Theodore P Watson, Esq. A federal contractor under investigation or indictment can be charged with defrauding the Government by knowingly providing goods that were procured in violation of the Buy American Act (BAA) and the U.S. Trade Agreements Act. BAA compliance laws are in place to protect jobs in the United States and to keep the sale of American products to their maximum. As government contractor fraud defense attorneys, we represent large and small businesses facing investigations and indictments for Buy American Act fraud.
In January 2016, a federal government contractor settled to pay a total of $3 million to resolve civil and criminal allegations that it violated the Buy American Act by using non-compliant foreign materials on federally funded construction projects–and falsified documents in an attempt to hide its violations. Wisconsin-based Novum Structures LLC , agreed to plead guilty to one count of concealing a material fact, in violation of 18 USC 1001, and pay a $500,000 criminal fine. Buy American False Claims Act cases are alive and well. The key to defending against this level of procurement fraud is to develop sound internal controls to evaluate and assess the sources of your foreign products
What exactly are the False Claims Buy American Act Rules?
Buy American Act and Buy America requirements
The Buy American Act, 41 U.S.C.A. §10a-d., allows a preference for goods made in America when it comes to federal construction procurements. “The Act” or “BAA” requires the federal government to purchase domestic “articles, material and supplies” when they are bought for public use (on a federal construction project) unless a specific legal exemption applies.
- BAA compliance requirements apply to direct purchases by the U.S. federal government valued at more than US$10,000.
- Buy America requirements apply to purchases of iron, steel and other manufactured products permanently incorporated into infrastructure projects. Further, these projects must be undertaken by U.S. states and municipalities with funds issued by certain U.S. federal departments and agencies.
Violation of the Buy American Act & What is Buy American Act Fraud?
The general rule is that if a federal contractor knowingly provides goods that were procured in violation of the Buy American Act and the U.S. Trade Agreements Act, it can be criminal and or civilly liable if the Government would not have purchased the goods from that company if it had known of the violations.
The Federal Acquisition Regulations (FAR), subpart 25, has detailed guidance and rules for determining if your products, parts, or end products meet the domestic or foreign origin legal requirement for purposes of the Buy American Act. There are many broad exemptions to the Buy American Act. For example, the Act does not apply if the purchasing agency determines “it to be inconsistent with the public interest, or the cost to be unreasonable.” 41 USC §10a.
Furthermore, under the U.S. Trade Agreements Act of 1979, the President is authorized to waive any procurement law or regulation (including the Buy American Act) that would accord foreign products less favorable treatment than that given to domestic products. 19 U.S.C.A. §2511. Treaties and agreements may place limitations on the Act’s applicability.
Small businesses, manufacturers and companies providing parts or products to the federal government should be aware that although the contracting officer has the ability to waive Buy American Act requirements if the agency would not have bought the goods from that contractor if it had known of the BBA violations, that will initiate an investigation or case for Buy American Act fraud.
How Do Buy American Act Requirements Fraud (BAA Compliance) Cases Start? A Buy American Act requirements fraud case can start in a variety of ways. The most common is that one of your current or previous employees (or another competing business) may bring a qui tam action (whistleblower case) against you. Large businesses and small contractors seeking criminal defense attorneys should be very mindful that they should hire an attorney who understands the government contracting process and the various FAR regulations that govern Buy American cases involving public procurement and construction materials associated with each project.
The DOJ or OIG investigation will find BAA fraud for companies who knowingly intended to defraud the government. This can lead to a conspiracy charge when several players are involved. When you find out that you are under investigation, you should immediately conduct your own internal investigation and involve contractor fraud defense attorneys who understand the process and the legal requirements.
An investigation for major fraud includes responding to subpoenas, providing documents to the DOJ or OIG, and even making yourself available for interviews. Once the case starts, it can also turn into a civil and or criminal fraud case. This gets tricky since you now have to essentially deal with two cases at once. This is so simply because the burden of proof for a civil case and a criminal case is different.
Buy American Act Certification Creates Your Liability: Your liability for fraud under the Buy American Act starts with the certification phase. For procurements over certain threshold amounts, contractors must certify that their supplies and products comply with the legal requirements. Buy American fraud cases start at this point – your signature. Criminal investigators don’t really care if there was a mistake or some mitigating reason. They will move forward with a civil or criminal case against you. Hence, finding the right BAA compliance defense lawyer will be important.
What are the penalties? As in the case above, the facts of the case dictate the level of penalties imposed. Where the contractor demonstrates an intent to defraud the government, criminal penalties will be more intense.
U.S. Trade Agreements Act Fraud
If you are a federal government supplier under the Multiple Award Schedule contracts (GSA) and you are selling products to government purchasers under the Federal Supply Schedule, you must certify and agree to comply with the U.S. Trade Agreements Act of 1979, 19 U.S.C. § 2501, et. seq. Thus, certifying that your supply chains are also in compliance with the law. Under the Act, if your company is a manufacturer or vendor and sells foreign-made products to the Federal Government, you can only sell such products that are made or “substantially transformed” in countries with reciprocal trade agreements with the United States.
Federal Prosecutors Bring Qui Tam False Claims Act Lawsuits After a Finding of False Claims Buy American Act Fraud
Whether the contracting officer suspects a violation or a whistleblower contacts the OIG investigations office, federal law enforcement (mostly DOJ) will bring Qui Tam or False Claims Act criminal or civil charges for each procurement or purchase order within the relevant time period.
However, they must first find a valid case of False Claims Buy American Act fraud or Trade Agreements Act fraud to move forward with false claims charges. Federal attorneys also sometimes fail to assess whether you meet any buy American act exceptions.
Buying parts from China is a hot item in BAA fraud cases. There are other countries of origin that apply. However, you have the responsibility as a government contractor or subcontractor to comply with the law.
Other Department of Defense (DOD) Restrictions: In addition to the traditional fraud cases, there are additional manufacturing restrictions that apply to federal contractors that provide certain products that are produced in the United States. For example, under the National Defense Authorization Act, the Department of Defense may restrict the procurement of ammunition that are critical to our national defense to sources within the national technology and industrial base (i.e., United States and Canada) when it is necessary to create or maintain a domestic capability for their production. 10 U.S.C.A. § 2505. See Buy American Act Frequently Asked Questions.
Watson & Associates Defense Lawyers Can Help In Buy America Act Requirements Fraud Cases and False Claims Act Lawsuits
Watson & Associates government contracting BAA compliance lawyers and procurement fraud defense attorneys understand the procurement process and FAR Buy American requirements.
Watson’s attorneys for government contractors are committed to defending meritless government procurement fraud allegations and overzealous criminal defense cases. If your company is targeted for government procurement fraud or looking to defend a False Claims Act lawsuit, contact us online to schedule a free, confidential appointment with one of our whistleblower defense attorneys.
We help government contractors during the investigation stages and litigation stages about their manufactured products for violation of the Buy American Act fraud and U.S. Trade Agreements Act fraud.
Call us for immediate help at 1.866.601.5518