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Court finds Circle C Construction, LLC, liable for falsifying certifications, but remands for further proceedings to determine damages

The United States Court of Appeals for the Sixth Circuit has affirmed a District Court ruling holding Circle C Construction, LLC, liable under the False Claims Act for submitting false payroll certifications, while remanding the case for further determinations about damages.  Circle C’s contract –for construction work at a Kentucky military installation –explicitly incorporated the certification requirements of the Davis-Bacon Act, 40 U.S.C. § 3142 wage and hour law specifying wage determinations for electrical workers.  Circle C, a contractor with 20 years of experience in government contracts, conceded its knowledge of various Davis-Bacon requirement and stated that one of its co-owners and its bookkeeper attended a training session at the Fort Campbell installation on the prevailing wage requirement for federal government contracts.  Despite its knowledge of these requirements, Circle C did not include the employees of its primary electrical work subcontractors, Phase Tech, on its original certifications, nor did it verify that these workers were paid prevailing wages.  All Phase Tech electrical workers and laborers were paid at least two dollars an hour less than prevailing wages.

The Sixth Circuit found that Circle C’s payroll certifications were expressly false because:

  • they stated that they were complete, when in fact no Phase Tech employees who worked on the project were listed, and
  • they falsely represented that the prevailing wages were paid to subcontracted employees.

The Sixth Circuit overturned the damages award because the estimation of cost to the government by the Supervisory Contract Specialist at the Directorate of Contracting at the Fort Campbell Army Post:

  • lacked specific detail,
  • included projects outside the scope of the amended complaint (in Tennessee instead of Kentucky),
  • did not adequately account for the discrepancies in the relevant sums presented by the parties, and
  • did not accurately represent the difference between what the government paid to Circle C, what Circle C paid to Phase Tech, and the payments to which Circle C would have been entitled in the absence of its fraud.

This reversal and remand for further proceedings on damages indicates that an activity by activity accounting, instead of a general estimated amount based on percentages, might be necessary to effectively calculate damages under the express certification theory.

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