Anti-Kickback Act Settlement Costs Contractor $2.72 Million

A New York contractor has agreed to pay $2.72 million to resolve claims that it violated the Anti-Kickback Act and False Claims Act in connection with its prime contract work on an EPA facility.

According to a Department of Justice press release, Sevenson Environmental Services Inc. accepted more than $1.6 million in kickbacks from six subcontractors, then passed the majority of those kickbacks through to the EPA.

The Anti-Kickback Act, and the FAR provisions implementing it, prohibit any person from providing, attempting to provide, soliciting, accepting, or attempting to accept a kickback.  A “kickback” as defined in the FAR, is “any money, fee, commission, credit, gift, gratuity, thing of value, or compensation of any kind which is provided, directly or indirectly, to any prime contractor, prime contractor employee, subcontractor, or subcontractor employee for the purpose of improperly obtaining or rewarding favorable treatment in connection with a prime contract or in connection with a subcontract relating to a prime contract.”  The clause at FAR 52.203-7 (Anti-Kickback Procedures) is to be inserted in solicitations exceeding the simplified acquisition threshold.

In Sevenson’s case, the government alleged that the contractor violated the Anti-Kickback Act by soliciting and accepting kickbacks from six subcontractors, which were then awarded subcontracts to perform work under Sevenson’s EPA prime contract.  Sevenson allegedly compounded its legal problems by passing the majority of these kickbacks through to the EPA, resulting in False Claims Act charges.

The Sevenson settlement is a good reminder that standard, oft-ignored FAR clauses like FAR 52.203-7 can have real teeth.  After settling the kickback allegations and related charges, Sevenson will be nearly $3 million poorer.

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