Construction & Military Contract Civil Investigative Demands (CIDs)
For federal government construction and military contractors, civil investigations can lead to recoupment demands, fines, and contract termination. If an investigation uncovers evidence of intentional contract fraud, company executives and key personnel can also face criminal prosecution.
Federal government contracting is a lucrative business. Companies of all sizes can secure substantial contracts, with many larger firms doing billions of dollars in federal contract work each year. The federal government’s spending on construction and military resources is particularly substantial. The federal discretionary defense budget was approximately $686 billion in 2019, and data from the Associated General Contractors of America indicate total federal construction spending of approximately $230 billion over the same 12-month period.
However, the fact that the federal government’s construction and military spending is so substantial also means that federal authorities maintain strict oversight of contractors operating in these sectors. These authorities have a number of tools at their disposal for uncovering government contract fraud, waste, and abuse, with one of the most-effective being the Civil Investigative Demand (CID). CIDs are a type of administrative subpoena that allow federal authorities to gather information in support of contract fraud investigations without the initiation of formal court proceedings, yet contractors that fail to comply can still face contempt charges and other legal consequences.
Federal Defense Attorneys for Government Contract Fraud Investigations
At Oberheiden, P.C., our practice is devoted to representing clients in federal matters. Our attorneys have extensive experience in construction and military contract fraud investigations, including prior experience as federal prosecutors overseeing investigations and prosecutions under the False Claims Act (FCA). Our practice is nationwide in scope; and, as a result of our extensive experience in federal white-collar cases, we are able to offer proactive and strategic representation that is specifically designed to preserve our clients’ federal contracts while avoiding the imposition of fines and other penalties.
Our federal defense attorneys are available to represent construction and military contractors across the country in federal matters involving:
- Federal Bureau of Investigation (FBI)
- General Services Administration (GSA)
- National Aeronautics and Space Administration (NASA)
- U.S. Department of Defense (DOD)
- U.S. Department of Homeland Security (DHS)
- U.S. Department of Housing and Urban Development (HUD)
- U.S. Department of Justice (DOJ)
- U.S. Department of State (DOS)
- U.S. Department of Transportation (DOT)
- All other federal agencies
10 Common Allegations in Civil False Claims Act Investigations Targeting Federal Government Contractors
Typically, Civil Investigative Demands issued in connection with federal construction and military contracts involve allegations under the False Claims Act. The FCA is a broad statute that imposes civil (and in some cases criminal) penalties for any individual and business that, “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval,” by any federal government agency. Conspiring to submit a false or fraudulent claim is punished equally under the False Claims Act (i.e. in the case of bid rigging), and individuals and companies prosecuted under the FCA will often face charges under various other federal statutes as well. In a typical case, it is not unusual for allegations of stealing government property, laundering money, and engaging in mail fraud and wire fraud to all be on the table.
This is true in all types of federal contract fraud investigations, including those involving allegations of:
- Bid Fraud
- Bid Rigging
- Substitution of Inferior Products and Materials
- Inflation of Labor and Material Costs
- Delivery of Substandard Products or Services
- Cross-Charging Between Federal Government Contracts
- Improper Allocation of Costs to Federal Government Contracts
- Quality Control Testing Fraud
- Truth-In-Negotiations Act (TINA) Violations
- Unlawful Bribes and Kickbacks
In many cases, federal agents and prosecutors will be targeting multiple allegations against the same contractor or group of contractors. In order to mount a successful defense, it is critical to quickly determine the scope and nature of the government’s inquiry so that you can strategically target the right allegations without unnecessarily exposing information that might lead to expansion of the investigation. With our federal defense attorneys’ experience on both sides of federal contract fraud investigations, we can discern what specific allegations the DOJ is targeting (this will not be evident from the CID itself) and then structure our defense representation accordingly.
