Legal Meets Practical

On this rainy Wednesday, I find that there are more than a few choices for blog topics today. As such, I’m not limiting myself to just one. Here are my top three news items for the week of November 15, 2015:

Are You Missing Out on the NVSBE?

The National Veterans Small Business Engagement is in full swing in Pittsburgh, Pennsylvania (November 17-19). This is the annual conference put on by the Department of Veterans’ Affairs (VA) for veteran-owned small businesses (VOSBs). Alas, it is too late for you to attend this year, but put this on your radar for next year. With thousands of attendees and the presence of hundreds of procurement officials, it’s a great place to network for prospective teaming partners and federal opportunities. Also, it offers dozens of learning sessions on a variety of topics, so you can take your pick based on what interests/affects you. (Last year, I presented on teaming opportunities for VOSBs). As a reader, if you’re attending the conference and have something to say about it (whether about your experience this year, or in years past), please leave a comment!

The CVE’s Attempt at Process Improvement

The VA’s Center for Verification and Evaluation (CVE) has effected major changes in how it processes VetBiz applications. (This is the verification process for a VOSB to be included in the VA’s VetBiz registry and be eligible for VA set-asides). Basically, when the CVE assesses eligibility for the program, they ask for a lot of documents relating to the business (corporate documents, tax documents, resumes, etc). Now, the CVE is asking for certain documents initially, and once the business gets through that hoop, it asks for the rest. The idea, I understand, is to stop some businesses from wasting everyone’s time. Also, it gives businesses the chance to fix their corporate documents at the beginning of the process in the event an issue that needs fixing. I’m not a huge fan of these changes, which the CVE is labeling a “pre-qualification,” as it makes the process more piece mail (and piece-mail unnecessarily complicates a process). Also, if a business has a problem with its operating agreement or bylaws, this would be flagged at the end of the process, anyway. We’ll see if this change sticks.

Chris Kyle Estate v Jesse Ventura: Will We See a Second Round?

The estate of Chris Kyle, veteran and author of the acclaimed American Sniper, has appealed to a federal court, asking it to overturn the $1.8 million jury verdict for defamation and unjust enrichment found in favor of the colorful Jesse Ventura. This case stemmed from a chapter in American Sniper which described unsavory actions/comments by Ventura which he alleged (and proved) never took place. Part of the grounds for appeal is that Ventura’s lawyer had informed the jury that Kyle’s book publisher’s insurance company, not his widow, would be forced to pay a verdict. (Presumably, this made them less shy about granting such huge damages). The appeal was filed on October 20, and there is yet to be a ruling. This case is an interesting one (from a legal standpoint in particular, as Ventura recovered on legal grounds that are very hard to win on – unjust enrichment), so I’ll be covering this if the appeal is granted.

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Last week, two things happened that are huge for veterans competing in federal space. One, you can’t do anything about. The second, you can. So please – chime in!

As to the first item, on November 9 the Supreme Court issued an Order yanking the Kingdomware case from its docket, requiring the petitioner (a veteran-owned small business) to explain why the case should be heard given that the contracts at issue have been fully performed. This is because the Court won’t hear a case if the issue is “moot,” meaning that deciding it doesn’t matter any more. It will, however, hear a case if the result doesn’t matter in the instant scenario, but will affect others in the future. (For example, when Roe v. Wade, the landmark case legalizing abortion, was decided, the petitioner had already given birth).

This case has been dragging along since 2012, when the Government Accountability Office (“GAO”) first determined that the VA had violated its own regulations (not to mention policy of helping out veteran-owned small businesses) by failing to set aside contracts off the Federal Supply Schedule for veteran-owned small businesses when certain criteria were met. (Access the full history on the case here). After the VA won at the U.S. Court of Federal Claims, and again at a district court level, Kingdomware filed a writ of certiorari at the U.S. Supreme Court, which was granted this summer.

The parties must file briefs with the Court by November 20, and assuming the case moves forward, oral argument will be re-scheduled for January. Hopefully this is a hurdle, not a brick wall, and veteran business owners will have their day!

