Judges Focus on What U.S. Knew About AECOM Billing Noncompliance

May 21, 2021, 4:04 PM

Second Circuit judges Friday asked counsel for a False Claims Act whistleblower to explain why his suit against AECOM alleging fraud under an Afghanistan support contract should be reinstated if the U.S. Army knew about noncompliance but kept paying.

Hassan Foreman, a former AECOM finance supervisor, alleged that AECOM defrauded the Army by submitting inaccurate timesheets from workers. The U.S. District Court for the Southern District of New York dismissed the suit for lack of materiality under the FCA because the Army extended AECOM’s contract multiple times despite knowledge of alleged misconduct.

The panel of Judges Dennis Jacobs, Robert D. Sack, and Denny Chin wanted to know how there can be materiality if the government kept paying AECOM for years of contract performance, and specifically after Foreman filed his complaint in 2016, if the government knew about the allegations.

Foreman’s attorney, Daniel F. Olejko of Bragalone Olejko Saad PC, insisted that the government was only aware of certain allegations against AECOM, not all.

For example, the Army kept paying without knowledge that AECOM had a policy of billing 154 hours for each pay period regardless of the actual hours worked, Olejko said.

He also said the fact Foreman filed his complaint in 2016 doesn’t mean the government had actual knowledge of fraud at that time. Whether the Army knew it was actually being defrauded and kept paying AECOM isn’t clear, and requires discovery in a revived suit to make that determination, Olejko said.

AECOM’s counsel, Benjamin D. White of Kaplan Hecker & Fink LLP, said the district court correctly decided Foreman didn’t allege materiality because the government has made payments for over 10 years with knowledge of the noncompliance.

Evidence, like corrective action reports, shows significant back and forth between the government and AECOM about the contractor’s noncompliance with labor billing requirements, he said.

The district court properly relied on a Defense Contract Audit Agency report detailing AECOM’s noncompliance to conclude materiality is lacking here, White also said.

AECOM’s contract, known as MOSC-A, required providing vehicle and equipment maintenance, facilities management and maintenance, supply and inventory management, and transportation services to the 401st Army Field Support Brigade in Afghanistan.

Foreman, who worked for AECOM from 2013 to 2015, says he was terminated after raising various compliance problems with the contractor.

The district court dismissed the suit in April 2020, and rejected a motion to alter its ruling several months later.

Reasons for Paying

In his brief filed with the U.S. Court of Appeals for the Second Circuit, Foreman asserted the government can have good reasons—even with actual knowledge of wrongdoing—to continue to pay a contractor, such as protecting and supplying U.S. soldiers.

It isn’t easy for the government to just “pull the plug” on contracts where there is some knowledge of fraud, said J. Nelson Thomas of Thomas & Solomon LLP, which represents whistleblowers in Rochester, N.Y.

The government, for example, just can’t stop Medicare or Medicaid funds to a hospital it knows is violating the FCA where those funds are providing critical health services, and the lack of receipt of those funds would be catastrophic, he said.

AECOM said in a response brief that no fraud could exist here because the Army knew about the compliance issues and “offered every indication that it was pleased” with the contractor’s overall performance.

Nelson Bumgardner Albritton PC also represents Foreman.

The case is United States ex rel. Foreman v. AECOM, 2d Cir., No. 20-2756, argued 5/21/21.

To contact the reporter on this story: Daniel Seiden in Washington at dseiden@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Patrick L. Gregory at pgregory@bloomberglaw.com

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