A Massachusetts statute M.G.L. c. 266, §67B makes it a felony for a contractor or subcontractor to knowingly make or present a false claim to a public owner. A person convicted of violating that statute faces a $10,000 fine or five years in state prison, or both..
The statute is broad in its effect because it applies equally to a contractor who actually makes a false claim, and to one who merely presents to the public owner a false pass through claim of a subcontractor. A contractor need not participate in the falsification of its subcontractor's claim to face criminal prosecution. He violates the statute, and faces criminal penalties, if he merely knows the claim is false and still presents it to the owner on behalf of the subcontractor.
The practical effect of this criminal statute is to place responsibility on the contractor to review claims of its subcontractors carefully before submitting them to a public owner. That review needs to focus on the records substantiating such claim.
If those records appear falsified, or do not otherwise support the claim, the contractor must demand explanation and verification. Contractors need to walk a fine line between their right and obligation to pass on claims of their subcontractors where ultimate liability for the claim rests with the owner, and their need to protect themselves against serious legal consequences which could result from presenting false claims.
A criminal conviction for making or presenting false claims on a public project may involve the most severe penalty, but it is not the only penalty the law inflicts. Under M.G.L. c. 12, §5B a contractor or subcontractor convicted in a criminal proceeding on a false claims charge, faces additional civil penalties, including another fine of $10,000, plus triple any damages incurred by the public owner, plus all expenses of the lawsuit including legal fees, expert fees and investigative costs. For a more complete description of these civil penalties, see Construction Law Comments, Spring 2001. That's not all. Under M.G.L. c. 29, §29F a contractor or subcontractor convicted on false claim charges will almost certainly be debarred from bidding or otherwise participating in public construction projects. For more details of debarment, see Construction Law Comments, Fall 1998.
In short, a contractor or subcontractor caught in the legal web of making or presenting false claims is on the fast track to ruin.
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