The False Claims Act: Protecting the Public From False Submissions for Claims to the Federal Government

June 1, 2008

Law of the Month

A. The False Claims Act
Under a federal statute known as the False Claims Act (FCA), 31 U.S.C. §§ 3729-3733, those who knowingly submit, or cause another person or entity to submit, false claims for payment of government funds are liable for three times the government’s damages plus civil penalties of $5,500 to $11,000 per false claim.

The FCA covers fraud involving any federally funded contract or program, with the exception of tax fraud.

The term “knowingly” as used in the FCA means a person, with respect to information, who (1) has actual knowledge of the information; (2) acts in deliberate ignorance of the truth or falsity of the information; or (3) acts in reckless disregard of the truth or falsity of the information. In other words, the FCA is not limited solely to those who intentionally misrepresent facts in order to obtain payments or other benefits from the Government; it also covers reckless conduct. Thus, if a defendant should have known that its representations to the Government were not true or accurate, but did not bother to check, such recklessness may constitute a violation of the FCA. Likewise, if a defendant deliberately ignores information which may reveal the falsity of the information submitted to the Government, such “deliberate ignorance” may constitute a violation of the FCA. Whether the fraud is intentional or not, the same penalties may be assessed against the wrongdoer and the same reward is payable to the qui tam plaintiff.

The FCA also permits recovery from those who “cause” misrepresentations to be made to the federal Government by others. In other words, a person may violate the law even if he or she does not actually submit the false information to the Government, but instead creates or provides false information that is then submitted to the Government by another.

B. Qui Tam Provisions
The FCA contains qui tam, or whistleblower, provisions. Qui tam is a unique mechanism that allows citizens with evidence of fraud against government contracts and programs to sue, on behalf of the government, in order to recover the stolen funds.

If the fraud has not previously been publicly disclosed, any person may bring a qui tam action regardless of whether he or she has “direct” or first-hand knowledge of the fraud. If the fraud has already been publicly disclosed, a person may still bring a qui tam action if he or she has direct knowledge of the fraud, independent of the publicly disclosed information.

In compensation for the risk and effort of filing a qui tam case, the citizen whistleblower or “relator” may be awarded a portion of the funds recovered, depending on whether the Department of Justice intervenes and prosecutes the case. If the Justice Department takes over, the qui tam plaintiff is entitled to between 15% and 25% of the recovery. If the Justice Department does not intervene, and the qui tam plaintiff pursues the action individually, the qui tam plaintiff is entitled to between 25% and 30% of the recovery. A qui tam suit initially remains under seal for at least 60 days during which time the Department of Justice can investigate and decide whether to join the action.

C. Examples of Qui Tam Cases
In recent years most qui tam actions have been used to fight Medicare fraud and fraud against other federally funded health care programs. A broad array of scenarios can constitute FCA violations. Some examples include the following:

  • A contractor falsifies test results or other information regarding the quality or cost of products it sells to the Government;
  • A health care provider bills Medicare for services that were not performed or were unnecessary;
  • A grant recipient charges the Government for costs not related to the grant;
  • Billing for goods and services that were never delivered or rendered;
  • Billing for marketing, lobbying or other non-contract related corporate activities;
  • Performing inappropriate or unnecessary medical procedures in order to increase Medicare reimbursement;
  • Billing for work or tests not performed;
  • Phantom employees and doctored time slips: Charging for employees that were not actually on the job, or billing for made-up hours in order to maximize reimbursements;
  • Being over-paid by the government for the sale of a good or service, and then not reporting that overpayment; and
  • Billing for research that was never conducted; falsifying research data that was paid for by the U.S. government

D. Anti-Retaliation Provisions
The FCA provides protection to employees who are retaliated against by an employer because of the employee’s participation in a qui tam action. The protection is available to any employee who is fired, demoted, threatened, harassed or otherwise discriminated against by his or her employer because the employee investigates, files or participates in a qui tam action.

This “whistleblower” protection includes reinstatement and damages of double the amount of lost wages if the employee is fired, interest on any back pay, and compensation for any special damages sustained as a result of the discrimination, including litigation costs and attorneys’ fees.

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For more information about "The False Claims Act: Protecting the Public From False Submissions for Claims to the Federal Government," contact Lori M. Lubinsky at llubinsky@axley.com or 608.283.6752.