(CN) – KBR may avoid claims that it billed Uncle Sam for bogus services after the Supreme Court seemed unlikely Tuesday to apply the wartime suspension of the statute of limitations.
Benjamin Carter, a former employee of KBR’s reverse-osmosis water-purification unit (ROWPU) in Iraq, is the relator of the False Claims Act action against KBR and its former parent company Halliburton. KBR had been known as Kellogg Brown & Root when it was a Halliburton subsidiary.
Carter accuses the companies of having billed the U.S. government for water-purification services on military bases in Iraq that they never performed, and therefore exposing troops to contaminated water.
He says Halliburton and KBR “knowingly made, used or cause to be made or used, false records or statements to get false or fraudulent claims paid or approved by the government.”
U.S. District Judge James Cacheris dismissed Carter’s allegations in 2011 under the first-to-file rule and the statute of limitations, but the 4th Circuit reversed in 2013 based on its finding that the U.S. was “at war,” under the Wartime Suspension of Limitations Act (WSLA), when the alleged fraud occurred.
The act extends the deadlines for lawsuits when the U.S. is at war – declared or not. Normally, a qui tam suit must be filed within six years of the alleged fraud.
KBR argued before the U.S. Supreme Court today that Carter could not prosecute the case because the Wartime Suspension of Limitations Act applies exclusively to crimes, not to civil claims such as fraud.
The military contractor also said that the case should be dismissed because the government declined twice before to get involved in similar cases, which were dismissed.
“It doesn’t make a lot of sense for you to be able to just keep coming into court and filing a lawsuit telling the government, hey, you know that stuff that you already know? Let me tell it to you again,” KBR attorney John Elwood told the court.
Justice Sonia Sotomayor responded: “Well, the reality is you don’t need the qui tam unless the government doesn’t want to waste resources on something, but that doesn’t mean that they didn’t find that there might be something there.”
Elwood apologized twice during the oral argument for having a “bad memory.”
Carter’s attorney David Stone faced far more skeptical questioning. He acknowledged that the act was placed in the criminal code, but argued that it is not the only law in the criminal code that also applies to civil offenses.
Stone relied in large part on historical evidence to support his argument.
“Historically, you have to look at when the statute was being passed,” Stone said. “In 1942, they were concerned about – they were in the middle of a war that was consuming the entire nation.”
“The 1944 Congress said in a report that this will allow – because the bulk of the offenses under this act will not be cognizable and investigated until after the war – this will allow for that for the litigation to occur,” Stone continued. “So they used the term ‘litigation,’ again, suggesting that’s not a term you normally use when you’re talking about crimes. They used that term.”
Justice Samuel Alito interrupted him: “Is that your – that’s your best evidence, that there was a reference to litigation?”
Justice Antony Scalia joined in, “Where – where did that appear?”
Stone replied that it appeared in a Senate report, and Scalia said, “OK. That’s all I needed to know,” to laughter in the court.
The government’s attorney Malcolm Stewart joined with Carter in arguing that the Limitations Act also applies to civil offenses, not just crimes, ever since Congress removed the phrase “now indictable” from the statute.
“Well, whoa, whoa,” Scalia interrupted. The justice agreed that “offense” could apply to either a civil or criminal matter.
“But what that language did in the original statute was to make it clear that the word ‘offense’ in this statute was being used in a criminal sense,” Scalia said. “And I don’t think that that implication is eliminated by simply taking out the taking out the ‘now indictable’ language, which could have been eliminated for a very different reason; and that is, to show that it – it operates prospectively.”
Stewart said the government agrees with KBR that if a qui tam action is dismissed on the merits, the government is barred from later bringing a different action on the same claim.
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