For companies facing qui tam lawsuits in North Carolina, building a sound defense strategy is critical to minimizing the potential for government intervention and financial liability. Qui tam cases involve lawsuits filed by private citizens (called “relators”) on behalf of the government; and, once a suit has been filed, the government has a responsibility to investigate and make a determination as to whether to get involved. By taking an aggressive approach to qui tam defense, companies can often influence this determination, and ideally convince both the government and the relator that further litigation is unwarranted.
Qui Tam Defense: Pre- and Post-Intervention Strategies
While it only takes a basic allegation of fraud under the federal False Claims Act for a relator to initiate a qui tam lawsuit, far more is required – both substantively and procedurally – for the lawsuit to move past the initial pleading stages and ultimately lead to a finding of liability. Proving liability under the False Claims Act is a difficult task, and companies accused of government contract fraud, Medicare fraud and other violations will often have numerous defenses available.
Some of the more-common defenses in qui tam litigation under the False Claims Act include:
1. Procedural Deficiencies
As with all types of federal litigation, relators in qui tam actions must comply (and often strictly comply) with the Federal Rules of Civil Procedure (FRCP). Relators should not be given a “pass” on technical and procedural deficiencies, and challenging these deficiencies at the outset of the litigation can often – at the very least – slow down the process and begin raising questions about the relator’s case for the government’s attorneys.
2. Failure to File an Adequate Disclosure Statement
Along with the Complaint (the document filed in federal court to initiate the qui tam lawsuit), the relator must also submit a disclosure statement to the Department of Justice. This statement must include, “substantially all material evidence and information the [relator] possesses.” While the disclosure statement is not initially made available to the defendant, issues later discovered may provide grounds to seek dismissal of the case.
3. Insufficient Allegations to Support Liability
In order to establish liability under the False Claims Act, the relator’s allegations and evidence must support a finding of a certain level of intent. Generally speaking, submitting an inaccurate invoice or claim for payment to the government does not, standing alone, rise to the level of federal fraud.
In order to succeed in qui tam litigation, the relator and the government must typically be able to prove, at a minimum, that the defendant should have known about the false claim. As a result, even in cases involving legitimate allegations of false claims, defendants will often be able to present countervailing evidence to avoid False Claims Act liability.
Contact Cheshire Parker Schneider & Bryan, PLLC in Raleigh, NC
The federal criminal defense attorneys at Cheshire Parker Schneider & Bryan, PLLC provide experienced and strategic legal representation for companies facing qui tam lawsuits in North Carolina. To speak with one of our attorneys about your case, please call (919) 833-3114 or contact us online today.
All certified public accountants (CPAs) in North Carolina are subject to Subchapter 08N of the North Carolina Administrative Code, which is entitled “Professional Ethics and Conduct.” This subchapter establishes the rules that govern all CPAs and accounting practices in the state, including those relating to confidentiality and client records.
While there are several provisions of Subchapter o8N that either directly or indirectly address confidentiality and client records, the two primary sections devoted to these topics are:
- 21 NCAC 08N .0205 Confidentiality
- 21 NCAC 08N .0305 Retention of Client Records
Under 21 NCAC 08N .0205, CPAs in North Carolina owe a strict duty of confidentiality to their clients:
“A CPA shall not disclose any confidential information obtained in the course of . . . a professional engagement except with the consent of the . . . client.”
While there are a number of exceptions to this rule, they are all narrowly limited, and they only apply in certain discrete circumstances where disclosure is required by law or rule. For example, disclosure of confidential client information is allowed without consent if required by court order or subpoena, or if requested in connection with an enforcement action by the State Board of Certified Public Accountant Examiners (the “State Board”).
Retention of Client Records
Under 21 NCAC 08N .0305, North Carolina CPAs owe a number of duties with regard to the retention and return of client records. Generally speaking, a CPA must return a client’s records “in his or her possession . . . after a demand is made for their return.” The rule further makes clear that “records shall be returned upon demand,” unless a reasonable delay is necessary to retrieve a closed file or extract work papers that are subject to retention under the rule.
With regard to work papers, CPAs in North Carolina have a general obligation to retain them for at least five years (or longer if required by law). All retained records remain subject to the confidentiality obligations in 21 NCAC 08N .0205. However, if certain work papers “contain data that should be reflected in the client’s books and records but . . . have not been duplicated therein,” then those work papers must be provided to the client upon request as well. As examples of work papers to which clients may be entitled, 21 NCAC 08N .0305 lists:
- Worksheets in lieu of original entry
- Worksheets in lieu of general or subsidiary ledgers
- Adjusting and closing journal entries and supporting details not included in the client’s journal entry
- Consolidating and combining journal entries, worksheets and supporting details used to arrive at final figures included in financial statements, tax returns and other final products
Speak with a Raleigh Professional License Defense Attorney in Confidence
If you are facing licensing action due to an alleged breach of confidentiality or failure to appropriately dispose of client records, the professional license defense attorneys at Cheshire Parker Schneider & Bryan, PLLC can defend you in your State Board proceeding. To discuss your situation in confidence, call our Raleigh, NC law offices at (919) 833-3114 or request a consultation online today.