The American Recovery and Reinvestment Act of 2009 ("ARRA"), known more commonly as President Obama's stimulus package, presents an unprecedented opportunity for private businesses interested in contracting with the federal government. The Professional Services Council, which represents federal contractors, estimates that almost $40 billion of the $787 billion program will go to federal contractors and suppliers. However, as experienced federal contractors know, working with the government presents its own set of drawbacks and challenges. Two things a new or inexperienced contractor should be aware of are: (1) the False Claims Act ("FCA"), a unique legal remedy the federal government and whistleblowers have at their disposal to address contractor fraud; and (2) the increased protection whistleblowers will receive under the ARRA.

The False Claims Act
The FCA, 31 U.S.C. § 3729 et. seq., was originally a Civil War law signed by Abraham Lincoln. The FCA, as it exists now, penalizes a contractor for knowingly submitting false claims for payment to the federal government. The Department of Justice has the ability to bring criminal or civil proceedings against contractors and suppliers it believes to have committed such fraud. The FCA's civil remedies permit the government to recover three times its actual losses as well as additional fines. In 2008 alone, the Department of Justice used the FCA to recoup more than $1.3 billion from those doing business with the government.

Perhaps more importantly, the FCA empowers and incentivizes private citizens - whistleblowers, who are typically current or former employees of the contractors - to bring their own civil actions to recover sums on behalf of the government. These whistleblowers, labeled qui tam relators, can share as much as thirty percent of the treble damages and fines they recover on behalf of the government, plus their attorneys' fees. Recently, qui tam relators have been filing between 300 and 400 FCA suits each year.

Would-be federal contractors have substantial reason to believe that the Department of Justice and relators' attorneys will use the False Claims Act to allege ARRA project fraud. In response to the sufficiently analogous Troubled Asset Relief Program ("TARP") and Capital Purchase Program ("CPP"), Senator Chuck Grassley penned a highly-publicized letter to then-Treasury Secretary Paulson and then-Attorney General Mukasey urging the use of the FCA to police project fraud. He opined that entities receiving funds under these programs are subject to the FCA if they use false or fraudulent submissions to obtain federal funds. Moreover, pending as of April 3, 2008 in the United States Senate is the Fraud Enforcement and Recovery Act of of 2009 ("FERA"), co-sponsored by Sen. Grassley, which among other things seeks to amend the FCA to expand contractors' liability. Because of the public scrutiny that the financial bailouts are receiving and these clear messages sent to relators' attorneys by prominent elected officials, contractors have to be cognizant of the risks of potential FCA claims in pursuing stimulus funds. Where state governments are to act as pass-throughs for federal stimulus dollars the same concerns may be present under state law analogs to the FCA.

FCA suits generally cite at least one type of operative fraud. First, some contractors are accused of misrepresenting their eligibility for programs from which they seek payment. Second, many whistleblowers accuse companies of submitting false applications for grants or loans. Third, companies can be accused of overcharging the government or providing goods or services different from those promised or contracted for. Finally, the government and relators frequently claim false certifications by contractors of their compliance with laws, contract terms and/or regulations.

So what can a company pursuing stimulus project funds do to minimize its FCA risk? First and foremost, prospective contractors should communicate with the government with the utmost candor and not misrepresent their business' capacity or performance. Nevertheless, many companies are still embroiled in FCA disputes when their ambiguous representations or negligent mistakes appear to be (or can be contorted into appearing like) fraud. These risks can be minimized with better personnel and processes. If a company does not have the benefit of a staff experienced with government contracting, management should assemble a team of competent employees to dedicate themselves to learning the complex web of government contract documentation and regulations. Procedurally, during contract negotiations with the government, representations made to the government and concessions received should be carefully documented. Contractors must both ask questions and push government contracting officers to explain ambiguities - in writing. If issues persist, would-be contractors should seek counsel.

The ARRA's Enhanced Whistleblower Protection
While the FCA is designed to address fraud, Section 1553 of the ARRA protects (and thus promotes)whistleblowing on mismanagement, waste and public health dangers related to stimulus funds. Employees of non-federal employers receiving covered funds - i.e., private business, state and local government employees - may not be "discharged, demoted or otherwise discriminated against" for disclosing misuse of stimulus funds. While other federal laws provide whistleblowers with protection, those in the ARRA represent a significant expansion.

Section 1553 of the ARRA prohibits reprisals for disclosures made by an employee to a wide range of federal officials, courts, and grand juries, as well as to the employee's supervisors or others at the company with authority to investigate complaints. With respect to disclosures made to representatives of the employer, it is important to note that the ARRA departs from recent case law and extends protection to disclosures made even in the ordinary course of that employee's duties.

Perhaps more importantly, the ARRA provides for increased damages and easier proof of reprisal than other laws. The ARRA provides no cap on the employee's damages. This sets the ARRA apart from other whistleblower laws.

The ARRA then embraces an expansive concept of circumstantial proof to the benefit of the whistleblower. The whistleblower needs only demonstrate that his or her disclosure was a "contributing factor" in the reprisal by showing either that the official responsible for the reprisal knew of the disclosure or that the reprisal occurred within a sufficiently close period of time to permit a reasonable person to conclude that the disclosure was a contributing factor. This is a significantly reduced burden of proof and obviously creates potential liability for an employer legitimately taking action against an employee who only coincidentally made a disclosure regarding stimulus funds.

Section 1553 of the ARRA, as well as the whistleblower protections in the FCA and in state law, highlights the importance of documenting legitimate and non-retaliatory reasons for any adverse employment actions in minimizing the risk of expensive whistleblower litigation. Whenever possible, officials responsible for receiving and investigating complaints and disclosures from whistleblowers should not be the same officials responsible for disciplinary actions. Furthermore, in disciplining or discharging problem employees who have engaged in protected activity under the ARRA, employers will have to ensure that such adverse action is consistent with actions it took against other similarly-situated employees.

Conclusion
Companies should recognize the negative aspects of working with the government in making informed decisions on whether to pursue stimulus funds. Stimulus dollars do not represent "found money," but instead come with heightened negotiation and compliance costs that should be accounted for in any cost-benefit analysis. Moreover, contractors and suppliers should further recognize that the federal government represents the most formidable opponent in litigation, particularly when it is armed with inside information provided to it by protected whistleblowers. Unless contractors appreciate these risks and conduct themselves accordingly, their stimulus dollars (as well as their own) will more likely end up stimulating plaintiffs' lawyers representing whistleblowers and qui tam relators.