Month: December 2016

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Virginia BEST Job Site Safety Initiative Collaboratively Created by AGCVA and VOSH

The Virginia BEST (Building Excellence in Safety, Health, and Training) is a volunteer safety initiative developed collaboratively between the Associated General Contractors of Virginia and the Virginia Department of Occupational Safety and Health.

According to AGC Chairman, Mike Cagle, the Virginia BEST program is “designed to reduce employee injuries, improve employee morale and position AGCVA members to be more competitive by becoming the best in class construction companies.” The program includes management and employee involvement, worksite analysis, hazard prevention control, and safety and health training; with three levels of participation from basic to highest achievement.

Of particular note, one of the tangible benefits of program participation is that companies reaching the highest level will be given exemptions from planned construction inspections by the VOSH program.

More information regarding the Virginia BEST program is available on the AGCVA website, on last access linked below:

http://agcva.org/virginia-best/

NAVIGATING THE UNITED STATES’ AND THE IMO’S BALLAST WATER MANAGEMENT RULES

Ballast water management has attracted the attention of regulators both in the United States and internationally recently.  If not properly managed, ballast water may introduce invasive species into an ecosystem.  This danger occurs when a vessel collects ballast water, including the organisms in that water, into its tanks in one port and then releases that ballast water and those organisms into a different ecosystem when it arrives at a different port.  Despite that there is agreement between American regulators and the International Maritime Organization about the need to address this issue, they have established different ballast water management standards.

The United States Coast Guard adopted Ballast Water Management regulations for all non-recreational vessels operating in American waters which were not merely traversing American waters that became effective on June 21, 2012.  33 C.F.R. § 151.2000 et seq.  The USCG regulations provide five options for compliance: (1) do not release any ballast water into American waters; (2) install a USCG approved ballast water management system that causes ballast water to contain quantities of organisms below certain levels; (3) use only ballast water from an American public water source; (4) perform a complete ballast water exchange at least 200 miles from any shore before discharging ballast water; or (5) release the ballast waters to a treatment facility onshore or on a different vessel.  In the event of noncompliance, the USCG may (1) levy a civil penalty of up to $35,000 per person; (2) hold a vessel operating in violation of the regulations liable in rem; and/or (3) charge a person who knowingly violates the rules with a class C felony.

The International Maritime Organization’s Ballast Water Management Convention, adopted on February 16, 2004, recently was ratified by Finland, putting it over the threshold to become effective.   At this point the ratifying countries represent more than 35% of global shipping tonnage by flag state.  The Convention’s ballast water management rules will go into effect on September 8, 2017.  Under these standards, vessels sailing internationally that have the capability to carry ballast water must have a Ballast Water and Sediments Management Plan approved by the nation under which the vessel is operating and a recordkeeping system to document any operations concerning ballast water.

The Convention provides that vessels shall either complete a ballast water exchange at least 200 miles from shore with at least 95% exchange in volume, or employ a ballast water management system that satisfies rules regarding the concentration of organisms allowed to be in discharged ballast water and that is approved by the nation under which the vessel is operating.  The Convention states that violators shall be punished pursuant to the law of the nation under which the vessel is operating.

Operators should pay close attention to the ballast water management standards in the relevant jurisdiction to avoid noncompliance and potential penalties.   They should also pay close attention to potential differences in ballast water management rules.  For example, the USCG’s requirements for approval of a ballast water management system are particularly strict and may be higher than those required pursuant to the IMO’s standards.  Thus, a ballast water management system that complies with the IMO rules may not necessarily satisfy the USCG standards and could be wholly insufficient or acceptable only on a short term for those operating in American waters.  To ensure compliance, operators should read the rules closely and consult legal counsel when developing their ballast water management policies.

THE FALSE CLAIM ACT: THE GOVERNMENT’S SLEDGEHAMMER JUST GOT BIGGER

The False Claims Act (FCA) has long been the United States Government most effective tool for dealing with fraud in government contracting, and that tool is now more powerful than ever.  Originally enacted during the Civil War to combat war profiteers, it allows the government to seek criminal and civil penalties. As a reward to those who report fraud, it allows relators to recover between 15 and 30% of the amount recovered on behalf of the government, plus their attorney’s fees. A claim subject to the FCA is broadly interpreted to include just about any statement submitted to the government in order to obtain payment. Each false FCA violation is punishable with up to five years in prison, and 10 years if it involves a conspiracy.  In addition, each violation is subject to civil penalties of treble damages, plus a fine.  In each of the last four years, the Department of Justice recovered more than $3.5 Billion from FCA cases.[1]

The Government’s recovery under the FCA is sure to rise as this summer, the Department of Justice published an interim rule effective August 1, 2016 nearly doubling the fine applicable for each false statement.[2]  This rule adjusts the minimum per-claim penalty from $5,500 to $10,781, and the maximum per-claim penalty from $11,000 to $21,563.  Anyone doing business with the Government is likely to make repeated statements to the government subject to the FCA during the course of a contract, making this increase a huge liability exposure for potential violators.  While these increased fines may open the door to an argument that they violate the United States Constitution’s Eighth Amendment prohibition on excessive fines, in most situations it will give government investigators and private relators increased leverage in costly settlements discussions and criminal prosecutions.

