In our August 1 post, we discussed how companies that acquire government contractors can inherit the False Claims Act (“FCA”) exposure based on their targets’ cybersecurity violations. Now, the Department of Justice (“DOJ”) delivered another vivid real-world example: a $1.75 million settlement in which a private equity (“PE”) firm, Gallant Capital Partners LLC, was named jointly and severally liable for its portfolio company’s cybersecurity violations on a U.S. Air Force contract.
The outcome underscores two critical truths. First, DOJ will pursue financial sponsors when a contractor in their portfolio fails to comply with its contractual cybersecurity requirements. Second, investors that fail to ask about, document, and remediate a target’s security shortcomings can find themselves financing both the acquisition and the government’s recovery.
Read the full post on our Government Contracts Navigator blog.