What Is the False Claim Act?

The False Claims Act “(“FCA”) is the federal government’s most powerful weapons to recover money that has been lost to fraud. The FCA, which was passed during the Civil War on the heels of massive government contracting fraud, has been considerably strengthened over the years. In 1986, Congress passed a series of amendments which significantly increased the rights of private plaintiffs to pursue cases in which the government does not intervene. Those amendments also increased the amount that could be awarded to the whistleblower, if the suit is successful in recovering money for the government.

Under the FCA, a private citizen can sue on behalf of the United States and the taxpayers to recover money that has been paid out by the United States because of fraud. An FCA case brought by a private citizen is called a “qui tam” action. (No one seems completely sure how to pronounce this Latin phrase, but a good approximation is “key tam.”) If the case is successful, and the government recovers money, the plaintiff who sues on behalf of the United States (called a relator because his claims relate to those of the United States government) can receive a reward, in the nature of a finder’s fee, ranging from 15% of the recovery to 30%, depending upon the circumstances.

Under the FCA, a claim is false or fraudulent if the person submitting the claim either actually knew the information submitted to the government was false, or acted with reckless disregard of the truth or falsity of the information. A person submits a claim with actual knowledge if he has before him all the facts that would lead him to know that a claim was false. An example of this might arise in a case where a physician bills Medicare for a treatment or procedure that was never actually provided to a patient. A physician could also submit a false claim with actual knowledge, if he billed for the most complex, highly reimbursed, procedure or treatment when only the least complex service with a much lower reimbursement rate was actually provided. (Cases in which a physician, hospital or other providers submits an inflated bill are referred to as “upcoding.”) In the government contracting context, a contractor may submit a false claim with actual knowledge of its falsity where the contractor bills the government for work that was never done, or bills for goods that were never provided to the government.

The FCA imposes liability on persons who act with reckless disregard or deliberate ignorance of, the truth or falsity of the claims it submits. Reckless disregard may occur, where for example, a physician or other provider certifies to Medicare that he complied with the Antikickback Statute without determining whether the payments he receives from a pharmaceutical or device manufacturer comply with that statute. In the government contracting arena, reckless disregard can occur where a contractor certifies, for example, that the goods he sells to the government were made in a country with which the United States has a trade agreement, without making a reasonable inquiry to determine the actual country of origin of those goods.

These are just examples that illustrate the general principles behind the FCA. In other words, false or fraudulent claims that seek the payment of federal monies can come in all shapes and sizes and involve health care fraud and government contracting or grant fraud. The main take away, though, is that to be held liable under the FCA, the government (or the relator) must: (1) prove that the claims was actually materially false – that is, that the government would not have paid the claims submitted if they had known the truth about the circumstances surrounding the submission of that claim; and (2) that the defendant knowingly submitted false claims as that term is defined by the statute.

For those of you who would like to read more on the False Claims Act, you can read a complete version of the False Claims Act by clicking here. To read a Primer on the False Claims Act, which was prepared by the United States Department of Justice follow this link. https://www.justice.gov/sites/default/files/civil/legacy/2011/04/22/C-FRAUDS_FCA_Primer.pdf

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