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Fourth Circuit Interprets Corporate Knowledge And Materiality Under FCA

Jan.08.2004

In United States ex rel. Harrison v. Westinghouse Savannah River Co. (Dec. 19, 2003), the Fourth Circuit upheld a civil penalty of $195,000 ($7500 times 26 invoices) because the false cert "negatively affected the integrity of the bidding process," although zero actual damages were proven. The court held that (a) the False Claims Act's "knowledge" element was satisfied when one employee of the corporate defendant had knowledge of the facts making the corporation's certification false, even though there was no evidence that the same employee knew that the cert was required or even that it had been submitted; and (b) the false cert (that no organizational conflict of interest (OCI) existed in connection with a subcontract award) was "material" because it would have "had a natural tendency to influence" the government's decision to fund the subcontract "if it had known the full details" at the time of award, even though the government in fact concluded that no OCI existed when it subsequently learned of the issue and continued to pay for the subcontract work thereafter.

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