5 Key Facts about Federal Construction and Defense Contract CIDs
For federal government construction and military contractors, receiving a Civil Investigative Demand is a matter that needs to be taken very seriously. Deadlines come up quickly, and failing to timely submit a compliant response can have severe negative ramifications. But, being overly compliant can be dangerous as well. Here are five key facts about receiving and responding to a federal CID as a construction or military contractor:
1. Receiving a CID Does Not Necessarily Mean that Your Company is Under Investigation.
If you have been served with a Civil Investigative Demand from the DOJ, this does not necessarily mean that your company is under investigation for federal contract fraud. The DOJ issues CIDs to suspects, targets, and witnesses, and it could be the case that federal authorities are seeking to gather information in support of an investigation into another company or individual. As we work with you to prepare your response to the CID, we will also be maintaining close contact with the DOJ agents and prosecutors handling the investigation in order to determine your company’s role.
2. Receiving a CID Does Not Necessarily Mean that You are Safe from Criminal Prosecution.
Equally, if not more, important, receiving a CID does not necessarily mean that you are safe from criminal prosecution. Even though the federal government’s investigation is currently civil in nature, it could quickly turn criminal if the investigation uncovers evidence (or purported evidence) of intentional contract fraud. In any event, civil and criminal False Claims Act charges both carry substantial penalties, and ensuring that you and your company avoid charges needs to be your top priority during the government’s investigation.
3. The DOJ has Immense Power to Demand Information through the Issuance of CIDs.
Even though CIDs are not court-issued subpoenas, they still carry the weight of law and the DOJ has immense power to demand voluminous records from federal government contractors. In fact, the extra-judicial nature of CIDs is largely what makes them so effective for the DOJ. While there are grounds to challenge CIDs in court, federal judges must defer to the DOJ’s investigative authority in most, and CIDs are rarely quashed in their entirety.
As a result, when faced with an overly-burdensome or potentially dangerous CID, a federal contractor’s most-viable option is usually to attempt to negotiate the scope of the CID with the DOJ. At Oberheiden, P.C., we have had significant success negotiating to limit our clients’ document production obligations during civil contract fraud investigations.
4. There are Consequences to Making Mistakes When Responding to a CID.
When responding to a CID, avoiding mistakes is critical to preventing costly consequences. This includes mistakes such as failing to submit a timely response (or negotiating an extension before a deadline passes), omitting responsive documents (either intentionally or unintentionally), and failing to preserve the attorney-client privilege. When we represent federal construction and military contractors with respect to CID responses, we work closely with our clients’ key stakeholders to help them make informed decisions while taking all necessary steps to ensure that their interests are protected during and after the government’s investigation.
5. Avoiding Prosecution Following Receipt of a CID Requires Experienced Federal Defense Counsel.
Due to the risks involved with both responding and failing to respond to a Civil Investigative Demand from the DOJ, contractors that have received CIDs need to engage federal defense counsel promptly. When choosing your representation, it is critical to choose a law firm with an extensive track record in federal fraud investigations. At Oberheiden, P.C., we have successfully defended clients in federal fraud investigations nationwide, and we can leverage our experience to defend you and your company against any and all federal contract-related allegations.
Are You Concerned about Allegations of Federal Construction or Military Contract Fraud?
If you have received a Civil Investigative Demand, if one of your subcontractors or bidding partners has received a CID, or if you have caught wind of a possible federal investigation, it is important that you seek legal representation right away. You need to give yourself as much time as possible to fend off any allegations, and taking a proactive and aggressive stance during the investigation will typically prove to be the most-effective way to avoid prosecution. Our federal defense attorneys are available to speak with prospective clients 24/7, and we can provide representation on an emergency basis if necessary in order to ensure that you meet your obligations pursuant to your Civil Investigative Demand.
Request a Confidential Initial Consultation at Oberheiden, P.C.
If you need to speak with a federal defense attorney about a CID your company has received in relation to a construction or military contract, we encourage you to contact us for a free consultation. To speak with a member of our federal defense team in confidence, call 214-469-9009 or inquire online now.