This summer, the United States Supreme Court also weighed in on the expansive scope of the False Claims Act.  In Universal Health Services, Inc. v. United States,[3] a healthcare provider billed the government through the Medicaid program for providing specific mental health professional services. However, many of the individuals providing these services were not properly licensed.  While the healthcare provider did not make an express statement to the government about the licensure of these individuals, the Supreme Court found under the “implied false certification theory” that the bills can be a basis for a violation under the FCA.  A violation exists if a “claim” makes a specific representation about the goods or services provided, and the company fails to disclose noncompliance with material statutory, regulatory or contractual requirements. In other words, material omissions or half-truths can trigger FCA liability just as much as an affirmative false statement.  Now that the Supreme Court has approved of the “implied false certification theory,” the Government has broadened powers to enforce the FCA in many situations involving government contracting.

If increased fines and stricter interpretation is not enough to make companies take notice of the FCA, then increased enforcement activities should certainly get their attention.  Contractors fraudulently using Disadvantaged Business Enterprise (DBE) programs have been the subject of numerous investigations and settlements over the last year.  Contractors have been suspended, debarred, and convicted for using a DBE entity as a pass through scheme to flow money from government contracts to non-DBE entities.  Granite Construction, Inc. will pay over $8.25 Million in fines and forfeitures where Granite conspired to make it look like a DBE company was performing work, when it was providing no commercially useful function.[4]  Ahern Painting Contractors, Inc. was suspended by the U.S. Department of Transportation for using a DBE to pass through materials from a non-DBE supplier for a bridge maintenance, repair and painting contract in New York.[5] Sound Solutions Windows & Doors LLC was fined $5.8 million under the FCA and FCJ Real Estate Development Company was debarred for 3 years for using a pass-through entity “to obtain the appearance of DBE participation” on an FAA funded contract at Chicago’s O’Hare International Airport.[6]  Also in Chicago, Elizabeth Perino was convicted in a DBE pass-through fraud scheme where she falsified certain documents to disguise that her company did not meet DBE requirements and conspired to make it appear that it had performed work really performed by the prime contractor.[7] In March, Philadelphia based contractor, Markias, Inc. was suspended for an alleged pass-through conspiracy on two federal funded bridge renovation projects.[8] In July, a DBE owner plead guilty to using her company to obtain kickbacks for herself, while not providing any services on a bridge project.[9] In Idaho, Elaine Martin was recently sentenced to 84 months in prison and her companies debarred for submitting false applications to participate in DBE programs.[10] Finally, The Department of Justice is now suing the CEO and CFO of a company that already paid a $50.6 million fine under the FCA for overbilling services on reconstruction contracts in Afghanistan, Iraq and other countries.[11]

The False Claims Act is the Government’s most powerful tool used to combat fraud and abuse in contracting with the government. Contractors should beware that increased penalties, broad interpretation by courts and increased investigations have made the FCA even more powerful and a fearsome weapon to combat fraud that must be respected.


[2] Federal Register, Vol. 81, No. 126, 42491, June 30, 2016.

[3] Universal Health Services, Inc. v. United States, 136 S. Ct. 1989 (2016).

[4] U.S. Dep’t Labor, Office of Inspector General, OIG Investigations Newsletter, Vol. I, Nov. 30, 2015, p.3.

[10] https://www.oig.dot.gov/library-item/33626, August 16, 2016 (MarCon, Inc., MarCon Precast, Inc. and Elaine Martin)

TENANTS RIGHTS IN FORECLOSURE UNDER VIRGINIA LAW

Often when residential properties undergo foreclosure, they have tenants residing in them.  In those circumstances, the Code of Virginia requires the landlord to provide notice to the tenant that foreclosure is pending.  The Code of Virginia also allows a tenant to remain in the property after foreclosure, subject to the requirements of the federal Protecting Tenants at Foreclosure Act (PTFA) and provided that the tenant complies with the lease, including by continuing to pay rent.  If these requirements are met, the tenant can remain in the property until the lease expires.

The PTFA also includes provisions that benefit lenders after foreclosure.  Most importantly, a tenant can remain in possession of the property under the PTFA only pursuant to a “bona fide” lease.  For a lease to be considered “bona fide,” it must require the tenant to pay fair market rent and the tenant cannot be the child, spouse or parent of the foreclosed owner of the property.  This prevents a relative of the original owner from trying to remain in the foreclosed property pursuant to a lifetime, rent-free lease, which – believe it or not – has happened.

PTFA also included a “sunset” provision that repealed the statute as of December 31, 2012, which created uncertainty as to whether the PTFA still applied to foreclosures in Virginia.  A recent federal court decision, however, found that the terms of the federal statute still apply in Virginia, because Virginia’s statute incorporating the PTFA only incorporated the substantive sections of the federal act and not the “sunset” provision.  This is good news for banks and lending institutions who do business in Virginia, because they can continue to sell properties after foreclosure subject to the remaining term of any “bona fide” lease.  They also can collect fair market rent for the property and evict tenants who fail to pay rent.

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