In the summer of 2015, we cautioned that the Department of Defense’s (DoD’s) new cybersecurity regulations could be used offensively to support False Claims Act (FCA) cases and bid protests. Four years later, those premonitions have unfortunately come true. Recently, a federal court refused to dismiss a relator’s implied certification FCA case in which he alleged that his employer “misrepresented … to the government the extent to which it had equipment required by the regulations, instituted required security controls, and possessed necessary firewalls” in violation of DoD’s cybersecurity regulations. United States ex rel. Markus v. Aerojet Rocketdyne Holdings, Inc., No. 2:15-cv-2245, 2019 WL 2024595, *3 (E.D. Cal. May 8, 2019).
By way of background, the False Claims Act imposes civil and potentially criminal liability on anyone who knowingly presents a false or fraudulent claim for payment to the federal Government, or knowingly makes, uses or causes to be made or used, a false record or statement material to a false or fraudulent claim. 31 U.S.C. § 3729(a)(1)(A) & (B). The FCA permits a private person, known as a relator, to bring a qui tam civil lawsuit in the name of Government against anyone who violates the Act. Civil remedies can include up to three times the actual damages suffered by the Government as a result of the false claim along with a civil penalty between $5,000 and $10,000 for each violation. The relator receives a share of any proceeds from the action—generally 15 to 25 percent if the Government intervenes, and 25 to 30 percent if it does not, plus attorneys’ fees and costs. The FCA also has a lengthy statute of limitations of either six years from when the fraud is committed or three years after the Government knows or should know about the material facts giving rise to the claim, whichever is later, as long as the action is filed within ten years of the alleged fraud. 31 U.S.C. § 3731(b); Cochise Consultancy, Inc. v. United States ex rel. Hunt, 587 U.S. __ (May 13, 2019) (noting “if the Government discovers the fraud on the day it occurred, it would have 6 years to bring suit, but if a relator instead discovers the fraud on the day it occurred and the Government does not discover it, the relator could have as many as 10 years to bring suit”).
Read more at: Privacy and Data Security Insight