June 16, 2015 Military Contractor Fraud
UPDATE: U.S. Supreme Court Sheds Rare Light on Application of the Wartime Suspension of Limitations Act in False Claims Cases
Over the past two years, we have monitored the procedural milestones of a closely-watched False Claims Act case involving the global defense contractor Kellogg Brown & Root Services, Inc. Based in Houston, Texas, the firm provides logistical support and engineering services to both private companies and the federal government, including over $40 billion in contract work since the second Iraq War. Over the next two posts, we will examine both the background of the case, the concept of the Wartime Suspension of Limitations Act, and the Court’s ultimate holding in the matter.
Beginning in 2001, KBR was engaged in a contract with the Department of Defense for a wide variety of provisions to troops overseas, including tents, transportation, food service, military facilities management, and general support of the military as it engaged in the Iraq and Afghanistan wars. The contracts proved exceptionally lucrative for KBR, until a False Claims Act – and later, an SEC investigation – commenced in 2012, alleging that the firm inflated its invoices, sought reimbursement for services never rendered, and engaged in the general defrauding of American taxpayers.
Over the next several years, the case resulted in a holding in favor of the False Claims Act relators using the obscure Wartime Suspension of Limitations Act, which extends the traditional six-year deadline to file false claims lawsuits almost indefinitely. By contrast, KBR has argued that the WSLA should not apply to False Claims Act cases, as it was never intended as such, and relators should be bound by the six-year timeline like any other plaintiff.
After much legal wrangling, the issue finally made its way to the U.S. Supreme Court, which unanimously held in favor of KBR’s argument: the WSLA does not apply to False Claims Act lawsuits, and does not work to extend the deadline for filing such claims regardless of the nation’s overseas wartime conflicts.
Understanding KBR’s arguments against tolling the FCA’s statute of limitations
The WSLA was enacted during the World War I era and was drafted to provide up to 20 years for petitioners to seek redress for “offenses” occurring during wartime. More specifically, the language of the statute states that the statute of limitations would be extended to cover “any offense against the laws of the United States.” At issue in the case is Congress’s intent when using the word “offense,” and whether it was meant to include both civil and criminal infractions within the purview of the statute.
The relator’s argument in the historic False Claims Act case hinged on the notion that the WSLA undoubtedly applied to civil frauds, and pointed to a 1942 amendment of the Act which changed its scope from offense “now indictable under any existing statutes” to “any offense” against the U.S. – which was arguably intended to expand the definition of “offense” from merely criminal in nature (i.e., indictable) to civil frauds, as well.
By contrast, KBR argued that the statute has historically only applied to criminal actions occurring during wartime and was never intended to cover civil (i.e., financial) injuries.
In a rare 9-0 victory for the petitioners/defendants, the Court held in favor of the limited application of the WSLA to criminal offenses only. In tomorrow’s post, we examine the Court’s reasoning a little further, including details of the Court’s analysis of the issue.
Contact Berger Montague today
If you are aware of fraud occurring under a contract for military services, or any other type of contract involving state or federal funds, we encourage you to contact Berger Montague today.