Construction Law: False Claims Act

How Antifraud Law Has Impacted Recent Suits

by Trent Cotney, partner, Adams & Reese, LLP

(Editor’s Note:  Trent Cotney, partner at Adams & Reese, LLP, is dedicated to representing the roofing and construction industries.  Cotney is General Counsel for the Western States Roofing Contractors Association and several other industry associations.  For more information, contact the author at (866) 303-5868 or go to

For many contractors, securing a government contract can be a windfall.  Regular work with the government can be lucrative and keep a business strong.  Before you sign a government contract, you must ensure that you follow all the regulations.  Any missteps could result in a violation of the False Claims Act (FCA).

What Is the FCA?

         The False Claims Act was initially adopted in 1863 but was amended in 1943 and 1986 and, more recently, in 2009 and 2010.  Since 1986, it has been regarded as the nation’s most effective antifraud law.  Under the FCA, entities are prohibited from a number of actions, including using fraudulent means to secure a government contract or obtain government funds; overcharging the government for work; submitting a false claim about complying with a regulation, contract term, or law; and demanding payment for work that does not comply with the contract or is substandard.

         Often, FCA violations are brought to light via a qui tam claim.  This type of claim is made by a whistleblower who has evidence of fraud related to government contracts or programs.  The whistleblower may also be referred to by the term relator. 

Recent FCA Cases

         In 2022, FCA claims skyrocketed.  In fact, through FCA actions, referrals, and investigations, whistleblowers and government agencies were involved in more than 350 judgments and settlements.  Numerous FCA cases ended up in litigation, with the majority of those in the healthcare field.  However, no industry is immune to issues related to the FCA.  What follows are summaries of three 2022 cases related to the construction industry.

•       United States v. CB&I AREVA MOX Services LLC and Wise Services, Inc.  In this case related to overbilling, MOX Services was charged with submitting fraudulent and false invoices for materials that did not exist and for receiving illegal kickbacks.  The company was the prime contractor for building the United States DOE Mixed Oxide Fuel Fabrication Facility in Aiken, South Carolina.  As the prime contractor, it was responsible for confirming receipt and acceptance of all subcontractor invoices before submitting them to the DOE.  However, the subcontractor Wise Services submitted millions of dollars of invoices for non-existent materials, and MOX submitted those invoices to the DOE and received kickbacks from Wise.  Through a settlement in March 2022, MOX agreed to pay $10 million to the DOE.

•       U.S. ex rel. Sorenson v. Wadsworth Brothers Constr. Co., 48 F.4th 1146.  In this case related to materiality, Wadsworth Brothers Construction was hired for a federally funded transportation project that included improvements at the Salt Lake International Airport.  Kelly Sorenson, a former employee, filed a qui tam suit against Wadsworth, alleging that his employer had fraudulently certified compliance with the Davis-Bacon Act prevailing wage requirement.  He claimed that there were discrepancies in the amount he was paid.  He accused Wadsworth of forging timesheets since the hours did not match his airport ID scan history.  A lower court dismissed the case, and the Tenth Circuit affirmed that decision.  It ruled that the employee did not provide evidence that he was actually on the jobsite, not just at the airport, for the hours in question, and there was no indication that the Department of Labor was aware of the alleged Davis-Bacon Act violations.

•       U.S. ex rel. Ascolese v. Shoemaker Constr. Co., 55 F.4th 188.  In this case related to retaliation, the Philadelphia Housing Authority (PHA) hired Shoemaker Construction to build a public housing project.  Shoemaker then subcontracted with McDonough Bolyard Peck (MBP) to oversee quality control.  Don Ascolese was a quality control manager for MBP and noted several project deficiencies, which he communicated to MPB and Shoemaker.  When neither company acted on his concerns, he informed PHA.  He was subsequently fired.  At that point, he filed a qui tam claim, stating that Shoemaker and MBP defrauded the government and retaliated when he reported the problems.  Initially, the case was dismissed on the grounds that Ascolese had not put MBP on notice.  However, the Third Circuit reversed that decision.

         In addition to these lawsuits, other FCA cases impacted construction in 2022.

•       In May, Colorado-based Hensel Phelps Construction Company reached a settlement to pay $2.8 million to satisfy FCA allegations that it had illegally manipulated a subcontract specifically designated for service-disabled, veteran-owned small businesses. 

•       Also in May, seven South Korean companies were accused of rigging the contract bidding process for engineering and construction work on United States military bases in South Korea.  They reached a settlement to pay $3.1 million, based on allegations that their actions suppressed and eliminated competition, forcing the government to pay more for services than it should have. 

FCA Penalties

         Those found in violation of the FCA can face steep fines.  They are liable for three times the amount of money the government has been defrauded.  In addition, they can be charged with civil penalties ranging from $10,781 to $21,564 for each instance of fraud.  Relators who bring the initial claim can be awarded 15%-30% of the defendant’s total recovery, either by settlement or judgment.

Other Details

         There is a statute of limitations for filing qui tam claims.  They must be filed within six years of the date of the violation or within three years after the government knew of the offense, whichever time period is longer.  But, no claim is permitted more than ten years since the violation.  The federal FCA has been so successful that 31 states have established similar laws.  Many allow whistleblowers to receive a finder’s fee for spotting and reporting fraud in local, municipal, and state contracts.

Advice to Contractors

         When you enter agreements with the government, it is critical that you follow the letter of the law.  If you cut corners in the bidding process, produce subpar work, or participate in questionable billing, you can find yourself in hot water.  Before you sign any government contract, make sure you understand the FCA stipulations and can remain compliant.

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