Do you Sell Tech to the Government? You Need to Know Your False Claims Act Risks!

What is the False Claims Act, and Why Should I Care?

According to this https://www.morganlewis.com/pubs/uptick-in-fca-investigations-and-litigation-targeting-tech-services 11/2/2020 White Collar Lawflash from the Morgan Lewis law firm,

“The False Claims Act (FCA) imposes liability on any person for making false claims or false statements in connection with a claim. 31 USC § 3729(a)(1)(A), (B). A “claim” is any request or demand for money made directly or indirectly to the government. FCA liability requires proof of materiality, meaning that the government would not have paid a claim had it known of the alleged falsehood.

According to whistleblowerllc.com, in June, the Department of Justice updated the 2020 False Claims Act penalties to a range of $11,665 to $23,331 per act.

How Tech Companies Run Afoul of the FCA.

The Morgan Lewis article continues:

“Last year, the US Department of Justice (DOJ) recovered more than $3 billion from settlements and judgments under the federal FCA. While the majority of settlements involved alleged healthcare fraud, a traditional area of focus for prosecutors, some notable recent examples involved the sale of technology or software services.(Emphasis added).

  • In February 2019, an electronic medical records provider paid $57.25 million to settle FCA claims alleging that it had misrepresented the capabilities of its electronic health records software to the US Department of Health and Human Services during the procurement process.
  • In July 2019, a prominent hardware and software vendor agreed to pay $8.6 million to settle FCA claims alleging the company sold video surveillance equipment to government agencies with knowledge that the equipment was susceptible to cyberattacks.

These examples represent a broader trend in FCA liability that focuses on fraud in connection with the sale of software, hardware, and other tech services to government customers. Of particular concern are claims alleging that technology companies overstated or misrepresented the security or utility of their products to the government.” (Emphasis added).

Good Risk Management for Tech Companies.

The article concludes:

“Nonetheless, companies can take a number of steps to mitigate these risks. Specifically, government contractors or suppliers should ensure that, with respect to data and technology, their disclosures to government customers are robust. Having clear, accurate, thorough, and well-documented disclosures is key…Frequent communication with government customers regarding changes to underlying technologies as well as new risks to data security is not just a sound business practice—it’s a key component of a strong FCA defense. Ensuring that customers understand evolving risks and mitigation is crucial since neither technology nor its vulnerabilities are static. Finally, companies should ensure their representations concerning cybersecurity are not unrealistic in light of rapidly evolving technological risks and advances.”

Conclusion:

I have been helping tech companies write clear, concise contracts since my first General Counsel job at a venture-funded software company in Austin in the late ‘90s.

I have a network of such lawyers I would be happy to help you tap, if your company isn’t operating under the laws of California, Colorado, or Idaho.

Thank you!

Michael Oswald

michael@msochartered.com

www.msochartered.com

Please note: the above post contains educational information. It is not intended as legal advice. Engage an attorney who is licensed in your state to get advice on dealing with any specific legal issue.

© 2020 Michael S. Oswald

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