Construction Law

Overview of Oregon False Claims Act

By Brett M. Hill

Oregon recently joined a growing list of states to enact a false claims act. Washington has not adopted a false claims act at this time but there have been attempts in the past by legislators to enact a similiar statute into law. The Oregon False Claims Act (OFCA) imposes civil penalties against contractors on Oregon public projects who submit false or fraudulent claims for payment as well as other prohibited activities. The Act imposes liability against the contractors' company and any individuals participating in the prohibited conduct. Any contractor performing work on public works projects should take note of this new law.

The Act imposes liability against contractors and individuals for a number of activities: (1) submitting a claim the person knows contains false or fraudulent information; (2) to conspire with others to present a claim known to be false or fraudulent; (3) present a claim containing supporting documentation that is known to be false or fraudulent; (4) to buy property from a public agency from an officer or employee of the agency if the person knows the officer or employee is not authorized to sell the property; (5) to receive property of a public agency from a public officer or an employee as a pledge of an obligation or debt if the person knows the officer or employee is not authorized to pledge the property; and (6) to fail to disclose a false claim that benefits a person within reasonable time after discovering the false claim has been submitted for payment.

The Act generally requires that the contractor have knowledge of the false or fraudulent information. The knowledge of the contractor can be established if the contractor has actual knowledge, acts in deliberate ignorance of the false or fraudulent nature, or acts in reckless disregard of the false and fraudulent nature of the claim. The OFCA is particular troublesome for general contractors who pass through a subcontractors claim.

If the contractor violates the Act, the Attorney General of the State of Oregon can seek damages arising from a violation of the Act, plus the Court is required to award a penalty against the contractor for $10,000 per violation or an amount equal to twice the amount of damages incurred for each violation. Contractors can reduce their liability for fully cooperating with the Attorney General. The Attorney General can also be awarded reasonable attorneys' fees. Attorneys' fees can only be awarded against the Attorney General if the Attorney General had no "objectively reasonable basis" for bringing the action.

The Act also provides the Attorney General's office with the broad powers of performing an investigation of whether a violation of the Act has occurred before a lawsuit is filed. The AG's can initiate an investigation, require individuals to appear and testify under oath, issue written discovery requests, and require production of documents requested by the Attorney General's office.

Contractors performing work in the State of Oregon should take note of the new OFCA. The Act applies for all requests for payments on public projects, including pay applications, change orders, and formal claims. Prior to performing work on an Oregon public project, contractors are advised to consult with a qualified attorney to seek advice how to best avoid potential liability under the OFCA.

Full post as published by Construction Law Blog on December 07, 2010 (boomark / email).