What Is the False Claims Act?
Wars take their toll on societies primarily because of the lives affected, but also because of the economic damage they leave behind. As an example, the U.S. Civil War, which caused the deaths of nearly 2% of the U.S. population at the time, cost an estimated $4.2 billion. To add insult to this exorbitant injury, many of these costs were due to fraudulent claims to the federal government.
During the war, Congress uncovered significant instances of bribery and corruption. In one case it found that the government had unknowingly repurchased arms it had previously discarded as obsolete. Considering the impact of such fraud on the budget and the war effort itself, it's no surprise that Congress swiftly passed the False Claims Act (FCA) in 1863.
The FCA is still in effect today with a number of provisions protecting whistleblowers and incentivize fraud reporting in all areas of government spending. With recoveries of nearly $4.7 billion in 2016, the FCA plays a vital role in protecting the government's coffers.
What Does the False Claims Act Do?
The FCA, among other things, imposes strict consequences for those who submit fraudulent claims, which can include:
- Civil penalties of up to $10,000 (adjusted for inflation); and
- Three times the amount of damages.
Considering the amount of money the federal government spends on contracts, a recovery of treble damages could be significant. The health care industry has recently been one of the sectors most impacted by the FCA as it was the source for over half of the funds recovered in 2016 due to fraudulent medical claims.
What Constitutes a "Claim"?
Essentially, a person makes a claim by demanding money or property from the federal government whether or not a contract exists. This could include personal injury claims or claims against a federal contractor based on money or property it spent on the government's behalf. The FCA doesn't cover claims based on tax fraud as these cases are handled by the Internal Revenue Service (IRS).
The mere fact that a claim was false doesn't create liability under the Act. Instead, it must be fraudulent, involving some form of knowledge on the part of the perpetrator. This requirement is satisfied whenever there is:
- Actual knowledge of the false claim;
- Deliberate ignorance of the false claim; or
- Reckless disregard of the truth or falsity of the claim.
Common Examples of False Claims
Typical cases of fraudulent claims under the FCA include activities such as:
- Billing for goods/services never delivered
- Double billing for the same good/service
- Failing to report government overpayments
- Misrepresenting costs or records related to performance or quality
- Billing for non-FDA approved drugs or devices
- Performing unnecessary medical procedures
- Falsely certifying a contract (i.e. wrongly claiming minority or veteran status to secure a contract)
The False Claims Act: Citizen Enforcement
One of the hallmarks of the FCA is its reliance on private enforcement by average citizens or whistleblowers through its qui tam provisions (Latin for one that sues "for the king as well as for himself"). These provisions allow successful litigants to be awarded a percentage of the funds recovered (up to 30%).
Those initiating a qui tam action are called relators and, while they can sue anyone making fraudulent claims, they are barred from doing so if:
- They've been criminally convicted of conduct related to FCA violation;
- Someone has already filed a qui tam action for in the same matter or the government is already party to a proceeding in the same matter;
- The action is based on information disclosed through criminal, civil or administrative hearings in which the government is a party or through government hearings, audits, reports or investigations or the news media (except where the relator was the original source of the information)
Once filed, a Qui Tam complaint is sealed for 60 days, during which time the government decides whether to intervene and prosecute the case or to let the relator move forward on his or her own.
In private Qui tam actions, the relator must file the case within six years of the date of a violation (when the false claim is submitted) or else it is barred under the federal statute of limitations. In some cases, usually those where the government intervenes, the window increases to ten years.
Learn More About the False Claims Act
False Claims Act cases can get complicated especially when dealing with federal contracts and records. However, there are significant penalties, and rewards, for those involved. If you want to learn more, there are attorneys that specialize in the FCA and whistleblower protections. Get in touch with one near you today to learn more.