For a federal contractor, the certification is often where the case turns. Civil exposure may arise under 31 U.S.C. § 3729 for knowingly presenting a false or fraudulent claim; criminal exposure may arise under 18 U.S.C. § 1001 for materially false statements in a matter within federal jurisdiction; and, where federal program funds are involved, 18 U.S.C. § 666 may reach agents of the organization directly.
Waxman Litigation represents companies and their boards. Seth B. Waxman spent 13 years as an Assistant United States Attorney in the District of Columbia, including approximately eight years handling fraud and public corruption matters.
The three layers of exposure
Section 1001 can apply throughout a contractor investigation: it prohibits knowingly and willfully falsifying, concealing, or covering up a material fact, making a materially false statement or representation, or using a false writing in a matter within federal jurisdiction. The statute generally carries a maximum penalty of five years’ imprisonment.
| Layer | Statute | Nature |
|---|---|---|
| Civil false claims | 31 U.S.C. § 3729 | Civil liability, often initiated by a relator under § 3730(b) |
| False statements / certifications | 18 U.S.C. § 1001 | Criminal |
| Program fraud and bribery | 18 U.S.C. § 666 | Criminal liability that can apply to agents of organizations receiving federal program funds |
| Obstruction | 18 U.S.C. §§ 1519, 1512 | Criminal liability arising from conduct during the investigation or response |
(a) Except as otherwise provided in this section, whoever, in any matter within the jurisdiction of the executive, legislative, or judicial branch of the Government of the United States, knowingly and willfully—
(1) falsifies, conceals, or covers up by any trick, scheme, or device a material fact;
(2) makes any materially false, fictitious, or fraudulent statement or representation; or
(3) makes or uses any false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry,
shall be fined under this title, imprisoned not more than 5 years, or both, subject to the additional provisions of the statute.
Why § 666 can reach contractors
Section 666 can apply to an agent of an organization that receives qualifying federal benefits or funding. Among other conduct, the statute prohibits embezzling, stealing, obtaining by fraud, or intentionally misapplying property valued at $5,000 or more, as well as certain corrupt transactions involving the organization’s business.
(a) Whoever, if the circumstance described in subsection (b) of this section exists—
(1) being an agent of an organization, or of a State, local, or Indian tribal government, or any agency thereof—
(A) embezzles, steals, obtains by fraud, or otherwise without authority knowingly converts to the use of any person other than the rightful owner or intentionally misapplies, property that—
(i) is valued at $5,000 or more, and
(ii) is owned by, or is under the care, custody, or control of such organization, government, or agency; or
(B) corruptly solicits or demands for the benefit of any person, or accepts or agrees to accept, anything of value from any person, intending to be influenced or rewarded in connection with any business, transaction, or series of transactions of such organization, government, or agency involving any thing of value of $5,000 or more;
or
(2) corruptly gives, offers, or agrees to give anything of value to any person, with the intent to influence or reward such person in connection with such business, transaction, or series of transactions,
shall be subject to the penalties provided by the statute.
The statute is not limited to government employees. Depending on the circumstances, it can apply to an agent of an organization receiving qualifying federal benefits or funds. See public corruption.
Responding to a contractor investigation
Suspension and debarment proceed on a separate track from criminal and civil proceedings, with their own standards and timetables. Decisions made early in an investigation can affect each track. See False Claims Act defense and government subpoenas.
Frequently asked questions
What usually triggers these investigations?
An insider complaint is the most frequent trigger. It may already have become a sealed qui tam action that the company will not see for some time. See 31 U.S.C. § 3730(b).
Is a certification error a false statement?
A certification error is not automatically a false statement. The provision turns on knowledge and materiality, concepts that are fact-specific. See § 1001.
Can individuals be charged as well as the company?
Yes, individuals are routinely charged alongside the company. The federal-program provision at § 666 reaches agents of an organization, and § 1001 reaches the person who made the statement.
Does responding to the contracting officer resolve it?
Not necessarily, and what is said in that process can matter in the others.
Who decides whether a contractor is debarred?
The suspending and debarring official of the agency, not a court. FAR 9.406-2(a)(1) allows debarment for a conviction of or civil judgment for commission of fraud or a criminal offense in connection with obtaining, attempting to obtain, or performing a public contract or subcontract.
When does a debarment end?
It generally ends within three years. The period must be commensurate with the seriousness of the cause, and as a general rule should not exceed three years, though it is set case by case rather than by formula. See FAR 9.406-4(a)(1).
Where is a False Claims Act case filed, and who sees it first?
Under seal, and the contractor is not told. 31 U.S.C. § 3730(b)(2) requires the complaint to be filed in camera, to remain under seal for at least 60 days, and not to be served on the defendant until the court so orders — so the first sign is often an unexplained document request.
How does the government decide whether to take over a whistleblower case?
It decides inside the seal period, before the 60 days or any extension expires. The Government must either proceed with the action or notify the court that it declines — and if it declines, the person who brought it may conduct the case themselves. See 31 U.S.C. § 3730(b)(4).
How much does a False Claims Act judgment actually cost?
Far more than the amount billed. 31 U.S.C. § 3729(a)(1) imposes a civil penalty of not less than $5,000 and not more than $10,000 per claim, as adjusted for inflation under the Federal Civil Penalties Inflation Adjustment Act, plus three times the damages the Government sustains.
Sources and legal authorities
General information about federal law, not legal advice, and not a prediction of any outcome. Federal criminal exposure turns on facts this page cannot assess. If your company has been contacted by investigators or has received a subpoena, take advice before gathering documents or interviewing staff.
Related: White-Collar Defense · False Claims Act Defense · Public Corruption · Government Subpoenas. Call (301) 901-3109 or use the contact page.