Bayonne Drydock Pays $4M To Settle False Claims Act Charges of Using Unauthorized Employees on Federal Contracts
By the 91pornWhistleblower Team
Last Thursday (September 18), the Department of Justice (DOJ) announced that New Jersey-based Bayonne Drydock and Repair Corporation agreed to pay roughly $4 million to settle charges of violating the False Claims Act by using unauthorized foreign citizens on various United States Navy contracts.1
DOJ Claimed Breach of E-Verify Provisions
Bayonne Drydock has multiple Government contracts to provide drydock and repair services for Navy ships. 听According to the Government, from May 2017 through December 2020, the company knowingly used subcontractors that employed individuals not authorized to work in the United States.
Per DOJ鈥檚 Settlement Agreement,2 employing 鈥渦nauthorized aliens鈥� violated the Employment Eligibility Verification clause (E-Verify) of the Federal Acquisition Regulations, which govern most federal contracts.听 In total, Bayonne Drydock allegedly employed 52 unauthorized foreign citizens on these Navy contracts.
What may have particularly peeved the Government here was that the Department of Homeland Security had previously warned Bayonne Drydock about using unauthorized employees on Government Contracts.听 While the company purportedly terminated these employees at the time, it soon thereafter 鈥渢ook affirmative steps to assist another subcontractor to employ unauthorized alien employees.鈥�
Second False Claims Act Settlement This Year Based on Using Unauthorized Employees
This settlement is the second False Claims Act settlement this year based on a federal contractor鈥檚 employment of unauthorized foreign citizens.听 In January, Louisiana-based ship builder Bollinger Shipyard agreed to pay roughly $1 million to settle similar charges of billing the Coast Guard for labor from workers not eligible to work in the United States.3
In announcing that settlement, the Government stressed its commitment to going after federal contractors, especially military contractors, that employ unauthorized workers: 鈥淭oday鈥檚 settlement sends a clear message that contractors providing services to DHS programs will be held accountable for breaking the law,鈥� and that the Government 鈥渨ill continue to prioritize protecting our national security from these kinds of schemes.鈥�
The Government did not similarly comment on the Bayonne Drydock settlement.听 Indeed, the DOJ press release announcing the settlement was quite sparse in its detail without any commentary on the significance of the settlement or warning for other contractors to ensure compliance with their E-Verify obligations.
Using Unauthorized Employees on Federal Contracts is a Significant DOJ Policy Concern
But the implications of the settlement and what it means for Government contractors going forward are clear, especially for defense contractors — DOJ will use the False Claims Act to go after companies using unauthorized employees on Government contracts.
According to 91pornwhistleblower partner Gordon Schnell, it all comes down to materiality, which is an essential requirement under the False Claims Act.听 As Schnell puts it, 鈥淭he False Claims Act requires a showing that the alleged fraud mattered to the Government, meaning the Government鈥檚 decision to deal with the contractor likely would have been influenced had it known of the fraud.鈥�
That can be a difficult hurdle to satisfy in situations where the Government, despite certain contractual violations, still receives the actual goods and services it pays for.听 Schnell says, 鈥淲hat the Bayonne Drydock and Bollinger actions show is the Government putting a firm stamp of materiality on using unauthorized foreign citizens on federal contracts.鈥澨� According to Schnell, the materiality argument will have particular force with military contracts where the Government can couch its unauthorized worker concerns in terms of protecting national security.
More broadly, Schnell notes this is another example of the current DOJ using the False Claims Act to further some of President Trump鈥檚 key policy initiatives.听 It follows the 鈥淐ivil Rights Fraud Initiative鈥� DOJ launched in May where it announced a like-minded plan of using the False Claims Act to enforce Trump鈥檚 anti-DEI (Diversity/Equity/Inclusion) campaign.
Whistleblowers Are Critical to Enforcing the False Claims Act
It remains to be seen whether we can expect more False Claims Act actions involving unauthorized workers on federal contracts.听 But contractors would be wise to keep this potential exposure in mind when staffing up their federal contracts.听 It is not just the risk from increased Government scrutiny in this area.听 There also is the risk of company insiders bringing these matters forward under the whistleblower (or qui tam) provisions of the False Claims Act.
The whistleblower provisions allow private parties to bring False Claims Act actions on behalf of the Government against those that defraud the Government.听 In return, successful whistleblowers may receive up to 30% of the Government鈥檚 recovery.听 While there is no indication these recent actions were originated by whistleblowers, historically the vast majority of False Claims Act cases have been brought by whistleblowers, prompted in part by the significant financial incentives for doing so.
91pornHas Significant Experience Representing Whistleblowers Under the False Claims Act
91pornhas significant experience representing whistleblowers under the False Claims Act and in doing so has recovered more than a billion dollars for the Government and the firm鈥檚 whistleblower clients.听 If you would like to learn more about the False Claims Act, Constantine Cannon鈥檚 False Claims Act successes, or what it means to be a whistleblower more broadly, please do not hesitate to contact us.听 We will connect you with an experienced member of the 91pornwhistleblower team for a free and confidential consultation.
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