FALSE CLAIMS ACT DEFENSE RESPONSE

PART A: INITIAL RESPONSE TO FCA INVESTIGATION/ALLEGATION

CONFIDENTIAL - ATTORNEY-CLIENT PRIVILEGED

COMPANY INFORMATION

Company Name: [________________________________]

Address: [________________________________]

City, State, ZIP: [________________________________]

Industry/NAICS Code: [________________________________]

Point of Contact: [________________________________]

Title: [________________________________]

Telephone: [________________________________]

Email: [________________________________]

MATTER INFORMATION

Date Allegation/Investigation Discovered: [__/__/____]

Source of Notification:

☐ Civil Investigative Demand (CID)
☐ Subpoena
☐ Qui Tam Complaint (unsealed)
☐ Government Interview Request
☐ Informal Government Inquiry
☐ Whistleblower/Relator Communication
☐ Internal Discovery
☐ Other: [________________________________]

Government Agency(ies) Involved:

☐ Department of Justice (DOJ)
☐ Inspector General (specify agency): [________________________________]
☐ Other Federal Agency: [________________________________]
☐ State Attorney General: [________________________________]

Contracting Agency(ies) at Issue: [________________________________]

Contract Number(s) at Issue: [________________________________]

NATURE OF ALLEGATIONS

Brief Description of Alleged False Claims:
[________________________________]
[________________________________]
[________________________________]
[________________________________]

Time Period at Issue: [__/__/____] to [__/__/____]

Dollar Amount at Issue (if known): $[________________________________]

PART B: INTERNAL INVESTIGATION PROTOCOL

I. IMMEDIATE ACTIONS CHECKLIST

☐ Preserve Documents - Issue litigation hold immediately
☐ Engage Counsel - Retain experienced FCA defense counsel
☐ Identify Key Personnel - List employees with relevant knowledge
☐ Secure Electronic Data - Preserve emails, databases, systems
☐ Assess Disclosure Obligations - Evaluate mandatory disclosure requirements
☐ Review Insurance Coverage - Notify D&O and professional liability carriers
☐ Establish Privilege Protocols - Protect attorney-client communications

II. LITIGATION HOLD NOTICE

TO: All Employees with Potentially Relevant Information

FROM: [________________________________]

DATE: [__/__/____]

RE: Document Preservation - Litigation Hold

Effective immediately, you must preserve all documents, emails, electronic files, and other materials that may be relevant to [brief description without admitting liability].

DO NOT:
- Delete any emails, files, or documents related to [subject matter]
- Alter or modify any documents
- Discard any paper files
- Disable automatic backup systems

DO:
- Preserve all materials in their current form
- Contact [name] if you have questions
- Report any inadvertent deletions immediately

Failure to comply may result in serious consequences for the company and personally.

III. KEY PERSONNEL IDENTIFICATION

PART C: FCA DEFENSE ANALYSIS FRAMEWORK

I. FALSE CLAIMS ACT ELEMENTS

To establish FCA liability, the Government must prove:

Element 1: False or Fraudulent Claim

☐ Was there a "claim" submitted to the Government?
☐ Was the claim actually "false" or "fraudulent"?

Analysis:
[________________________________]
[________________________________]
[________________________________]

Element 2: Knowledge (Scienter)

The FCA requires that the defendant acted "knowingly," defined as:
- Actual knowledge of falsity
- Deliberate ignorance of truth or falsity
- Reckless disregard of truth or falsity

☐ Does the evidence support actual knowledge?
☐ Was there deliberate ignorance?
☐ Was there reckless disregard?

Analysis:
[________________________________]
[________________________________]
[________________________________]

Element 3: Materiality

A false statement is material if it has "a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property."

☐ Would the Government have paid the claim if it knew the truth?
☐ Does the Government actually refuse to pay similar claims when aware?

Analysis:
[________________________________]
[________________________________]
[________________________________]

II. POTENTIAL DEFENSES

A. No Falsity

☐ The claims were accurate and truthful
☐ Any inaccuracies were immaterial errors
☐ Ambiguous regulations/contract terms support our interpretation

Evidence/Arguments:
[________________________________]
[________________________________]
[________________________________]

B. Lack of Scienter (Knowledge)

☐ Reasonable interpretation of ambiguous requirements
☐ Good faith reliance on Government guidance
☐ Innocent mistake without intent to deceive
☐ No actual knowledge, deliberate ignorance, or reckless disregard

Evidence/Arguments:
[________________________________]
[________________________________]
[________________________________]

C. Lack of Materiality

☐ Government continued to pay despite knowledge of the alleged issue
☐ The alleged false statement was minor/technical
☐ Government does not refuse payment when aware of similar issues

Evidence/Arguments:
[________________________________]
[________________________________]
[________________________________]

D. Government Knowledge Defense

☐ Government knew all material facts before paying
☐ Government officials approved the conduct at issue
☐ Full disclosure was made to contracting officials

Evidence/Arguments:
[________________________________]
[________________________________]
[________________________________]

E. Public Disclosure Bar (Qui Tam Only)

☐ The allegations were previously publicly disclosed
☐ Relator is not an "original source"
☐ Disclosure occurred in federal proceeding, government report, or news media

Evidence/Arguments:
[________________________________]
[________________________________]
[________________________________]

F. First-to-File Bar (Qui Tam Only)

☐ A prior qui tam action based on same facts is pending

Evidence/Arguments:
[________________________________]
[________________________________]

G. Statute of Limitations

☐ Claims are barred by 6-year statute of limitations (from date of violation)
☐ Claims are barred by 3-year/10-year rule (3 years after Government knew or should have known, but no more than 10 years after violation)

Calculation:
[________________________________]
[________________________________]

III. DAMAGES AND PENALTIES EXPOSURE

A. Civil Penalties

Under 31 U.S.C. § 3729(a)(1), civil penalties range from $13,946 to $27,894 per false claim (as adjusted for inflation).

