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Fidelity & Surety Law Newsletter - Winter/January 2019

Being Mindful Of The False Claims Act 1 31 U.S.C.A. § 3729 (West 2019) et seq. All sureties knew that because of the False Claims Act (“FCA” or the “Act”) 1, a surety needed to be very careful about certifying an affirmative claim against the government. However, a few years ago, the surety world was jolted when an FCA case was filed against two sureties and a broker. The case essentially alleged that the sureties were liable under the FCA because they continued to bond a principal, allegedly with knowledge or under conditions in which they should have had knowledge, that the principal was not a properly certified disabled veteran-owned business. In an unrelated case, in September 2019, a settlement was announced between the United States Attorney’s Office for the Western District of North Carolina and a surety whereby the surety agreed to pay $1 million dollars to resolve an FCA claim that the surety should have known the principal it was bonding was not a proper U.S. Small BusinessAdministration Section 8(a) contractor. In that matter, the U.S. Attorney stated:

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