Protecting Government Defense Contracting with a Purpose: Interpreting Civil Liability Under the Anti-Kickback Act

INTRODUCTIONOn September 30, 2014, the Department of Defense awarded over $2.5 billion in defense contracts to private contractors.1 Awards of this magnitude occur daily, placing the federal government at serious risk if fraud and tion are not regulated and prosecuted.2 The Defense Contract Audit Agency ("DCAA") serves as the entity charged with auditing government defense contracts and investigating fraud in the contracting and bidding process.3 When the DCAAidentifies fraud or misrepresentation on a defense contract, the U.S. Department of Justice ("DOJ") then has the power to pursue civil and criminal actions against the government contractor.4Fraud in federal defense contracting can occur either when bribes are paid directly to the government or when kickbacks are given to contractors to induce favorable subcontract treatment.5 The first form of fraud involves payments made to employees or officials of the government to induce favorable government treatment.6 The second form involves bribes given to any prime contractor that has a contractual relationship with the government.7 The DOJ prosecutes private contractors involved in this second form of fraud under the Anti-KickbackAct of 1986 ("Anti-KickbackAct").8 The Anti-KickbackAct imposes penalties on prime contractors when they solicit or accept kickbacks on government contracts, or when they include the cost of kickbacks in their contract prices.9Originally enacted in 1946 in response to reports of kickbacks during World War II, theAnti-Kickback Act was amended forty years later to reflect the increasingly large volume of government defense contracts.10 The amended Anti-Kickback Act expounds three main goals in seeking to protect the government's interest and the role of prime contractors.11 First, the Act aims to deter prime contractors from overcharging the government as a result of kickbacks and to compensate the government in the event of a kickback.12 Second, theAct attempts to maintain market efficiency by ensuring that prime contractors enter into subcontracts on the basis of expertise and cost-efficiency.13 Finally, the Act is designed to create a regulatory structure that will impose appropriate levels of risk on prime contractors.14Recent debate concerning civil liability under the Anti-Kickback Act has exposed a challenge to the Act's ability to achieve its intended goals.15 Despite the longstanding majority view that the Act limits prime contractor vicarious liability, at least one court has recently taken a different approach and substantially broadened vicarious liability for prime contractors.16 This Note argues that because established methods of statutory interpretation do not uncover a preferred interpretation, the statute should be interpreted in light of its purpose and purported goals.17 Part I presents the civil liability provision of the AntiKickback Act and the conflicting interpretations of prime contractor vicarious liability.18 Part II examines the text and legislative history of the civil liability provision and concludes that the provision should be interpreted and applied in light of the Act's stated purpose and goals.19 Finally, Part III investigates the three main goals of the Act and argues that the provision should limit prime contractor vicarious liability to avoid creating substantial risks and undermining the purpose of the statute.20I. INTERPRETIVE DEBATE: THE ANTI-KICKBACK ACT'S CIVIL LIABILITY PROVISIONThe Anti-KickbackAct's amended civil liability provision serves as one of the DOJ's primary sources of recourse against prime contractors.21 The civil liability provision is a key component in successful defense contract fraud tions because imposes vicarious liability on prime contractors.22 The extent of available vicarious liability damages now turns on conflicting interpretations of that provision.23 This Part presents the conflicting interpretations of vicarious liability under the civil liability provision. …