What Is the False Claims Act?
The False Claims Act (“FCA”) is a Federal statute codified at 31 USC 3729-3733. This law permits private individuals to initiate suit against businesses which commit fraud against the
US Government. In effect, such parties become private Attorneys General.
Known colloquially as “whistleblowers,” these individuals possess inside information of business fraud against the government. Such knowledge is typically obtained through some special relationship with the offending business or organization. The legislative intent underlying the FCA was deterring fraud against the Federal government.
Summary of FCA Legislative History
The FCA was initially passed on March 2, 1863 in response to widespread contractor fraud during the Civil War. In 1943, the FCA was amended to lower the complainant’s allowable share of government-recovered damages. For some years prior to that, many people abused the law who had no actual autonomous knowledge of business fraud.
Shortly after a US Supreme Court ruling that such abusive suits were not barred, Congress amended the law to include a “governmental knowledge bar”. This amendment precluded an FCA suit if the government had pre-existing information about fraudulent allegations. The same legislation reduced complainants’ maximum recovery from 50 percent to 25 percent of any damages recovered in FCA suits.
FCA liability attaches when any legal or natural person fraudulently obtains or evades payment to the US Government. Specific misconduct that triggers FCA liability include:
Two major categories of conduct that not subject to FCA actions are:
Once official investigations are complete, the government decides whether to become an intervener in the matter. If so, it frequently attempts settlement directly with the defendant while the matter remains sealed.
If settlement is reached, the matter is resolved entirely outside of public view. If settlement does not occur, the matter is unsealed. The government and original complainant proceed jointly against the defendant. If the government does not intervene, the complainant may proceed alone.
This scenario is relatively rare, however, as the government’s decision not to join the litigation usually indicates serious weakness in its merits. Defendants are frequently emboldened by this official stance; this can make FCA suits prosecuted solely by realtors especially difficult, expensive, and time-consuming.
There are some advantages to non-intervention by the government, however. Whistleblowers are usually represented by private attorneys who have much greater incentive to persist in negotiating larger settlements than does the government. Moreover, private lawyers are less likely than government prosecutors to be influenced by outside political pressures case prosecution. Finally, relaters have more direct control over how the case progresses. This helps insure that their interests are adequately protected.
- Knowingly presenting or causing the presentation of false payment or approval claims
Knowing using, making, or causing the manufacture or use of false documentation in furtherance of a false claim
- Fraudulently representing the amount or type of material goods for prospective Government use;
- Attesting to receipt of property with insufficient knowledge of its veracity;
- Buying government property from an illicit or unauthorized government officer;
- Intentionally using, making, or causing the use or making of false documentation to reduce or evade a legal duty to remit or convey property to the Government.
- Certain acts taken against members of Congress, judiciary members, officials of the senior executive branch, or military service people
- Some statements, records, or claims made pursuant to the 1986 Internal Revenue Code that would constitute tax fraud.
- The FCA includes some very unique procedural provisions. FCA actions are initiated by filing a complaint in the appropriate US District Federal Court. This is the same as in other suits, with three major exceptions:
- FCA suits are sealed or secret and not open to public scrutiny;
- Complaint is not served on the defendant until the govt. completes its investigation;
- A copy of the complaint and accompanying documentation or corroboration is forwarded to the Justice Dept. for evaluation of the suit on its merits.