What Is the False Claims Act?

Wars take their toll on societies because of the lives affected, but also due to 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 U.S. government had unknowingly repurchased arms it had discarded as obsolete. Considering the impact of such fraud on the United States government budget and the war effort itself, it's no surprise that Congress passed the False Claims Act (FCA) in 1863.

The FCA, codified in the U.S.C (United States Code), remains in effect today. It operates under the oversight of the Department of Justice. It has provisions protecting whistleblowers and incentives for those who report fraud in all areas of government spending. With recoveries of nearly $2 billion in 2022, the FCA plays a vital role in protecting the government's coffers.

What Does the False Claims Act Do?

The FCA, among other things, is a federal law that imposes strict consequences for those who submit fraudulent claims. This can include:

• Civil penalties of up to $10,000 (adjusted for inflation)
• Three times the amount of damages

The FCA holds a vital role in protecting taxpayers from fraudulent practices that drain government resources. In addition to imposing civil penalties and treble damages, the FCA includes provisions that incentivize whistleblowers to come forward with information on fraudulent activities. These whistleblowers, known as false claims act whistleblowers, play a crucial role in initiating whistleblower cases under the FCA.

The recovery of treble damages is significant given the substantial amount of money the federal government spends on contracts. The healthcare industry, for instance, has been a focal point for FCA cases. Over half of the funds recovered in 2022 were attributed to healthcare fraud.

What Constitutes a Claim?

In FCA cases, the legal process often involves the filing of a claim or complaint by a whistleblower in a district court. This initiates legal proceedings against the alleged violators. The Department of Justice, led by the attorney general, often becomes involved in these cases, representing the government's interests and ensuring that justice is served.

A person can make a false claim by demanding money or property from the federal government, whether a contract exists or not. This could include personal injury claims or claims against a federal government contractor based on money spent or resources used on the government's behalf. The FCA doesn't cover claims based on tax fraud; those cases are handled by the Internal Revenue Service (IRS).

The fact that a claim was false doesn't create liability under the FCA. Instead, it must be fraudulent, involving some form of knowledge on the part of the perpetrator. This requirement is satisfied whenever someone, with knowledge, submits or causes to submit false claims to the government.

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. claiming undeserved 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 enforcement by private citizens or whistleblowers through its qui tam provisions. These provisions allow successful litigants to be awarded a percentage of the funds recovered, up to 30%.

Those initiating a qui tam case are called relators. While they can sue anyone making fraudulent claims, they are barred from doing so if:

• They've been criminally convicted of conduct related to an FCA violation
• Someone has already filed a qui tam action for 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 this 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 lawsuits, the relator must file the case within six years of the date of a violation when the false claim is submitted. Otherwise, it is barred under the federal statute of limitations. In some cases, often those where the government intervenes, the window increases to ten years.

Whistleblower Attorneys and the False Claims Act

False Claims Act cases can get complicated when dealing with federal contracts and employer retaliation. However, there are significant penalties and whistleblower rewards for those involved. 

If you want to learn more, there are whistleblower lawyers who specialize in the FCA and whistleblower protections. Get in touch with an attorney familiar with whistleblower laws near you.