The second item relates to the VA’s Veterans First Contracting Program, which is the means by which the VA awards set-aside contracts to veteran-owned small businesses and service-disabled veteran owned small businesses. Businesses must undergo a rigorous verification process in order for the VA to deem them “verified,” and then list them in the VetBiz database. (This process is not required for contracts issued by any federal agencies other than the VA).

On November 6, the VA published a Proposed Rule in the Federal Register, which seeks to strike the appropriate balance between preventing fraud in the Veterans First Contracting Program, and providing a process that would make it easier for more veteran-owned small businesses to become verified. The Proposed Rule is the result of a significant amount of dialogue between the VA’s Center for Verification and Evaluation (tasked with the verification process) and the veteran community. Some stakeholder feedback has been that the current regulations are too open for interpretation and are unnecessarily more rigorous than similar certifications programs run by the Small Business Administration (like the 8(a) program).

The last time the VA published a Proposed Rule on this topic, back in 2013, it received only 39 comments. 39! At this point there are over 10,000 businesses that have been verified. You cannot tell me that all of these businesses don’t have something to say about the process and how it can be improved. As such, if you are one of them, please chime in by the comment due date of January 5. For instructions on how to do so, access the Proposed Rule and instructions for comments here.

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Last week, I promised a two-part blog covering the recent False Claims Act lawsuit filed by the U.S. Government against a corporation and associated individuals for a rent-a-vet-scheme. This article continues it, but I wanted to begin by informing my readers that as of last week, Undersecretary for Benefits, Alison Hickey, resigned. This comes in the wake of a scandal relating to VA executives reaping hundreds of thousand dollars in relocation fees (for positions arguably created by them, for them). A Congressional hearing is scheduled in the near future, with five VA employees subpoenaed to appear. This isn’t something I want to cover in detail, but it’s important enough to pass on.

On to Part II of last week’s cautionary tale. In the case detailed, non-veterans approached a veteran with a full-time job elsewhere, installed him as the President of a corporation, and proceeded to pursue and win $24 million in service-disabled veteran-owned small business (SDVOSB) set-aside contracts while knowing the corporation was ineligible for the work. The U.S. Government is seeking damages for multiple counts of false claims, common law fraud, and unjust enrichment (the latter not discussed here). U.S. v. Strock Contracting, Inc., et. al. (1:15cv00887).*

The purpose of this blog is to explain exactly how much trouble you can get in for a scheme like this. Unlike with commercial contracts, government contracts are subject to a number of laws that carry civil and criminal penalties. (If you attempt to defraud the federal government, it gets very, very mad. Just in case that isn’t already abundantly clear.).

Count I of the Complaint accuses the defendants of violating the False Claims Act (FCA) by presenting false or fraudulent claims for payment. A “false claim” occurs every time an ineligible company knowingly asks for payment under an SDVOSB set-aside. Think of how many invoices one submits during the life of a contract.

Count II of the Complaint accuses the defendants of violating the FCA by making or using a false record or statement. These false claims occur when a non-eligible corporation (knowing it is not eligible) seeks verification for set-asides with the VA (by going through the verification process), self-certifies on SAM, and bids on contracts.

Count III  of the Complaint alleges conspiracy to violate the FCA by conspiring to submit or causing to be submitted a false claim or statement. A conspiracy claim would apply to any person who participated in a scheme – the folks who gathered the information for VetBiz submission, who hid the veteran’s non-involvement in the corporation from contracting officials. . . This means that you can be liable if you are an employee who goes along with a scheme, knowing it’s wrong.

Count IV of the Complaint is for common law fraud, which is generally a very difficult claim to prove. To be liable for fraud, one must make a misrepresentation of material fact, which someone else relies upon in acting. Here, the fraud is tied to the corporation claiming to be an SDVOSB, which was material to it obtaining contracts.

Did you notice how all of these claims are tied to the same sequence of events/scheme? This kind of endeavor puts a corporation at significant risk for treble damages, criminal penalties, high civil penalties, etc, because each invoice submitted, email sent, and bid submitted, can be a separate violation. Accordingly, if you have any question as to whether what you are doing is legal, seek out proper advice. Even if it’s an honest mistake, “I didn’t know any better” won’t work against the federal government for many types of regulatory violations (At least with the FCA, you have to act knowingly).