Estimated Number of False Claims: [____]

Minimum Penalty Exposure: $[________________________________]

Maximum Penalty Exposure: $[________________________________]

B. Treble Damages

The Government may recover three times the amount of damages sustained.

Single Damages Estimate: $[________________________________]

Treble Damages: $[________________________________]

C. Reduced Damages (Double Damages)

If the person:
1. Provided all known information to Government investigators within 30 days of obtaining information; AND
2. Fully cooperated with the investigation;

Damages may be reduced to double (2x) rather than treble (3x).

☐ Applicable
☐ Not applicable

D. Total Potential Exposure

PART D: RESPONSE TO CIVIL INVESTIGATIVE DEMAND (CID)

RESPONSE TO CIVIL INVESTIGATIVE DEMAND

CID INFORMATION

CID Number: [________________________________]

Date of CID: [__/__/____]

Issuing Agency: [________________________________]

Issuing Attorney: [________________________________]

Response Due Date: [__/__/____]

Categories of Documents Requested:
1. [________________________________]
2. [________________________________]
3. [________________________________]
4. [________________________________]
5. [________________________________]

Interrogatories Propounded: ☐ Yes ☐ No

Oral Testimony Requested: ☐ Yes ☐ No

RESPONSE OPTIONS

☐ Full Compliance - Produce all responsive documents

☐ Request Extension - Seek additional time for response

☐ Negotiate Scope - Discuss modifications to requests

☐ Assert Objections - Challenge overbroad or improper demands

☐ File Petition to Modify/Quash - Formal court challenge

PRIVILEGE LOG TEMPLATE

AC = Attorney-Client Privilege
WP = Work Product Doctrine

PART E: VOLUNTARY DISCLOSURE ANALYSIS

DISCLOSURE CONSIDERATIONS

Advantages of Voluntary Disclosure:

☐ Potential reduction from treble to double damages
☐ Demonstrates good faith
☐ May result in more favorable settlement
☐ Preserves business relationships with Government
☐ May satisfy FAR mandatory disclosure requirements

Disadvantages of Voluntary Disclosure:

☐ Admission of wrongdoing
☐ Triggers formal investigation
☐ May expose additional issues
☐ Waiver of certain defenses
☐ Potential criminal referral

FAR MANDATORY DISCLOSURE REQUIREMENTS

Under FAR 52.203-13 (Contractor Code of Business Ethics), contractors must disclose:

☐ Violations of Federal criminal law involving fraud, conflict of interest, bribery, or gratuity violations
☐ Violations of the civil False Claims Act
☐ Significant overpayments on contracts

Disclosure must be made to:
- Agency Inspector General
- Contracting Officer

Failure to disclose may result in suspension or debarment.

Analysis:

☐ Mandatory disclosure is required
☐ Mandatory disclosure may be required (uncertain)
☐ Mandatory disclosure is not required

Basis:
[________________________________]
[________________________________]
[________________________________]

PART F: SETTLEMENT NEGOTIATION FRAMEWORK

SETTLEMENT CONSIDERATIONS

Government Settlement Factors:

• Litigation risk and cost
• Defendant's ability to pay
• Strength of evidence
• Cooperation level
• Compliance improvements
• Collateral consequences (debarment)

Defense Objectives:

☐ Minimize financial exposure
☐ Avoid admission of liability
☐ Preserve Government contracting ability
☐ Avoid debarment/suspension
☐ Protect individuals
☐ Maintain reputation
☐ Resolve qui tam relator claims

SETTLEMENT STRUCTURE OPTIONS

A. Civil Settlement Only

Monetary payment without admission of FCA violation

B. Global Resolution

Civil settlement plus:
☐ Criminal non-prosecution agreement
☐ Corporate Integrity Agreement (CIA)
☐ Administrative agreement avoiding debarment

C. Qui Tam Relator Resolution

☐ Government intervention - relator share 15-25%
☐ Government declined - relator share 25-30%
☐ Separate relator settlement

IMPORTANT NOTES

Criminal Exposure

FCA violations may also give rise to criminal liability under:
- 18 U.S.C. § 287 (False Claims) - up to 5 years imprisonment
- 18 U.S.C. § 1001 (False Statements) - up to 5 years imprisonment
- 18 U.S.C. § 1341 (Mail Fraud) - up to 20 years imprisonment
- 18 U.S.C. § 1343 (Wire Fraud) - up to 20 years imprisonment

Debarment Risk

FCA liability is a cause for debarment under FAR 9.406-2. Contractors should simultaneously address suspension and debarment concerns.

Individual Liability

The FCA applies to individuals as well as corporations. Officers and employees may face personal liability.

Insurance Coverage

Review D&O, professional liability, and crime policies for potential coverage. Timely notice is critical.

SOURCES AND REFERENCES

• False Claims Act: 31 U.S.C. §§ 3729-3733
• DOJ Civil Division, Commercial Litigation Branch, Fraud Section
• DOJ Criminal Division, Fraud Section
• Universal Health Services v. United States ex rel. Escobar, 579 U.S. 176 (2016) (materiality)
• FAR 52.203-13 - Contractor Code of Business Ethics and Conduct
• FAR 3.1003 - Fraud Reporting