The federal False Claims Act (31 U.S.C. §§ 3729-3733) has become the government’s primary weapon in its arsenal to combat fraud on the government. The FCA was originally enacted during the Civil War to address procurement fraud and authorizes federal prosecutors to file a civil action against any person or entity that knowingly files a false claim. The FCA’s qui tam provisions also empower private persons to bring a civil action for a FCA violation individually and on behalf of the government, and to share in any proceeds of the suit. A party that commits any prohibited acts under the FCA may be subject to civil penalties, damages, criminal prosecution, and/or exclusion from participation in federal and state programs. Here is a brief rundown of the FCA’s high points:
Initial FCA Procedure
A qui tam case is initially filed under seal, which means it is kept secret from everyone except the federal government. Upon filing, the Department of Justice (DOJ) is notified so that the government may conduct its own investigation and determine whether it should assume primary responsibility of the lawsuit. If the government does not assume such responsibility (to intervene), then the whistleblower (also known as the “relator”) must move forward independently.
FCA Violations
The liability provisions that are most often used in FCA litigation are the false claims and false statement provisions. The false claims provision creates liability for knowingly presenting, or causing to be presented, a false or fraudulent claim for payment (31 U.S.C. § 3729(a)(1)(A)). The false statement provision creates liability for knowingly making, using, or causing to be made or used, a false record or statement material to a false or fraudulent claim (31 U.S.C. § 3729(a)(1)(B)). Other bases for liability include:
- Improper conduct to avoid paying the government or improper retention of an overpayment by the government (i.e. reverse false claim) (31 U.S.C. § 3729(a)(1)(G))
- Conspiring to commit a violation of any of the other liability provisions (31 U.S.C. § 3729(a)(1)(C))
- Knowingly and improperly withholding part or all of the government's money or property (31 U.S.C. § 3729(a)(1)(D))
- Intending to defraud the government by making or delivering (with the authority to do so) a document certifying receipt of property used, or to be used, by the government without completely knowing if the information on the receipt is true (31 U.S.C. § 3729(a)(1)(E))
- Knowingly buying, or receiving as a pledge of an obligation or debt, public property from an officer or employee of the government, or a member of the Armed Forces, who is not permitted to sell or pledge the property (31 U.S.C. § 3729(a)(1)(F))
The FCA also prohibits retaliatory actions against employees, contractors or agents who report or act to stop an FCA violation (31 U.S.C. § 3730(h)(1)). Liability under the FCA requires a defendant to act "knowingly," which is defined broadly as either actual knowledge, deliberate ignorance of the truth or falsity of the information, or reckless disregard of the truth or falsity of the information. It is important to note that specific intent to defraud is not required to be proven (31 U.S.C. § 3729(b)(1)).
Civil Investigative Demands
The main tool at the government's disposal for FCA investigations are civil investigative demands (CIDs). The FCA authorizes the DOJ to use CIDs to conduct depositions, issue interrogatories, and make document requests before the defendant is served with formal notice of the suit or the qui tam plaintiff's complaint is unsealed.
Penalties
A party that commits any FCA prohibited act is liable for a civil penalty of not less than $5,000 and not more than $10,000, plus three times the amount of damages that the government sustains because of the act of that party. Parties that file false claims may also be subject to criminal prosecution, imposition of civil money penalties, and exclusion from federal and state programs.
Relator Proceeds
In the event a person brings a qui tam action on behalf of the government and prevails, the “relator” (person bringing the suit) will receive at least 15 percent but not more than 25 percent of the proceeds of the action or settlement of the claim. The percentage ranges based on the contribution of the relator. The percentage of the proceeds awarded to the relator may be reduced to no more than 10 percent when the court finds that the action was based primarily on the disclosure of information relating to allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the news media. When the government does not proceed with the qui tam action and the relator conducts the action independently, the relator will receive an amount which the court decides is reasonable for collecting the civil penalty and damages. This amount must not be less than 25 percent but may not exceed 30 percent of the proceeds of the action or settlement.
If you have any questions regarding the FCA, please do not hesitate to contact attorney Matthew M. Fischer (matt@fischerlawpa.com). Matthew specializes in health and business law related issues and is a former Assistant General Counsel at the FBI and Senior Attorney Advisor at the U.S. Department of Health and Human Services.