False Claims Act

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The False Claims Act (31 U.S.C. § 3729 et seq., also called the "Lincoln Law") allows American citizens, whether affiliated with the government or not, to file actions against federal contractors claiming fraud against the government. Persons filing under the Act stand to receive a portion (usually about 15-25 percent)(Ethics and Computing, Bowyer) of any recovered damages.

The Act provides a 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.

1 History
2 Provisions
3 1986 changes
4 See also
5 External links

[edit] History

The American Civil War (1861–1865) was marked by fraud on all levels in the Union north and the Confederate south. The False Claims Act, passed by Congress on March 2, 1863*, was an effort by the USA to respond to entrenched fraud where the official Justice Department was reticent to prosecute fraud cases. Importantly, a reward was offered in what is called the "qui tam" provision, which permits citizens to sue on behalf of the government and be paid a percentage of the recovery. In a qui tam action, the citizen filing suit is called a "relator".

[edit] Provisions

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:

Knowingly presenting, or causing to be presented to the Government a false claim for payment;
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;
Conspiring to defraud the Government by getting a false claim allowed or paid;
Falsely certifying the type or amount of property to be used by the Government;
Certifying receipt of property on a document without completely knowing that the information is true;
Knowingly buying Government property from an unauthorized officer of the Government, and;
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.

The most commonly used of these provisions are the first and second, prohibiting the presentation of false claims to the government and making false records to get a false claim paid. By far the most frequent cases involve situations in which a defendant--usually a corporation but on occasion an individual--overcharges the federal government for goods or services. Other typical cases entail failure to test a product as required by the rigorous government specifications or selling defective products.

The False Claims Act was amended in 1943 to, most notably, reduce the relator's share of the recovered proceeds.* The law was again amended in 1986. By that time, there was great concern that the national deficit had risen dangerously and President Ronald Reagan had declared that a vast amount of government spending was being misused through waste and fraud.

After the 1986 amendments strengthening the Act were passed (see below), the Act was used primarily against defense contractors. By the late 1990's, however, the focus had shifted to health care fraud, which now accounts for the majority of cases filed by whistleblowers and by the government.

[edit] 1986 changes

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

The elimination of the "government possession of information" bar against qui tam lawsuits;
The establishment of defendant liability for "deliberate ignorance" and "reckless disregard" of the truth;
Restoration of the "preponderance of the evidence" standard for all elements of the claim including damages;
Imposition of treble damages and civil fines of $5,000 to $10,000 per false claim;
Increased rewards for qui tam plaintiffs of between 15-30 percent of the funds recovered from the defendant;
Defendant payment of the successful plaintiff's expenses and attorney's fees, and;
Employment protection for whistleblowers including reinstatement with seniority status, special damages, and double back pay.