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Originally enacted during the Civil War to fight profiteering by suppliers to the Union Army, the False Claims Act has evolved into a sweeping statute covering nearly every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 - July 9, 2014

July 09, 2014 | Insights

The Justice Department and Citigroup Inc. are "close to a deal for the bank to pay about $7 billion" to resolve a probe into the company's sales of mortgage securities. Read More »

Tags: Legal Ethics, False Claims Act

SCOTUS Picks up False Claims Act Case Dealing with Law's Statute of Limitations During Periods of War

July 03, 2014 | Insights

The Supreme Court has picked up a False Claims Act case that raises questions about the law's statute of limitations during periods of war, reports Law360. Read More »

Tags: False Claims Act

Florida AG Moves to Assert Control over State False Claims Act Claims

June 16, 2014 | Insights

In a positive step forward that would empower states to diminish frivolous False Claims Act cases, Florida Attorney General Pam Bondi's office is arguing that "it has the authority to dismiss a False Claims Act suit brought against Motorola Inc. [which] it deemed frivolous, saying it does not need approval from the relator who filed suit." Read More »

Tags: State Attorneys General, False Claims Act, Class Actions, Florida

In The News Today - June 13, 2014

June 13, 2014 | Insights

The Michigan Supreme Court this week "nixed" a state false claim lawsuit against several pharmacy companies, which claimed that the companies "overcharged Medicaid" for generic prescription drugs. Read More »

Tags: False Claims Act, Michigan

In The News Today - June 12, 2014

June 12, 2014 | Insights

The state of Florida argued Wednesday to a state appellate court that it has the authority to dismiss a False Claims Act suit brought against Motorola Inc. The court deemed it frivolous, "saying it does not need approval from the relator who filed suit." Read More »

Tags: Asbestos, Class Actions, False Claims Act, Florida, North Carolina

In The News Today - June 5, 2014

June 05, 2014 | Insights

The U.S. Second Court of Appeals issued a ruling which said that, "U.S. District Judge Jed Rakoff erred in rejecting a $285 million settlement between the Securities and Exchange Commission and Citigroup Inc." Read More »

Tags: False Claims Act

In the News Today - June 3, 2014

June 03, 2014 | Insights

BP is seeking US Supreme Court intervention after District Judge Carl Barbier lifted "a temporary stay in claims payouts" related to the 2010 Gulf Oil Spill. Read More »

Tags: False Claims Act

Reforming the False Claims Act for the 21st Century

May 08, 2014 | Insights

The May 2014 edition of Contract Management features an article by WilmerHale attorneys, David W. Ogden and Jonathan G. Cederbaum, about the need to reform the False Claims Act. Read More »

Tags: False Claims Act

In the News - April 24, 2014

April 24, 2014 | Insights

Montana Attorney General Tim Fox has signaled his intention to defend the state's $10 million limit on the punitive damages a judge or jury can award an individual after a district judge ruled the cap is unconstitutional. Read More »

Tags: False Claims Act, Foreign Corrupt Practices Act, State Legal Reforms

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

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