Decision 2. Corporate Liability for Employee Kickbacks

Berenzweig Leonard is beginning the New Year with a summary of four important government contract legal decisions handed down in 2013. A previous blog article discussed the one-sided legal concept of “apparent authority” that applies to a government contractor but not to the government. Today we discuss another problem presented by “apparent authority”: how the management of a government contractor could be liable for kickbacks company employees receive.

Decision 2. Corporate Liability for Employee Kickbacks

Apparent authority can cost a contractor significant penalties under the Anti-Kickback Act (AKA). Regardless of whether a government contractor knew that its employees were violating the AKA), the company may be civilly liable – for each occurrence, double damages plus $11,000 – for kickbacks its employees received. Alternatively, regardless of what a government contractor knew, the contractor may be liable for the actual amount of the kickback. An appeals court held that the company could be liable for “double damages plus $11,000” for its employees’ violations of the AKA based on “apparent authority” if, later in the litigation, the government proved that the kickback-accepting employees had the apparent authority to implicate their employer. United States ex rel., David Vavra  v. Kellogg Brown and Root, U.S. Court of Appeals for the Fifth Circuit No. 12-40447, July 19, 2013.

Terry O'Connor is the Director of Government Contracts with Berenzweig Leonard, LLP, a DC regional business law firm. He can be reached at toconnor@BerenzweigLaw.com.