The Court of Federal Claims has held that fraudulent acts of subcontractors will not be imputed to general contractors for purposes of the "special plea in fraud" statute unless (a) the general contractor was aware of or complicit in the fraud, or (b) the general contractor’s claims are actually pass-through claims by the fraudulent subcontractor. N.R. Acquisition Corp. v. United States, 52 Fed. Cl. 490 (May 14, 2002).
The special plea in fraud statute (28 U.S.C. § 2514) requires dismissal of all claims by a government contractor when any aspect of that contractor’s performance is found to be fraudulent. The claimant may not segregate its claims. Rather, fraud in one aspect of performance taints the entire performance, and the fraudulent contractor loses all claims, regardless of whether those claims are specifically related to the fraud or not.
