Construction Subcontractor Settles FCA Allegations for $2.8 Million
A recent settlement illustrates the broad reach of the FCA and the substantial liability that “mere retention” of an overpayment can impose on contractors several steps removed from a government contract. The dispute involved alleged overpayments made to Bartlett Holdings Inc. (d/b/a BHI Energy/Sun Technical Services) during its performance as a subcontractor on a Federal project.
Bartlett is a supplier of radiological protection services and skilled technicians to U.S. nuclear, fossil, wind, and hydro power industries. In 2008, Bartlett entered into a contract with Bechtel Power Corp. in support its contract with the Tennessee Valley Authority (TVA) regarding a nuclear plant construction project, wherein Bechtel was to provide professional engineering, procurement, and construction services for the project. Bartlett subcontracted to provide technicians under a staffing contract, pursuant to which Bartlett was to be reimbursed for, among other things, its actual costs of payroll taxes. The TVA was ultimately footing the bill for the project.
In 2014, a relator filed a qui tam action in the United States District Court for the Eastern District of Tennessee, alleging that Bartlett had received overpayments from TVA for payroll taxes incurred for employees working on TVA’s behalf under the staffing contract, and that Bartlett knowingly avoided an obligation to refund those overpayments to the TVA. Despite denying any wrongdoing, the Massachusetts-based subcontractor agreed to pay $2.8 million to settle United States ex rel. Azada v. Bechtel Power Corp, et al., No. 1:14-cv-151 (E.D. Tenn. filed March 22, 2014)(dismissed May 5, 2016).
This settlement underscores the long-arm of the FCA: subcontractors may be subject to alleged FCA violations even when they share no privity of contract with the Government. Secondly, it illustrates the extent of the so-called “reverse false claim,” which can impose significant liability for the “mere retention” of an overpayment.