This cautionary tale continues. The Complaint was filed on October 7, and from the history in the Complaint, it appears the Parties were in negotiations and discussions for quite some time prior to that. I’ll cover this case more, as the situation warrants, so stay tuned…

*The facts set forth in the Complaint and here are allegations only; liability is yet to be determined.

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Kids these days…

A Minnesota college student has invented an app that prevents night terrors after witnessing his father, an Iraq war veteran, struggle with them himself.

Macalaster College senior, Tyler Skluzacek, was in the sixth grade when his dad, Sgt. First Class Patrick Skluzacek, was deployed to Iraq. When he returned home, he displayed classic symptoms of post-traumatic stress disorder, including night terrors.

In September, Tyler entered a 36-hour coding contest called HackDC, the theme of which was helping veterans. He and his team created a top prize-winning smartwatch app called myBivy.

The app tracks an individual’s heartbeat and movements in order to detect when night terrors are about to occur. The owner’s smartwatch or smartphone will then use sound or vibration to bring its user out of the deepest cycle of sleep and prevent night terrors while allowing them to remain asleep.

“After a couple weeks of tracking the soldier, we can find the exact symptoms of the onset of the panic attack and try to use the watch or use the android phone to disrupt that or take them out of the deep sleep, but keep them asleep,” Tyler explained in an interview to People magazine. (Yes, that is not normally a source of my information, but I felt Tyler’s efforts to help vets like his father deserved kudos).

Tyler’s team won $1,500 through HackDC to continue their work on the app, and they’ve also raised an additional $10,577 on Kickstarter (and climbing…with an original goal of $1,194). The team has been working with the VA and sleep experts and hopes to bring the app to clinical testing by next spring.

Given that in the U.S. alone, around 3.6 million veterans are diagnosed with PTSD, let’s hope they raise however much they need to maximize the app’s effectiveness. If you want to donate to the cause, click here. (Legal Meets Practical, LLC has no connection with Tyler or his team in any way).

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On October 7, the U.S. Government filed a civil complaint* against a company for damages and civil penalties arising from false claims made in connection to SDVOSB status. The Complaint is one worth looking at, because it gives a complete and comprehensive rundown of what, exactly, can happen if one goes the rent-a-vet route. It is a cautionary tale for every SDOVSB competing in the federal arena.

The Complaint alleges that from 2008 through 2013, the Defendants – consisting of an SDVOSB and three individuals, manipulated the SDVOSB Program and the Veterans First Contracting Program in obtaining $24 million in SDVOSB set-aside contracts. (U.S. v. Strock Contracting, Inc., et. al., 1:15cv00887). In a nutshell, in 2006 they created a corporation, Veteran Enterprises Company (VECO), and appointed a service-disabled veteran as its President and 51% owner. At the time the individual was courted as the “veteran owner,” he worked full-time as a New York State Parole Officer, a position he held through 2013. The Defendants assisted VECO in obtaining its SDVOSB certifications (both self-certifications and through the VA), despite knowing that it did not meet the necessary criteria.

After VECO obtained its certifications, it successfully competed for a number of SDVOSB set-aside contracts. As set forth in the Complaint, during the next few years, the service-disabled veteran did little but sign the contracts and proposals presented to him (because, as anyone in the VetBiz registry knows, one element the VA scrutinizes is whether the veteran is signing these documents). He also acted as a figurehead in attending the pre-award and post-award meetings held by the contracting agencies, and performed inspections.

According to the Complaint, the service-disabled veteran earned a small portion of the monies reaped by this scheme, with Strock and the associated individuals reaping the vast majority of profits. In fact, he even earned less than the 5% he was promised. (This flies in the face of the regulatory requirements that the veteran be the highest-compensated employee).

