Contractors are no strangers to the courts of justice. Litigation between contractors and owners frequently occurs when a project does not get completed on time or the work does not comply with the Contract Documents. The disputes are typically litigated as breach of contract lawsuits. Contractors, however, who do business with the State of Nevada or the Federal Government should be aware that an inaccurate billing or claim, or worse, padding an invoice or claim, can carry serious consequences. Even if the State of Nevada or the Federal Government doesn’t catch the inflated bills, there is also a possibility that an employee or former employee might report the inaccurate bills to the State or the Federal government.

The Nevada False Claims Act is codified in NRS Chapter 357 and is known as the whistleblower statute. It is intended to be a tool to fight fraud against state and local governments and is modeled after the Federal False Claims Act (31 U.S.C. §§ 3729-3733). Both Acts reward whistleblowers who report fraud committed against the government. While many cases brought under the Acts involve Medicare or Medicaid fraud, the laws apply to any type of false or fraudulent claim submitted to the government for payment or approval including construction claims. The case may be brought by a whistleblower or by the government. E.g., NRS 357.070 (“[T]he Attorney General “shall investigate diligently any alleged liability pursuant to this chapter and may bring a civil action pursuant to this chapter against the person liable.”)

Cases brought under both the Federal and Nevada Acts can result in judgment in the amount of up to three times the amount of damages plus a civil penalty of $5,500 to $11,000 per false claim. 31 U.S.C. § 3729(a)(1); NRS 357.040(2). Both laws require a knowledge component, which could be shown by having actual knowledge, acting “in deliberate ignorance of whether the information is true or false” or acting “in reckless disregard of the truth or falsity of the information.” 31 U.S.C. § 3729(b)(1); NRS 357.040(3).

While most people think False Claims Act liability applies to situations where a person knowingly presents a false claim or knowingly presents a false record that is material to a false claim, the False Claims Act also prohibits reverse false claims and conspiracy. 31 U.S.C. § 3729(a)(1)(C); NRS 357.040(1)(i).

A reverse false claim is when a person “[k]nowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the State or a political subdivision” (31 U.S.C. § 3729(a)(1)(G); NRS 357.040(1)(g)) or “[i]s a beneficiary of an inadvertent submission of a false claim and, after discovering the falsity of the claim, fails to disclose the falsity to the State or political subdivision within a reasonable time.” NRS 357.040(1)(h). An example would be discovering that a billing error had been made resulting in an overpayment from the government and failing to report it and repay it. As noted above, this could result in triple damages and a $5,500 to $11,000 penalty for each overpayment.

The conspiracy provision of both acts provides liability for conspiring to commit any of the acts set forth in 31 U.S.C. § 3729(a)(1) (A), (B), (D), (E), (F), or (G) or NRS 357.040(1), respectively. These laws do not require the person to have personally received any payment based on a false claim. In Nevada, “[a]n actionable civil conspiracy ‘consists of a combination of two or more persons who, by some concerted action, intend to accomplish an unlawful objective for the purpose of harming another, and damage results from the act or acts.’” Consolidated Generator-Nevada, Inc. v. Cummins Engine Co., 114 Nev. 1304971 P.2d 1251 (1998) (quoting Hilton Hotels v. Butch Lewis Productions, 109 Nev. 1043, 1048, 862 P.2d 1207, 1210 (1993) (citing Sutherland v. Gross, 105 Nev. 192, 196, 772 P.2d 1287, 1290 (1989))). Thus, a consultant who conspired with a contractor to defraud the government and personally did not receive any funds traceable to the government could nonetheless be liable under the Nevada False Claims Act.

The Nevada False Claims Act has been modeled after the Federal False Claims Act, and both of these laws have been strengthened within the last six years to crack down on fraud by government contractors. Contractors need to be vigilant and take steps to avoid overbilling and inflating claims. If an overpayment may have occurred, even inadvertently, contractors should also determine whether and how best to report the overpayment.