DaytonDailyNews.com

WASHINGTON — The U.S. Supreme Court on Monday, June 9, narrowed the scope of a Civil War-era law allowing citizens to sue government contractors for defrauding the government, essentially making it tougher to sue subcontractors for fraud.

In a ruling in a case that began in southwest Ohio, Judge Samuel Alito ruled the government must be aware of subcontractor's fraud for a subcontractor to be held liable for it. A lawyer for the National Whistleblowers Center called the ruling "an ominous sign." Often, he said, the government isn't even aware of a subcontractor's invoices to the prime contractor.

The case began in 1995, when two employees of General Tool in Reading — Roger Thacker of Cincinnati and Roger Sanders of Lebanon — accused Indianapolis-based Allison Engine and two local subcontractors, General Tool and then-Southern Ohio Fabricators Inc., of not complying with the stringent terms of a government contractor. The companies' lawyer argued that the claim has to be presented to the federal government — not government contractors — to be fraudulent under federal law.

On Monday, Glenn Whitaker, a partner in the Cincinnati office of Vorys, Sater, Seymour and Pease and a lawyer for the company, focused on a phrase in Alito's ruling finding that the law applies if a government subcontractor submits a false statement to a prime contractor intending for it to be used to get the government to pay for its claim.

"You have to show some connection, some nexis between the subcontractor accused of fraud and the government's decision to pay an invoice," he said.

But James Helmer, an attorney for Thacker and Sanders, said his clients met all the standards laid out in the Supreme Court's decision.

"It looks like the case is headed back to Judge (Thomas) Rose in Dayton for trial," he said, referring to the U.S. District Court judge who originally dismissed the case in 2005.

David Colapinto of the National Whistleblower Center said the ruling was a blow to taxpayers. The ruling, he said, creates "a loophole for subcontractors to steal."

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