In general, the Complaint states that: “[b]y diverting contracts and benefits therefrom intended for service-disabled veterans towards an ineligible company, defendants undercut the purpose of statutorily created programs to encourage contract awards to legitimate SDVO small business.” It goes on to provide a rundown of the eligibility requirements set forth by both the SBA’s SDVOSB Program, and the VA’s Veterans First Contracting Program. Its five Counts accuse the defendants of violating the False Claims Act by: presenting false claims, making or using a false record of statement, and conspiring to submit/cause to be submitted a false claim or to make or use a false record or statement; as well as committing common law fraud and being unjustly enriched. It seeks millions of dollars from the Defendants, including treble damages associated with the false claims.

Because the Complaint comprehensively addresses the grounds for each claim, it’s helpful to understand what you’re not allowed to do. Stay tuned next week for a more detailed analysis (which you, hopefully, will never need. But if there’s ever a question…).

*This matter is yet to be adjudicated, and liability determined.  All facts set forth in this article are taken from the allegations made in the Complaint, which have yet to be determined as true.

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On Wednesday, President Obama signed a bill to fund the government through December 11, averting a shutdown and giving lawmakers about 10 weeks to negotiate a longer-term budget solution.

The 2016 fiscal year began on Thursday (October 1), and federal agencies would have had to furlough thousands of government workers if not for this last-minute reprieve.

As many of you may remember, the last government shutdown went on for 16 days in 2013 and cost the U.S. economy about $24 billion (especially since many government workers were paid administrative leave for doing nothing, not to imply this was their fault in any way).

The push by Republicans to defund Planned Parenthood threatened a government shutdown. When it came down to the wire, however, and Democrats continued to block the provision, Republican leaders removed it to let the bill pass. The House did pass a separate resolution to defund Planned Parenthood, but this was more of a statement than anything else – the resolution will not be taken up by the Senate.

So, as a government contractor, what do you need to know about shutdowns? We averted the issue this time, but in ten weeks, we might not be so lucky. Be prepared by reviewing these five tips:

• Know what gets shut down. TheAntideficiency Act governs how a shutdown works. It says agencies can’t obligate funds or contract work without appropriations. Agencies are also prohibited from accepting volunteered services.There are exceptions where contractors can continue to work, including emergency risks to property or human health, such as a hurricane. Agencies funded on multi-year appropriations or no-year appropriations can also remain open, leaving contractors some options, depending on what the agency projects they may be working on.

• Befriend your contracting officer. In theory, the contracting officer should be the person with access to the most accurate information relating to your contract(s). Don’t be shy about reaching out to him or her about the status of your contract(s); however, be cognizant of the fact that your contracting officer is undoubtedly stressed and may be dealing with other folks who are less than happy. You know the old saying – more flies with honey.

• Don’t stop working until you get a stop work order. We know how it works in government contracting. Don’t stop performing under your contractual obligations until you get your order in writing. If there is any ambiguity, email your contracting officer (for the paper trail) about status and document any conversations you have with him or her in an email later sent (to clarify your discussions, confirm what you’re doing, etc).

• Document everything. Document everything you do in a government shutdown, particularly those expenses occurred after a stop work order is issued. The government reimburses certain expenses incurred in government shutdowns.

• Know your risk. Especially for small businesses doing business with the government, time is money. If you’re doing one thing, you can’t do something else. If you work in construction and take on a commercial project while you are in limbo with the government, know that the government shutdown might end any day. Also, if you incur unforeseen costs because of a shutdown, such as having to cancel conferences and other events, some can be reimbursed through the government’s policy on equitable adjustment.

Thank goodness no one needed to use these tips this time around. But in 10 weeks, if a longer-term budget solution hasn’t been reached, you might need to dig this article up.

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Members of an informal watchdog group testified before a Senate committee this Tuesday, resulting in media blasting of the VA’s Office of Inspector General (OIG) for failure to properly investigate claims concerning potential harm to veteran health.

The watchdog group, known as the Truth Tellers, is comprised of more than 40 whistleblowers from different VA facilities. It is headed by Shea Wilkes, a mental health social worker at the Shreveport, Louisiana VA location who discovered that veterans were waiting months, even years, for appointments. In 2013, Wilkes filed a report with the OIG alleging secret wait lists, and when nothing was done, he went to the media.

The result? The OIG opened a criminal investigation into how Wilkes obtained the list he used as evidence to show that patients were not receiving adequate care. (The criminal investigation was dropped just this last July).

