False Claims Act

Congress enacted the federal False Claims Act in 1863 in response to complaints about "the frauds and corruptions practiced in obtaining pay from the government during the [Civil] War." Proposed by President Lincoln, the legislation offered private citizens a reward if they assisted the government in combating fraud.

The statute includes an ancient legal device called a "qui tam" provision (from the Latin phrase meaning "he who brings a case on behalf of our lord the King, as well as for himself"). This provision allows a private person, known as a relator or whistleblower, who has information that shows the defendant has knowingly submitted or caused the submission of false or fraudulent claims to the United States to bring a lawsuit on behalf of the United States.

In these whistleblower cases, the False Claims Act permits the government to recover up to triple damages from those who knowingly present, or cause to be presented, false claims to a United States government officer, employee, or member of the armed forces or who knowingly make, or cause to be made, false statements to get such claims paid by the United States. The whistleblowers law also applies to those who make false statements to conceal, avoid, or decrease an obligation to pay or transmit money or property to the government, and it covers certain conspiracies to violate the act.

Recent amendments to the act are meant to clarify the fact that liability attaches whenever a person knowingly makes a false claim to obtain money or property, any part of which is provided by the government without regard to whether the wrongdoer deals directly with the government, with an agent acting on the government’s behalf, or with a third-party contractor or other recipient of such money or property. This provision of the whistleblower statute is intended to make subcontractors down the contract chain liable for fraud they start.

In addition to damages, the courts are required to award the government a civil penalty of $5,500 to $11,000 for each violation of the act (i.e., for each claim submitted). The government is entitled to recover such penalties upon any showing that a defendant violated the False Claims Act without needing to prove that the violation resulted in damages. Thus, a defendant may be held liable for these penalties under the False Claims Act whether or not payment was made on the tainted claim.

In general, the whistleblower in a successful False Claims Act suit is entitled to between 25 and 30 percent of the recovery if the government declines to intervene and between 15 and 25 percent if the government does intervene.

Now many states and two cities also have false claims acts.