The United States Court of Appeals, Fourth Circuit, affirmed a Virginia District Court’s decision granting summary judgment to the defendant in a qui tam suit brought under the False Claims Act. U.S. ex rel. Owens v. First Kuwaiti General Trading & Contracting Co., 2010 WL 2794369, C.A.4 (Va.), July 16, 2010.

In 2005 the State Department contracted with First Kuwaiti to build a new U.S. Embassy in Baghdad, comprised of more than twenty buildings plus infrastructure. This was one of the largest construction projects ever undertaken by the State Department.

John Owens was hired as a general construction foreman but his building was not yet underway, so he handled a variety of assignments around the embassy site. He apparently grew increasingly dissatisfied with his job and resigned the following year.

Owens subsequently brought a qui tam suit under the False Claims Act (FCA), 31 U.S.C. Section 3729 against First Kuwaiti. He alleged that the firm billed falsely for deficient work in connection with construction of the embassy buildings. He claimed to have witnessed a number of construction mistakes at the job.

In response to the lawsuit’s fraud allegations, the U.S. government was obligated to investigate to determine whether to intervene in the FCA case. The government’s expert examined the matter and concluded that the defects in the construction were minor and not unexpected for a project of this size. Further, they had been repaired. The government elected not to intervene in the qui tam action.

The Court determined that the essence of relator John Owen’s claim is that his former employer failed to live up to its contractual obligations. He did not produce any evidence of knowing misrepresentations on First Kuwaiti’s part.

The Fourth Circuit opinion stated “Congress crafted the FCA to deal with fraud, not ordinary contractual disputes. The FCA plays an important role in safeguarding the integrity of federal contracting, administering strong medicine in situations where strong remedies are needed. Allowing it to be used in run-of-the-mill contract disagreements and employee grievances would burden, not help, the contracting process, thereby driving up costs for the government and, by extension, the American public.”

“The FCA provides that suit may be brought against anyone who “knowingly presents” to the government “a false or fraudulent claim for payment or approval.” 31 U.S.C. Section 3729(a)(1). It similarly allows suit against anyone who “knowingly makes…a false record or statement material to a false or fraudulent claim.” Id. at Section 3729(a)(1)(B). In adopting the FCA, “the objective of Congress was broadly to protect the funds and property of the government.” Rainwater v. United States, 356 U.S. 590, 592 (1958).”

A specific intent to defraud is not required; reckless disregard of the truth or falsity of the information can satisfy the “knowingly presents” requirement. Congress did not intend the false Claims Act to punish honest mistakes or incorrect claims submitted as a result of mere negligence. FCA is a fraud prevention statute. “It does not allow a qui tam relator to shoehorn what is, in essence, a breach of contract action into a claim that is cognizable under the False Claims Act.” United States ex rel. Kellogg Brown & Root, Inc. 525 F.3d 370, 373 (4th Cir.2008).

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