False Claims Act - Provisions

Provisions

The Act establishes liability when any person or entity improperly receives from or avoids payment to the Federal government (tax fraud is excepted). The Act prohibits:

1. Knowingly presenting, or causing to be presented a false claim for payment or approval;
2. Knowingly making, using, or causing to be made or used, a false record or statement material to a false or fraudulent claim;
3. Conspiring to commit any violation of the False Claims Act;
4. Falsely certifying the type or amount of property to be used by the Government;
5. Certifying receipt of property on a document without completely knowing that the information is true;
6. Knowingly buying Government property from an unauthorized officer of the Government, and;
7. Knowingly making, using, or causing to be made or used a false record to avoid, or decrease an obligation to pay or transmit property to the Government.

The most commonly used of these provisions are the first and second, prohibiting the presentation of false claims to the government and making false records to get a false claim paid. By far the most frequent cases involve situations in which a defendant—usually a corporation but on occasion an individual—overcharges the federal government for goods or services. Other typical cases entail failure to test a product as required by the rigorous government specifications or selling defective products.

The False Claims Act was amended in 1943 to, most notably, reduce the relator's share of the recovered proceeds.* The law was again amended in 1986. By that time, there was great concern that the national deficit had risen dangerously and President Ronald Reagan had declared that a vast amount of government spending was being misused through waste and fraud.

After the 1986 amendments strengthening the Act were passed (see below), the Act was used primarily against defense contractors. By the late 1990s, however, the focus had shifted to health care fraud, which now accounts for the majority of cases filed by whistleblowers and by the government.

Under the False Claims Act, the Department of Justice is authorized to pay rewards to those who report fraud against the federal government in an amount of between 15 and 30 percent of what it recovers based upon the whistleblower's report.

Certain claims are not actionable, including:

1. certain actions against armed forces members, members of the United States Congress, members of the judiciary, or senior executive branch officials;
2. claims, records, or statements made under the Internal Revenue Code of 1986 which would include tax fraud;

There are unique procedural requirements in False Claims Act cases. For example:

1. a complaint under the False Claims Act must be filed under seal;
2. the complaint must be served on the government but must not be served on the defendant;
3. the complaint must be buttressed by a comprehensive memorandum, not filed in court, but served on the government detailing the factual underpinnings of the complaint.