Section 3729(a)(1) of the False Claims Act imposes liability against a government contractor who “knowingly presents, or causes to be presented… a false or fraudulent claim.” In order for the government or plaintiff to establish knowledge under the False Claims Act, or FCA, under the theory of implied certification, the plaintiff must prove that the defendant knows (1) that it violated a contractual obligation, and (2) that its compliance with that obligation was material to the government’s decision to pay. If the plaintiff proves both elements, “then it will have established that the defendant sought government payment through deceit, which is the very mischief the FCA was designed to prevent.” U.S. v. Science Applications Int’l Corp., 626 F.3d 1257, 1271 (D.C. Cir. 2010).

The defendant in Science Applications, SAIC, was a scientific and technology applications company that entered into a contract with the Nuclear Regulatory Commission, or the “NRC.” Under the contract, SAIC agreed to provide technical assistance and expert analysis to support the NRC’s rulemaking decisions. The contract prohibited SAIC from entering into consulting work with other companies that may give rise to a conflict of interest. Several years after the contract began, it was determined that SAIC had, without proper disclosure, placed itself in conflicting roles with the NRC and other companies. Id at 1261-63.

At trial, a jury found that SAIC violated the False Claims Act by seeking payments from the government while knowing that it was violating contractual provisions governing potential conflicts of interest. One of the issues considered by the DC Circuit on appeal was whether SAIC knew that adherence to the conflict of interest provisions within the contract was a critical factor in the government’s decision to pay SAIC. Id at 1271.

In deciding whether the Government had satisfied the FCA’s knowledge requirement, the circuit court noted that testimony at trial “could support a jury conclusion that SAIC employees knew that the company, in violation of NRC conflict of interest regulations to which it certified compliance,” was providing consulting services to organizations regulated by the NRC. Id. at 1272.

The Science Applications court recognized that when Congress amended the FCA’s knowledge requirement in 1986, even in the absence of a specific intent to defraud, “defendants were subject to liability … if they had actual knowledge of the falsity of their claims [which] are made with deliberate ignorance or reckless disregard of the truth or falsity of their claims.” Id at 1274 (internal citations omitted). Science Applications further explains that Congress adopted the 1986 amendment so that the definition of “knowingly” captured the “ostrich-like conduct which can occur in large corporations were the corporate officers insulate themselves from knowledge of false claims submitted by a lower level subordinate.” Id at 1274, citing Senate Report No. 99-345 at 7 (1986).

The Science Applications decision is helpful for the detailed explanation it provides regarding the False Claim Act’s knowledge requirement. As the Court explains, Congress defined “knowingly” to include some forms of constructive knowledge. “Knowingly” will impose liability for mistakenly false claims “only when the defendant deliberately avoided learning the truth and engaged in aggravated gross negligence.” The court goes further and cites decisions equating a reckless disregard with aggravated gross negligence. Courts, including Science Applications, recognize that the FCA’s definition of knowledge is a “less exacting definition,” than common law fraud. Id at 1275. Even so, in certain circumstances “innocent mistakes” and “negligence” remain defenses under the Act.

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Jason Cornell is an attorney who represents whistleblowers with the law firm Clark Fountain LaVista Prather Keen & Littky-Rubin. Clark Fountain represents plaintiffs in various matters throughout the United States. If you have questions regarding the issues addressed in this or other posts, you can reach Jason at 561 899-2111, or jcornell@clarkfountain.com.