Small firm attention

big firm results

Construction companies and the False Claims Act

On Behalf of McNabb, Bragorgos, Burgess & Sorin, PLLC | Oct 19, 2022 | Construction Law

The False Claims Act is a federal law that prohibits companies from making false or fraudulent claims when submitting invoices to the government for payment. Construction companies in Tennessee need to be aware of this law because they routinely submit invoices to government entities for reimbursement of project costs.

This act addresses an area of construction law that imposes liability on companies who knowingly submit false or fraudulent claims for payment. The act also allows private citizens (“whistleblowers”) to file lawsuits against companies on behalf of the government. Whistleblowers are entitled to a portion of any money recovered as a result of their lawsuit.

What constitutes a false claim?
A false claim can be either an express false claim or an implied false claim. An express false claim is when a company knowingly submits a false invoice or statement in order to receive payment from the government. An implied false claim occurs when a company makes a claim for reimbursement even though it knows that it is not entitled to the payments sought.

As an example, a construction company could be working on a government-funded project and incur $100,000 in eligible costs. The company then submits an invoice to the government for reimbursement of those costs. However, the company knows that it actually only incurred $75,000 in eligible costs but included $25,000 in ineligible costs in order to receive a larger reimbursement check. In this case, the company has submitted an express false claim.

An example of an implied false claim would be if the construction company billed the government for work that was never actually performed. In order for a claim to be considered false under the act, it does not necessarily have to be blatantly fraudulent. It simply needs to be untrue in some way.

What are the penalties for submitting false claims
Companies that violate the False Claims Act can be subject to significant penalties for breaking this type of construction law. In addition to monetary penalties imposed by the state, the company may also have to pay attorneys’ fees and costs incurred by the whistleblower if a whistleblower suit is successful.

Construction companies need to be aware of the False Claims Act
Construction companies should ensure that their invoices and claims for reimbursement are accurate and truthful. Failure to do so could put them in a legal bind that could end up being extremely costly and damage the company name.