The recent settlement reached by International Business Machines Corporation (IBM), Cúram Software Ltd. (Cúram), and the Department of Justice provides a useful lesson for government contractors—especially contractors in the healthcare industry.
The $14.8 million settlement follows allegations that Cúram-IBM violated the False Claims Act (FCA) by making material misrepresentations in a proposal to support the development of Maryland’s Health Insurance Exchange website and IT platform. Specifically, Cúram made a presentation in which it stated that its software could make eligibility determinations, calculate tax credits, address changes in life events, and integrate with other contractors’ software. Cúram-IBM was subsequently selected for award as a subcontractor, and its software was plagued with problems. The software did not perform as promised, and Maryland’s healthcare exchange website failed within minutes of its launch. Eventually, Maryland terminated the contract.
The termination was followed by an investigation carried out by Maryland and the federal government. The investigation led to allegations that Cúram-IBM misrepresented the status, functionality, and capabilities of its software. As the Maryland Attorney General explained, “these companies failed to deliver what they promised.”
Other contractors can avoid ending up in a similar situation by ensuring that any information provided for a procurement is accurate. As this settlement shows, overpromising can cost a company millions if it is unable to deliver. The risk of an FCA claim is particularly acute for healthcare companies, as nearly every state has its own version of the FCA, and many state FCAs are directed towards federal healthcare spending. Indeed, the Maryland healthcare contract involved in the Cúram-IBM case was partially funded by a grant from the U.S. Department of Health and Human Services.
Being judicious about statements made in connection with a procurement can help a contractor avoid FCA liability down the road. For advice on the FCA, including how to put your business in the best position to avoid an FCA allegation, the attorneys in PilieroMazza’s False Claims Act practice group are available to assist you.
Michelle Litteken, the author of this blog, is a member of the firm’s Government Contracts Law, Litigation, and False Claims Act practice groups.