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					Mandatory Disclosure
       Part II:
 The Rule in Practice
    Case Studies

     David J. Mandl
Associate General Counsel
    UT-Battelle, LLC

Spring DOECAA Conference
       May 13, 2010
                                        Case Study #1

     • How it all began
               -        Allegations to Staff Concerns regarding employee’s outside
                        activity

               -        Mandatory Disclosure Panel Convened due to nature of
                        allegations

               -        Internal Audit begins the factual investigation

               -        Early indications of criminal misconduct

               -        Decision made to involve an independent investigator




2   Managed by UT-Battelle
    for the U.S. Department of Energy
                       The Independent Investigation

• Scope
        -           Reviewed Outside Activity Request Forms
        -           Reviewed employee emails
        -           Reviewed travel records
        -           Conducted interviews
•       Results
        -        Evidence that part-time employee was using lab contacts to
                 solicit business for his private company




3   Managed by UT-Battelle
    for the U.S. Department of Energy
                             Preliminary Legal Analysis

• Factual Evidence Identified Potential Covered Violations
         -         Civil False Claims Act
         -         Criminal False Statements (18 U.S.C. 1001)
         -         Wire Fraud (18 U.S.C. 1343)
         -         Significant Overpayment


• In-House Legal Analysis


• Preliminary Legal Conclusions

4   Managed by UT-Battelle
    for the U.S. Department of Energy
                               Outside Counsel Analysis

• Retain Outside Counsel with relevant expertise
        -        Limited Guidance, No Precedent
        -        Gravity of the Potential Violation
        -        Uncertain Effect of the Disclosure
• Consistent Conclusions
        -        Confirmed Technical Violation
        -        Confirmed Inapplicability of Other Sections
        -        Confirmed Close Case
        -        Assisted with Damage Assessment
        -        No written work product requested
5   Managed by UT-Battelle
    for the U.S. Department of Energy
                                  The Disclosure Decision
• Convening the Mandatory Disclosure Panel
        -        Presentation of Facts
        -        Presentation of Legal Analysis
        -        Panel Decision
        -        To Disclose
        -        Form of Disclosure

• Post-Decision Actions
        -        Management Briefing
        -        Set Meeting with IG
        -        Corrective Actions
        -        Legal Review of Investigative Report
6   Managed by UT-Battelle
    for the U.S. Department of Energy
                                        Corrective Actions

• Reassess Policies and Procedures

• Employee Discipline

• Recovery of Funds




7   Managed by UT-Battelle
    for the U.S. Department of Energy
                                        Form of Disclosure


    • In-Person Presentation

    • Formal Letter

    • Supporting Documentation

    • Labels and Markings

    • Copy to Contracting Officer

8   Managed by UT-Battelle
    for the U.S. Department of Energy
                                         IG Reaction
    • Took note of corrective action
    • Funds at issue were insignificant
    • No monetary loss to government – funds had already been
      reimbursed
    • Appreciated thorough investigation
    • Next Steps:
           -        Refer to Complaint Coordination Committee at HQ
                         • Refer back to IG
                         • Refer for HQ audit or investigation
                         • Send to local operations office for informational purposes
    • Disposition: Oral notification that case closed
9    Managed by UT-Battelle
     for the U.S. Department of Energy
              The Timeline: “Timely Disclosure”
• July 2009: Investigation Begins
• September 2009:
          -    Interviews of Relevant Individuals
          -    Initial Disciplinary Actions Taken
• October 2009:
          -    Formal Report of Investigation
          -    Continue Disciplinary Actions
• November 2009:
          - Retain Outside Counsel, Receive Legal Analysis
          - Informal notice to OIG
          - MD Panel Meeting, Disclosure Decision
          - Lab Management Briefing
          - Draft Disclosure Document
• December 2009:
          - Meeting with OIG
          - Formal Documentation Submitted to OIG, CO
10   Managed by UT-Battelle
     for the U.S. Department of Energy
     Case Study #2: A FCA Hypothetical

• Consider a compilation of common facts
          -        Timecard Fraud
          -        P-Card Fraud
          -        Fraudulent Reimbursement Request


• Raise More Questions than Answers?




