False Claims Act

In the United States, the False Claims Act (31 U.S.C. § 3729 et seq.) provides a powerful legal tool to counteract fraudulent billings turned in to the Federal Government. Citizens with insider knowledge of false claims in health care, military, or other government spending programs can be rewarded.

The Act establishes liability when any person or entity improperly receives from or avoids payment to the Federal government--tax fraud excepted. In summary, the Act prohibits:

1. Knowingly presenting, or causing to be presented to the Government a false claim for payment;

2. Knowingly making, using, or causing to be made or used, a false record or statement to get a false claim paid or approved by the government;

3. Conspiring to defraud the Government by getting a false claim allowed or paid;

4. Falsely certifying the type or amount of property to be used by the Government;

5. Certifying receipt of property on a document without completely knowing that the information is true;

6. Knowingly buying Government property from an unauthorized officer of the Government, and;

7. Knowingly making, using, or causing to be made or used a false record to avoid, or decrease an obligation to pay or transmit property to the Government.

(False Claims Act Amendments of 1986, Pub. L. 99-562, Oct. 27, 1986, 100 Stat. 3153)

1. The elimination of the "government possession of information" bar against qui tam lawsuits;

2. The establishment of defendant liability for "deliberate ignorance" and "reckless disregard" of the truth;

3. Restoration of the "preponderance of the evidence" standard for all elements of the claim including damages;

4. Imposition of treble damages and civil fines of $5,000 to $10,000 per false claim;

5. Increased rewards for qui tam plaintiffs of between 15-30 percent of the funds recovered from the defendant;

6. Defendant payment of the successful plaintiff's expenses and attorney's fees, and;

7. Employment protection for whistleblowers including reinstatement with seniority status, special damages, and double back pay.

Proving A Violation Of The FCA

The FCA prohibits a variety of fraudulent acts. However, in most actions brought pursuant to this statute, the relator must prove that the defendant “knowingly” presented to the United States a false or fraudulent “claim” for payment.

Previous versions of the FCA required the relator to prove the defendant had “actual” knowledge of the false nature of the claim, as well as the specific intent to defraud the United States.

However, the current version defines “knowing” and “knowingly” in a much more expansive manner and eliminates completely the requirement to demonstrate the defendant had the specific intent to defraud the United States.

Now, a relator may succeed if it can be shown that the defendant

(1) had “actual” knowledge of the false nature of the claim;

(2) acted in “deliberate ignorance” of the truth or falsity of the claim; or

(3) acted in “reckless disregard” of the truth or falsity of the claim.

Thus, a relator may ultimately succeed without ever having to prove the defendant had knowledge of the claim’s falsity.

For example, a doctor who delegated billing authority to his wife and failed to review the claims for accuracy, was found guilty of a violation of the FCA based upon his “reckless disregard” for the truth or falsity of the billing records.

A “claim” under the FCA is defined as:

“any request or demand, whether under a contract or otherwise, for money or property which is made to a contractor, grantee, or other recipient if the United States Government provides any portion of the money or property which is requested or demanded, or if the Government will reimburse such contractor, grantee, or other recipient for any portion of the money or property which is requested or demanded.”

The recognition of what constitutes a claim is critical for two reasons. First, the number of fraudulent claims presented by a defendant will determine the penalties that may be adjudged. Typically, a defendant is “liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, plus three times the amount of damages which the Government sustained because of the act of that person,” per claim.

Second, and on a more practical level, increased penalties will result in an increased recovery for the relator, whose recovery is based upon the total proceeds recovered in the action.

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