There are many concerns that can keep private equity (PE) firms’ management teams up at night. Economic headwinds, geopolitical instability, and supply chain problems can change the fortunes of a PE firm and its portfolio companies seemingly overnight.
Unfortunately for those PE executives already struggling with these challenges, there’s an increasingly prevalent concern rearing its ugly — and potentially costly — head: exposure to liability under the False Claims Act (FCA).
PE firms can be liable for their portfolio companies’ misconduct under the FCA
Under the FCA, enacted in 1863 in response to federal defense contractor fraud during the Civil War, any person convicted of, or admits to, knowingly submitting false claims to the government is liable for up to three times the government’s damages, along with an inflation-adjusted penalty. In addition, the FCA allows private citizens to file qui tam suits on behalf of the federal government against alleged wrongdoers. And there is a great incentive for purported whistleblowers to do so: A private citizen who is successful in his/her claim is entitled to receive a portion of the government’s recovery. For this reason, the FCA and its qui tam suits have mobilized a legion of corporate whistleblowers who believe they can do well by doing good and calling out their current or former employers’ alleged frauds.
Any company doing business with the federal government, whether by selling goods or services,...
A federal grand jury in St. George returned an indictment today charging a Utah podiatrist and two nurses who worked for him with fraud for their roles in a $29 million Medicare false claims case....