract and brought Corning Cable Systems in as a supplier.
The allegations state that all three contractors provided gratuities including gifts and tickets to sporting and other events, entertainment, and meals to outside consultants and CIA employees in order to “ influence contract specifications that would favor the three companies in the award of a contract.”
Additionally, the $3 million settles allegation that the three contractors inappropriately received source selection information from a CIA employee by providing gratuities, and that said gratuities had been concealed prior to the award.
William Jones, former Anixter sales representative, filed a whistleblower lawsuit resulting in this $3 million settlement. As a Qui Tam Realtor, Jones will receive $585,000 as his share of the government’s recovery.
On March 8, 2013 the Department of Justice announced that Corning Incorporated agreed to pay the United States Government $5.65 million to settle allegations of False Claims Act violations. Specifically, that both during the contract negotiation of a General Services Administration’s (GSA) Multiple Award Schedule (MAS) program and during the contract’s administration, “Corning knowingly failed to meet its contractual obligations to provide GSA with current, accurate and complete information about its commercial sales practices, including discounts offered to other customers, and that corning knowingly made false statements to GSA about its sales practices and discounts.”
The settlement also resolves allegation that Corning “ knowingly failed to comply with the price reduction clause of its GSA contract by failing to disclose to GSA discounts Corning gave to its commercial customers when they were higher than the discounts that Corning had disclosed to GSA, and by failing to pass those discounts on to government customers.” As a result, the United States Government purported it received lower discounts and ultimately paid significantly more than it should have for Corning products.
The allegations were initially brought in a lawsuit filed by former Corning Life Sciences sales representative Kevin Jones, under he qui tam provisions of the False Claims Act. Mr. Jones will receive $904,000 as his share of the government’s recovery.