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Front-Loaded and Inflated Pay Apps

On February 24, 2017, the Massachusetts Attorney General’s Office (“AGO”) announced sweeping penalties against two contractors for violations of the Massachusetts False Claims Act.  According to the AGO, a General Contractor (GC) and its subcontractor (sub) knowingly submitted front-loaded and inflated payment applications on a public project in Somerville.  The AGO sued the GC and its president, as well as the sub and its manager.  The parties later entered consent judgments in Suffolk County Superior Court.  The contractors agreed to pay $420,000 in damages, including civil penalties of $110,000.  The AGO also barred the contractors from bidding public projects for 5 years and accepting new public contracts for 1 year.

This is the most recent example of the AGO’s significant power when it comes to false claims act liability.  Contractors face countless pitfalls and the slightest misstep can lead to an investigation with potentially devastating results.  False claims liability will not only affect your bottom line, it can negatively affect how you do business.