The False Claims Act’s Liability Provisions (Part 4 of 7): Conversion of Government Property

The False Claims Act has seven liability provisions. Attorneys use some in almost every case, while others are rarely used. In a series of posts, each provision will be discussed.

The Act’s fourth liability provision is 31 U.S.C. § 3730(a)(1)(D), which provides that any person who “has possession, custody, or control of property or money used, or to be used, by the Government and knowingly delivers, or causes to be delivered, less than all of that money or property” is liable.

Simplified Example: The National Portrait Gallery contracts with Acme Fine Art Transport Company to transport a portrait of Abraham Lincoln to another museum for a temporary exhibit. Acme keeps the portrait for itself instead of delivering it.

This little-used provision of the False Claims Act allows the Government to recover losses incurred because of conversion of Government assets. S.Rep. 111-10, at 13 (2009); S.Rep. 110-517, at 17 (2008).

A new case was recently issued finding that a relator properly pled a False Claims Act conversion claim against The Brink’s Company and Jackson Metals. As the relator in this case alleged, Brink’s has a contract with the Federal Reserve to transport and store Government-owned coins. Unbeknownst to the Government, Jackson Metals paid Brink’s to get access to Government-owned pennies in Brink’s vaults. Jackson then swapped pre-1982 pennies owned by the Government with post-1982 pennies. Pre-1982 pennies are more valuable because of their high copper content.

In just one example where this scheme occurred, Jackson Metals paid Brink’s $3,424 to access a tractor-trailer load of pennies. Brink’s also saved on transportation costs, because Jackson Metals transported the pennies for free in its non-armored vehicle. Jackson Metals then made a profit of $44,892.33 by swapping the pre-1982 pennies with less valuable post-1982 pennies. The Southern District of Ohio held that the relator adequately alleged a False Claims Act conversion scheme under 31 U.S.C. 3730(a)(1)(D). United States ex rel. Holbrook v. Brink’s Co., 2015 U.S. Dist. LEXIS 4951 (S.D. Ohio Jan. 15, 2015)

If you know of someone who has stolen Government property or funds, or who has cheated the Government, protect yourself and explore potential remedies. You can obtain guidance from experienced legal counsel by contacting us.

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