Does the False Claims Act apply where a subcontractor actually made the false statements?
Yes. The Supreme Court’s decision in United States v. Bornstein, 423 U.S. 303, 305 (1976), established conclusively that prime contractors cannot avoid False Claims Act liability where subcontractors cause them to make false statements or claims to the Government. The “prime contractor is responsible for assuring that all the work required by the entire contract is furnished, and cannot be relieved of this responsibility by subcontracting part of the work.” The False Claims Act permits recovery against a subcontractor who causes a prime contractor to submit false claims to the Government. Where a contractor is innocent, but its subcontractor is not, both are liable. This protects the Government financially when a subcontractor’s assets are modest and protects the Government where prime contractors do not adequately select nor monitor their subcontractors’ performance.
