False Claims Act

Originally enacted during the Civil War to fight profiteering by suppliers to the Union Army, the False Claims Act has evolved into a sweeping statute covering nearly every company doing business with the federal government. The law imposes liability on persons who knowingly submit false claims seeking government funds or who knowingly seek to avoid paying amounts owed to the government. Although well-intentioned, the law has been transformed into a lucrative money machine for plaintiffs’ lawyers and their clients – while hurting American businesses and taxpayers.

While the need for an antifraud statute is clear, the False Claims Act’s broad language and overzealous enforcement have encouraged significant abuse—turning what should be simple contractual disagreements and paperwork mistakes into claims for fraud. read more...

The law allows the government to pursue any government contractor suspected of making “false claims” about their goods or services to the government. And it allows third-party whistleblowers (called qui tam relators) to sue in the name of the government and to keep a large part of any award or settlement. The statute allows for treble damages (damages three times the amount of the alleged fraud) as well as other potentially excessive penalties, including a prohibition on companies or individuals receiving federal contracts. Total monetary damages under the False Claims Act have risen from $272 million in 1992 to a record $4.9 billion in 2012.

Since the law was expanded in 1986, plaintiffs’ lawyers have built a cottage industry around qui tam lawsuits – netting tens of millions for whistleblowers and their lawyers instead of for taxpayers. In fact, the current application of the law is so unbalanced that some whistleblowers are receiving monetary awards for information on violations that they committed.

A number of reforms to the False Claims Act are needed to restore fairness and predictability and to prevent inappropriate payments. These include:

  • Providing a safe harbor for companies with robust compliance programs
  • Creating reasonable whistleblower incentives to ensure that legitimate fraud is reported, while preventing outrageous awards to whistleblowers and their attorneys
  • Clarifying the use and meaning of “implied certifications”—the doctrine that says a simple, non-monetary error (such as incorrect paperwork by a government contractor) can be used as the basis for a False Claims Act lawsuit
  • Limiting the government’s power to bar companies and individuals from federal contracts as a method to coerce massive settlements

 

Research

Fixing the False Claims Act: The Case for Compliance-Focused Reforms

October 23, 2013 | Authored by Peter Hutt of Akin Gump and David Ogden of Wilmer Hale, this paper proposes a number of reforms to the False Claims Act.

The Great Myths of State False Claims Acts: Alternatives to State Qui Tam Statutes

October 23, 2013 | Authored by Jonathan Diesenhaus of Hogan Lovells, this paper addresses the unexpected effects and complications from state laws that attempt to mirror the federal False Claims Act.

All Results for False Claims Act

In the News Today - April 7, 2014

April 07, 2014 | Insights

A proposal to allow private lawsuits over allegations of tax discrepancies is a "horrible, horrible idea," Matt Webb told the Pittsburgh Post-Gazette. Read More »

Tags: Class Actions, False Claims Act

In the News Today - March 31, 2014

March 31, 2014 | Insights

A U.S. District Court judge has dismissed nearly 6,000 asbestos lawsuits, finding that Ohio - not Pennsylvania - has jurisdiction in the case. Read More »

Tags: Asbestos, False Claims Act, Pennsylvania

WV House Rejects False Claims Act Bill

February 26, 2014 | Insights

The West Virginia House of Delegates voted against the Government Fraud and Prevention Act, a state version of the federal False Claims Act. Read More »

Tags: False Claims Act, West Virginia

In the News Today - February 24, 2014

February 24, 2014 | Insights

The False Claims Act "really encourages a lot of speculative litigation that unfortunately a lot of companies end up having to settle, because they are such an expensive type of case to litigate," ILR Senior Vice President Matt Webb told the Pittsburgh Post-Gazette. Read More »

Tags: False Claims Act, Delaware

In the News Today - February 11, 2014

February 11, 2014 | Insights

A non-profit Wall Street watchdog is challenging the legality of a $13 billion settlement between the Department of Justice and JPMorgan. Read More »

Tags: False Claims Act

In the News Today - February 3, 2014

February 03, 2014 | Insights

The Louisiana Supreme Court overturned a $258 million verdict against Janssen Pharmaceutical. Read More »

Tags: False Claims Act, Securities Litigation Reform, State Attorneys General, Delaware, Louisiana

In the News Today - January 30, 2014

January 30, 2014 | Insights

The Louisiana Supreme Court has overturned a nearly $258 million verdict in state Attorney General Buddy Caldwell's lawsuit brought under the state's version of the federal False Claims Act over the prescription drug Risperdal. Read More »

Tags: State Legal Reforms, Securities Litigation Reform, False Claims Act, Louisiana, Delaware

ILR Report Identifies New Lawsuit Trends, Key Lawsuit 'Players' and Examines Growing AG-Plaintiffs' Bar Alliances

January 29, 2014 | Insights

What are the new trends in American litigation? Where are opportunistic plaintiffs' lawyers prospecting for lawsuit gold? Why are some state attorneys general cozying up to the plaintiffs' bar? Read More »

Tags: State Attorneys General, Securities Litigation Reform, False Claims Act, Class Actions, Asbestos

In the News Today - January 29, 2014

January 29, 2014 | Insights

According to Securities and Exchange Commission Chairwoman Mary Jo White, the SEC is preparing for "a very busy year in enforcement" in 2014. Read More »

Tags: State Legal Reforms, Securities Litigation Reform, False Claims Act, West Virginia

In the News Today - January 28, 2014

January 28, 2014 | Insights

2013 saw the Justice Department garner $3.8 billion in False Claims Act settlements and judgements, and "a record number of quit tam whistleblower actions have entered" the pipeline in the last two years. Read More »

Tags: Foreign Corrupt Practices Act, False Claims Act

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