In a recent case from the U.S. District Court for the District of Columbia, United States ex rel. Scollick v. Narula, Case No. 1:14-cv-01339, two surety companies and the broker that issued bonds on federal construction projects succeeded in summarily dismissing civil False Claims Act allegations involving federal small business set-aside contracts. The case is alarming because it suggests that payment and performance bond sureties could potentially be liable for the civil False Claims Act violations of the principals on the bonds they issue.
On July 19, 2022, in the decision filed under seal, the District Court ruled in favor of Hudson Insurance Co., Hanover Insurance Co., and Centennial Surety Associates (collectively, the Sureties) denying whistleblower, Andrew Scollick’s claims, which attempted to extend the scope of civil False Claims Act liability to sureties that provide bid, performance, and payment bonds on federal construction projects. The whistleblower contended that the Sureties reasonably knew through underwriting activity that large contractors were using service-disabled veteran-owned small business (SDVOSB) and in some cases, Historically Underutilized Business Zones (HUBZone, contractors as fronts to obtain work set aside for those socio-economic categories.
The civil False Claims Act (FCA) imposes liability on anyone who commits fraud against the federal government and provides considerable civil and criminal penalties for violations of the FCA. For...
A waste disposal company won dismissal of a False Claims Act suit alleging it improperly billed the federal and Montana governments for services it didn’t provide. Whistleblowers Max Bauer Jr. and...