The False Claims Act (“FCA”) is among the federal government’s most powerful tools for combating fraud against government contracts and programs. One of the most significant aspects of the False Claims Act is its qui tam provision, which allows individuals – whistleblowers – with inside knowledge of fraud to bring suit on behalf of the government. As compensation for their efforts, these citizen-whistleblowers or qui tam “relators” are entitled to receive 15-30% of the amount the government recovers. With the help of qui tam whistleblowers, the federal government has recovered more than $21 billion in the past 22 years.
The Lincoln Law
The False Claims Act dates back to the Civil War and is sometimes called the Lincoln Law. It was passed in response to rampant fraud by private contractors who were billing the government for goods that were not actually delivered. The Lincoln Law version of the False Claims Act went through a number of changes between the Civil War and World War II. Unfortunately, each set of amendments weakened the effectiveness of the False Claims Act, resulting in its diminished use as a weapon for qui tam whistleblowers to combat fraud against government programs. Because the amendments to the False Claims Act drastically reduced the potential rewards for qui tam whistleblowers, many people were no longer willing to bring a qui tam action and risk their jobs by accusing their employers of illegal behavior.
The False Claims Reform Act of 1985
When increased federal expenditures throughout the 1970s and 1980s led to an increase in fraud against the government, the need to amend the False Claims Act became clear. In response to growing concerns about the False Claims Act’s ability to stem fraud, Senator Charles Grassley and Representative Howard Berman sponsored the False Claims Reform Act of 1985. This law, passed in 1986, made sweeping changes to the False Claims Act. These amendments made it easier for the government to investigate False Claims Act cases, lowered the required burden of proof, increased the potential whistleblower’s share to 15-30%, imposed treble (triple) damages for fraud, lengthened the statute of limitations for filing qui tam suits, and required defendants to pay reasonable fees to the whistleblower’s attorneys in successful qui tam prosecutions.
Most importantly, the amendments underscored Congress’ intent to forge a powerful partnership between government enforcement authorities and the citizen-whistleblower in qui tam actions. Congress expanded the role of whistleblowers and their counsel in qui tam actions and allowed them to supplement the government’s resources in the investigation and prosecution of qui tam actions. The amendments also included provisions to protect qui tam whistleblowers from employer retaliation.
With the exception of minor changes in 1988 and 1990, the 1986 version of the False Claims Act was in effect through early 2009. This version substantially increased the government’s power to combat fraud, as shown by the increase in the number of qui tam cases filed and tax dollars recovered. The number of qui tam cases filed each year increased more than tenfold, from 31 cases in 1987 to 356 cases in 2007. The 1986 amendments also allowed the federal government to collect more than $13.6 billion in qui tam cases. This number would be even higher if states’ portions of the recoveries in qui tam actions such as those involving Medicaid fraud were also included in the calculations.
The Fraud Enforcement and Recovery Act of 2009
The economic crisis of the past several years, combined with some judicial decisions that circumscribed the effectiveness of qui tam actions, again prompted Congress to reevaluate the False Claims Act. Recognizing the key role the False Claims Act plays in both deterring and uncovering fraud, Congress strengthened the law in early 2009 through the Fraud Enforcement and Recovery Act (“FERA”).
The FERA amendments encompass significant improvements to the False Claims Act. These improvements include, among other things, broadening the scope of fraud covered by the False Claims Act, enhancing the government’s ability to investigate fraud and false claims, allowing the government to recover its costs expended in investigating and prosecuting False Claims Act cases, and reducing defendants’ ability to escape liability through technicalities.
Moreover, the FERA amendments include changes underscoring the importance of qui tam whistleblowers in combating fraud. In addition to the changes outlined above, the FERA amendments provide for freer exchange of information between federal, state, and local government attorneys and whistleblowers’ attorneys, and also expand whistleblowers’ protection from employer retaliation.
Finally, the FERA amendments reflect the ever-growing importance the government places on the False Claims Act’s role in combating fraud. With dramatically increased federal spending under the stimulus package, the False Claims Act promises to play a vital role in ensuring the integrity of government programs and contracts in the coming years.
Types of False Claims Act Cases
- Defense Contractor and Procurement Fraud
- Healthcare and Pharmaceutical Fraud
- False Insurance Claims
- Government Contractor Fraud Waste and Abuse
- Financial Industry Fraud
- Securities Fraud
- Foreign Corrupt Practices Act and Global Whistleblowers
- Tax Fraud & IRS Whistleblower Claims
- State False Claims Acts