11   Managed by UT-Battelle
     for the U.S. Department of Energy
                                         Civil False Claims Act
 • Civil liability for (among other things):
           -         Knowingly presenting or causing to be presented a false or
                     fraudulent claim for payment or approval; or
           -         Knowingly making, using, or causing to be made or used, a
                     false record or statement material to a false or fraudulent
                     claim.
           -         “Claim” means any request or demand for money or property
                     that
                     •        Is presented to an officer, employee or agent of the U.S.; or
                     •        Is made to a contractor, grantee or other recipient, if the money or property is to be
                              spent or used on the Government’s behalf or to advance a Government program
                              or interest, and . . .
                     •        The U.S. Government provides the money or property or reimburses the
                              contractor, grantee or other recipient.
12   Managed by UT-Battelle
     for the U.S. Department of Energy
                                         Timecard Fraud

     • Simple Facts:
             -         Non-exempt employee enters 8:00 to 4:30 daily, but arrives late,
                       leaves early and takes long lunches



     • Not-so-Simple Legal Analysis . . .




13   Managed by UT-Battelle
     for the U.S. Department of Energy
                                         Timecard Fraud

 • Did s/he stay late?
          -         Arrival time can be confirmed
          -         Departure time more difficult


 • Does it matter?
            -       If aggregate hours are correct, is false record a problem?
            -       Still must be a “false or fraudulent claim”




14   Managed by UT-Battelle
     for the U.S. Department of Energy
                                               Timecard Fraud

 • Was the conduct before or after May 2009?
           -         FCA Amendments expanded liability
           -         Pre-May 2009, additional hurdles
                              •          Presentment requirement for claims
                              •          Intent requirement for records or statements
           -         In many circumstances, pre-Amendment timecard fraud would
                     not be actionable
           -         Different result under current law?




15   Managed by UT-Battelle
     for the U.S. Department of Energy
                                           Timecard Fraud

     • Is the false record or statement “material”

            -        “Natural Tendency to Influence”

            -        Influence what?

                          •         A government decision?
                          •         A contractor decision?




16   Managed by UT-Battelle
     for the U.S. Department of Energy
                                         Timecard Fraud

• When does the M&O Contractor submit a claim?
• M&O Contractor is Uniquely Situated
          -        “Letter of Credit” Funding
          -        Documentary Support for routine expenses is not generally
                   provided to DOE, though DOE has access to documentation and
                   has audit and inspection rights
          -        Unlike other contractors, M&O Certifications are not absolute (with
                   certain exceptions)
          -        Accounting systems allow for periodic adjustments
          -        Some support for “de minimis” exception to reporting


17   Managed by UT-Battelle
     for the U.S. Department of Energy
                                         P-Card Fraud

 • Simple Facts: the employee who uses a P-Card for Personal
   Purchases

 • More Interesting Facts: The employee who returns items for
   merchandise credits
          -         If merchandise credit records are not available due to time lapse,
                    when is there credible evidence?
          -         If merchant has maintained records but refuses to release them
                    without a subpoena?




18   Managed by UT-Battelle
     for the U.S. Department of Energy
     Fraudulent Reimbursement Requests

     • The Facts:
             -         Employee submits reimbursement request for expenses that
                       were not incurred
             -         Assume request submitted in April 2009
     • The Questions:
             -         Does the date matter?
             -         What about retroactivity for false records or statements?
             -         What if courts change their tune?
             -         Effect of legal technicality (especially an open question) on
                       credible evidence standard?

19   Managed by UT-Battelle
     for the U.S. Department of Energy
                                         Conclusions

     • Requirements are still new and relatively untested

     • Few clear answers . . .

     • But many interesting questions

     • Key is to develop a sound process

     • Active involvement of counsel is crucial

     • Work with your IGs



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     for the U.S. Department of Energy
                                  Questions or Comments?




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