CRS-6 items which are not within contract specifications or which do not meet contract requirements, including the substitution of inferior materials or products (see, for example, United States v. Steiner Plastics Mfg. Co., 231 F.2d 149 (2d Cir. 1956), conspiracy and fraud prosecution for delivering jet cockpit canopies, which had not been properly inspected, by switching approval stamps and serial numbers from previously inspected canopies.) 5. Bribery, graft and conflicts of interest: This area covers bribes to federal officials, gratuities and gifts offered by contractors to federal contract officers or other federal employees, "kickbacks" to prime contractors from subcontractors, and violations of conflict of interest laws such as the "revolving door" prohibitions and restrictions limiting the influence and advocacy activities of former federal officials before their agencies. 6. Bid rigging: This may involve several different activities, including collusive bidding by contractors or other agreements to limit competition, refrain from bidding or divide a market; and could involve the illegal receipt by contractors, and disclosure by a federal official, of classified or secret information to assist a contractor in bids. (Note, for example, The Washington Post, January 5, 1986, pp.F1-2, "GTE Trial to Test Secrets Lavs' Use.") When invoices or vouchers are submitted to the government for payment under a contract that was illegally or fraudulently obtained because of bid-rigging, such claims may be deemed "fraudulent" or "false", even if they reflect actual contractor costs and performance. (United States v. Winchester, 407 F.Supp. 261 (D.C. Del. 1975)). Among the provisions of federal statutory law which may be brought to bear upon such conduct in the area of fraud in defense procurement are the following: false statements law, 18 U.S.C. 1001; false claims, 18 U.S.C. § 287; conspiracy to defraud, 18 U.S.C. § 371; mail and wire fraud, 18 U.S.C. SS 1341, 1343; RICO, 18 U.S.C. § 1961 et seq; bribery, 18 U.S.C. § 201, conflicts of interest 18 U.S.C. § 203,209, post-employment, "revolving door" conflicts of interest 18 U.S.C. § 207; trade secrets act and classified information restrictions, 18 U.S.C. § 1905, 18 U.S.C. § 798; among others. The two most commonly used provisions bearing upon inaccurate or improper charging 'd: appear to be the false statements (18 U.S.C. § 1001) and false claims (18 U.S.C.287) laws. False Statements (18 U.S.C. § 1001). This provision of federal criminal law prohibits knowingly and willfully making a false or fraudulent statement concerning a matter within the jurisdiction of a federal agency. The provision states specifically as follows: $1001. Statements or entries generally Whoever, in any matter within the jurisdic shall be fined not more than $18,000 or impris- (June 25, 1948, ch. 645, 63 Stat. 148.) - The essential elements of the crime have been described an ftalious: Proof of five elements is essential to to sustain a conviction under the false statement ? Unlike the false claims act provision, there does not have to be within the This elements of this offense a "claim" for money against the government. statute may therefore be used to prosecute false or fraudulent corporate or company documents of a contractor which are not actually or necessarily "claims" against the government in themselves, but, in the context of procurement fraud, are used to support claims, bills or vouchers against the government. Furthermore, such documents do not have to be submitted directly to the government for a violation. 16 One of the major legal issues that is involved in prosecutions of procurement fraud and abuse under this provision, and similarly in enforcement under the false claims statute, often revolves around the "specific intent" requirement. The "specific intent" required under § 1001 is not an "intent to defraud" (see United States v. White, 765 F.2d 1469, 1472 (11th Cir. 1985); Nilson Van & Storage Co. v. Marsh, 755 F.2d 362 (4th Cir. 1985), cert. denied 106 S.Ct. 65), but rather is an "intent to deceive", 17 that is, that defendant "had the specific intent to make a false or fraudulent statement deliberately ་. or at least with reckless disregard of the truth and with the purpose to avoid learning the truth." 18 As explained by the court in the Ninth Circuit, the act 15 United States v. Lange, 528 F.2d 1280, 1287 (5th Cir. 1976). 16 United States v. Kraude, 467 F.2d 37, 38 (9th Cir. 1971) cert. denied 409 U.S. 1076 (1972); Ebeling v. United States, 248 F.2d 429, 434 (8th Cir. 1957); Lange, supra at 1287; United States v. Baker, 626 F.2d 512, 514 (5th Cir.) 17 United States v. Baker, supra at 515; United States v. White, supra at 1472. 18 United States v. Tamargo, 637 F.2d 346 (11th Cir. 1981), cert. denied 455 U.S. 824; United States v. White, supra at 1481-82. CRS-9 aust have been done willfully, and with knowledge: To willfully make a false statement under § 1001, a Since there is "specific intent" required under both this statute and the false claims law (18 U.S.C. § 287), defenses to prosecutions under these provisions may focus on unintentional contractor mistakes or reasonable alternative interpretations by contractors of often complex, ambiguous, or flexible accounting and cost standards and federal regulations regarding procurement. This issue of lack of intent to deceive, to defraud, or to do a wrongful act is discussed and developed more fully below in discussing the false claims law. Most circuits also require as an element of the false statements crime that the statement involved be "material." The purpose of this requirement has been found to be "to exclude 'trivial' falsehoods from the purview of the statute." 20 To meet the "materiality" standard, however, it need not be shown that the government was actually deceived, sustained a pecuniary loss or was influenced by the statement, but only that the statement had "the capacity to influence a determination required to be made." 21 It should be noted that 19 United States v. Carrier, 654 F.2d 559, 561 (9th Cir. 1981). 20 United States v. Baker, supra at 514, quoting United States 518 F.2d 168, 170-71 (5th Cir. 1975). 7. Beer, 21 United States v. Beer, supra at 122; United States v. Baker, supra at 514; United States v. Chandler, 752 F.2d 1148 (6th Cir. 1985); United States v. Richmond, 700 F.2d 1183 (8th Cir. 1983); United States v. Fern, 696 F.2d 1269 CRS-10 "materiality" is not an essential element of making a false statement in the Second Circuit. 22 The false statement law may thus be brought to bear on a number of various fact situations concerning procurement fraud, including the aischarging of labor or other costs by falsifying time sheets or other cost or business documents; overcharging or inflating the cost to the government for services or products by making false submissions or certifications of cost or pricing data required by the Truth in Negotiations Act; product substitution by way of falsifying approval stamps, inspection documents or required certifications or statements of adherence to contract requirements or specifications; and bid rigging where a firm falsely certifies an "Independent Price Determination" (see DAR 1-115(a) and 7-2003.1). False claims (18 U.S.C. § 287). The false claims statute prohibits one from knowingly making a false, a fictitious, or a fraudulent claim against the United States. The statute reads specifically as follows: 287. Falss, fictitious or fraudulent claims Whoever makes or presents to any person or officer in the civil, military, or naval service of the United States, or to any department or agency thereof, any claim upon or against the United States, or any department or agency thereof, knowing such claim to be false, ficti tious, or fraudulent, shall be fined not more than $10,000 or imprisoned not more than five years, or both. (June 25, 1948, ch. 645, 62 Stat. 698.) 22 United States v. Elkin, 731 F.2d 1005, 1009 (2d Cir. 1984), cert. denied 105 S.Ct. 97. |