The Truth Tellers’s testimony before the Senate painted a horrifying picture of retaliation against whistleblowers and inaction by the OIG. In particular, it alleged that if hospital leaders at the Tomah, Wisconsin VA hospital and the OIG had listened to whistleblowers, Marine Corps veteran Jason Simcakoski may have not been prescribed the lethal mixture of 13 different medications that killed him last year. (The OIG had completed an investigation of excessive opiate prescriptions at Tomah last year but closed the case without sharing findings with the public or Congress).

Sean Kirkpatrick, whose brother Christopher was a psychologist and whistleblower at the Tomah hospital, testified that his brother frequently told his family he was concerned about the overmedication of many of his veteran patients. Christopher Kirkpatrick killed himself in 2009. He had been fired after filing a complaint about narcotics abuse at the Tomah site.

The VA’s OIG’s office has responded to the panel testimony, but it has been a defense rather than a game plan. Claiming a lack of resources, ​Deputy Inspector General Linda Halliday acknowledged that the OIG investigates less than 10 percent of the nearly 40,000 complaints it receives annually about problems at the agency. “There is a serious discrepancy between the size of our workforce and the size of our workload,” Halliday said. She said her office has roughly 650 professional staff members while the agency they investigate has more than 350,000 employees and a budget greater than $160 billion. “The OIG is not right-sized to respond to all the complaints that we currently receive.”

That’s not something Halliday specifically can fix, but someone needs to. It’s like inviting a party of 50 over for dinner and saying well, sorry, I only have chairs and food for five of you and then staring at the guests until they leave. That’s not how you would hold a dinner party, and it’s certainly not how one of our most important federal departments should operate.

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Imagine getting fired for filing a whistleblower action against your employer, and then returning to work after vindication two years later. How awkward would that be?

Department of Veterans’ Affairs (“VA”) employee and Army veteran Mr. Bradie Frink is in that exact situation after a federal investigatory body determined that he was retaliated against for seeking Congressional help in finding his lost disability claims file.

According to the VA’s Office of Special Counsel (“OSC”), Mr. Frink’s supervisor wrongly accused him of abusing vacation time and misusing his position to track down his file, which was lost for four months before Mr. Frink contacted Senator Barbara Mikulski’s office for assistance in resolving the issue. The OSG also found that the three different employees involved in the firing “lacked credibility” in their stories, and even if they had been correct, the punishment should have been less severe than being fired.

“In nearly every single instance involving similarly-situated employees, the penalties were much lower relative to the alleged misconduct than in Frink’s case,” the OSC noted in its 19-page report. “Furthermore, the level of care taken to counsel employees and document misconduct, as well as the amount of investigation done to confirm what really happened, all contrasted sharply with how the VA handled Frink’s case.”

Investigators speculated that the supervisors were touchy over Mr. Frink because the Baltimore RO was already facing scrutiny over claims processing. The Baltimore Sun had revealed months earlier that the Baltimore RO had the highest percentage of backlogged disability claims in the country, as well as the highest processing error rate. As such, Mr. Frink’s query to Senator Barbara Mikulski was particularly unwanted. This is also evidenced by the fact that Mr. Frink was let go within a month after Congressional staffers reached out to the RO.

“Intimidation or retaliation — not just against whistleblowers — but against any employee who raises a hand to identify a problem, make a suggestion or report what may be a violation in law, policy or VA’s core values — is absolutely unacceptable,” the VA said in a statement.

The OSC recommended that Mr. Frink be given his job back and given back pay, and recommended two supervisors who retaliated be disciplined. Mr. Frink was officially rehired as of yesterday.

One last note – Mr. Frink’s file was located soon after Senator Mikulski’s staff contacted the RO, and his claim was processed later that year. But who knows the outcome?

After all, the Baltimore RO allegedly has the highest error rate in the country.

*Did you find this article informative? If so, sign up for Sarah Schauerte’s legal blog on veteran issues at: https://legalmeetspractical.com. Please remember to click the link sent to your email to activate your subscription!

