Tennessee Federal Court Awards Damages against a Contractor even though the Government Received the Product for which it Paid

The United States District Court for the Middle District of Tennessee has ordered a contractor who violated the False Claims Act to pay more than $700,000 in damages even through the contractor provided the government with the product it purchased.

In United States ex rel. Brian Wall v. Circle C Construction, LLC, No. 07-cv-91 (M.D. Tenn. August 22, 2014), Circle C Construction entered into a contract with the Army to construct buildings at a military base. The contract required Circle C to ensure that its subcontractors paid its employees in accordance with the prevailing minimum wage. Circle C subsequently submitted certifications to the government that it had complied with the minimum wage requirement. It was subsequently determined that the certifications were false because certain electricians were not paid what they were owed under the contract.

One of the issues which arose during the proceeding to assess damages was the amount of money which, given its fraud, Circle C would have been entitled to receive. The government argued that Circle C would have received nothing because, if it had known that Circle C would not comply with prevailing wage requirement for a portion of the project, it would not have paid Circle C for that portion. Circle C responded that it should not be required to pay any damages because the false certifications and the failure to pay the electricians the monies they were owed did not diminish the value of the buildings that the government purchased. The court agreed with the government, noting that there was ample evidence that the government would not have paid Circle C for the electrical work if it had known that Circle C was violating the minimum wage requirement. Therefore, Circle C was required to pay the government all of the monies it received in connection with the electrical work which was performed on the buildings. In accordance with the FCA, this amount was subsequently trebled.