First To File: Issue 5

• Published date: 25 October 2022
• Subject Matter: Government, Public Sector, Real Estate and Construction, Government Contracts, Procurement & PPP, Construction & Planning
• Law Firm: Steptoe & Johnson
• Author: Ms Amba M. Datta, Paul Hurst, Patrick F. Linehan and Caitlin Conroy

In this issue:

• A settlement involving a construction company that improperly claimed credit for using disadvantaged business entities on federally-funded New Jersey construction contracts that did not actually perform the work.
• An Anti-Kickback Statute case where the district court denied defendant's motion to compel certain Medicare claims data and rejected the "benefit of the bargain" approach to damages for AKS-tainted Medicare claims.
• An FCA case involving a motion to stay discovery during the pendency of a dispositive motion.

NJ Construction Co. Settles Out of Turnpike FCA Suit

Industry: Construction

Topics: Subcontractor liability, Disadvantaged Business Entities Program

A New Jersey construction company, C. Abbonizio Contractors (C. Abbonizio), settled a False Claims Act lawsuit alleging that the company misrepresented the amount of subcontract work performed by socially and economically disadvantaged business entities (DBEs) in connection with a federally-funded New Jersey Turnpike project.¹

C. Abbonizio received a $39 million subcontract from PKF Mark II (PKF) to perform earthwork and pipe installation in support of PKF's prime construction project. PKF's prime contract required PKF to make a good faith effort to subcontract 15% of the total contract value to DBE subcontractors. As a result, as part of its subcontract, C. Abbonizio agreed to use DBEs to complete 15% of its work. According to the Government, C. Abbonizio, however, circumvented this requirement and paid DBEs to serve as "middlemen" and purchase materials from other businesses while creating invoices that made it appear as though the DBEs were actually performing the work. The government alleged that one of the companies that C. Abbonizio used as an intermediary put magnetic signs with its own logo on another company's truck. C. Abbonizio transmitted information to PKF asserting that these pass-through entities were performing work in order for PKF to claim DBE participation credit. In turn, PKF included this information in reports to New Jersey Department of Transportation claiming DBE credit.²

Takeaway: This settlement serves as a reminder that subcontractors are also subject to FCA liability where they mislead prime contractors and cause false claims to be passed on to the government.

United States v. Teva Pharms. USA, Inc., No. 20-CV-11548 (NMG), 2022 WL 6820648 (D. Mass. Oct. 11, 2022)

Industry: Healthcare

Topics: Anti-Kickback Statute, Discovery Issues

In one of the numerous...