A VA Office of Inspector General (OIG) Report released this week contains some truly heartbreaking, but not shocking, news: based on enrollment center records capturing the number of now-deceased VA healthcare applicants, 307,000 vets may have died waiting for health care.

The OIG Report, which was prompted by a whistleblower tip, found that of about 800,000 records stalled in the agency’s system for managing health care enrollment, there were more than 307,000 records that belonged to veterans who had died months or years earlier. Not only that, but the Report substantiated three serious allegations:

• That 47,000 veterans died while their health care applications were in a pending status;
• That over 10,000 veteran health records were purged or deleted at the VA’s Health Eligibility Center; and
• That 40,000 unprocessed applications, spanning a 3-year time period, were discovered in January of 2013.

This was all in response to a request by the House Committee on Veterans Affairs’ to investigate the whistleblower’s allegations of mismanagement at the VA’s Health Eligibility Center. While details on the whistleblower are scant, it would appear that it is a VA employee who spoke up. (Also note that there is currently legislation in the works intended to enhance protections for such whistleblowers).

It should be kept in mind that due to limitations in the system’s data, the number of records do not necessarily represent veterans actively seeking enrollment in VA health care. As such, these numbers are certainly overblown. Still, reading the Report is like reviewing a laundry list of bad acts. In one case cited, a veteran who applied for VA care in 1998 was placed in “pending” status for 14 years. Another veteran who passed away in 1988 was found to have an unprocessed record lingering in 2014.

Interestingly enough, this report was released only a week after the VA sent out a mass email blast, congratulating itself for its “record level of service” as it relates to reducing its disability claims backlog. (Faster processing, of course, comes at the cost of quality. Also, as soon as a claim is decided, the VA can say “that’s one less for our backlog!” even if the vet appeals. I would love to know the rate of appeals now versus prior to the implementation of the disability backlog initiative).

As I’ve said before, the VA has some truly good folks, and I’ve had the pleasure to work with many of them. (Many of which end up leaving the VA). But when I see this Report, coupled with this email, it makes me realize how important advocating for our veterans truly is.

Our veterans need all the help they can get.

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Who could have imagined? A bill supporting veterans where the theme is, “veterans shouldn’t count!” But there it is.

The Hire More Heroes Act, created as an incentive for small businesses to hire veterans, effectively provides that veterans receiving TRICARE or VA medical care should not be counted for purposes of the Affordable Care Act (ACA). The ACA requires employers of 50 or more full-time employees to provide qualified health insurance. The bill would exclude veterans receiving health care benefits from this count.

In other words, if a company has 55 employees, but 7 of those employees are veterans with TRICARE coverage, the company would have only 48 employees for purposes of the ACA and therefore not be required to provide a company-wide healthcare plan. This provides an incentive for companies with around 50 employees to hire veterans, because they will avoid crossing the threshold that requires them to provide health insurance coverage.

Illinois Congressman Rodney Davis first introduced the Hire More Heroes Act in November of 2013, and it passed the House twice last Congress. H.R. 3474 first passed the House by a vote of 406-1 on March 11, 2014 and again as part of a broad, bipartisan jobs package called the Jobs for America Act on September 18, 2014. After the bill failed to become law as part of these larger packages, Davis reintroduced the bill again in 2015. Considering that the bill’s (technically, it is a “joint resolution”) provisions amount to no more than four pages, this has certainly simplified the process. And indeed, it sailed through the House on July 25, 2015 and was scheduled for a Senate hearing on August 24, 2015.

It’s hard to know how many businesses or veterans will be affected by this bill. After all, how many businesses hover right around the threshold of 50 employees? This bill will likely most affect those businesses that are actively veteran friendly, including veteran-owned businesses; where a large proportion of the employee population is veterans.

The disadvantage, of course, is that non-veteran employees of these companies are left without insurance coverage. Given that insurance coverage is more expensive than ever, this will cost these individuals thousands of dollars a year; and this will also make these businesses less attractive to prospective non-veteran employees.

If you want to see what comes of this, you can access more information and track the bill here.

*Did you find this article informative? If so, sign up for Sarah Schauerte’s blog on veteran issues at: www.legalmeetspractical.com. Remember to click the link sent to your email to activate your subscription!