False Claims Act (FCA)

Originally enacted during the Civil War to fight profiteering by suppliers to the Union Army, the False Claims Act has evolved into a sweeping statute covering nearly every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. Read More...

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 errors into claims for fraud. In addition, many states have their own state-level False Claims Acts that also suffer many of the same problems as the current federal statute. 

The law allows the government to pursue any government contractor suspected of making “false claims” about their goods or services to the government. It also 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. A successful False Claims Act case against a company or person can ultimately result in a prohibition against that company or person receiving future federal contracts or funds. Total monetary damages under the False Claims Act have risen from $272 million in 1992 to a record $3.7 billion in FY 2017.

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 themselves 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 (among others):

  • 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 ethical companies and individuals from federal contracts as a method to coerce massive settlements

 

Suggested Resources

Research

All Results for False Claims Act (FCA)

  1. Preventing Government Overpayments to Qui Tam Plaintiffs: Proposed Amendments to the False Claims Act

    October 26, 2011 | Research

    This paper examines the structure of the FCA's whistleblower provisions and available information on whistleblower motivation and concludes that the statute's existing structure systematically overpays Relators and their counsel. This paper identifies several simple legislative amendments that would address these systematic flaws and ensure that the government is getting its money's worth when it pays Relators under the FCA.... Read More

  2. State Farm Urges SCOTUS to Dismiss Claim by ‘Whistleblower’ Who Leaked Suit to Media

    February 16, 2011 | News and Blog

    An attorney for State Farm urged the U.S. Supreme Court yesterday to "dismiss lawsuits by whistleblowers who violate a nondisclosure requirement in the federal law that targets fraud against the government," reports The National Law Journal's Marcia Coyle.... Read More

  3. In the News Today - November 2, 2016

    February 16, 2011 | News and Blog

    What do you get when you mix two of the most pro-litigation tools in America today? ... Read More

  4. In the News Today - November 2, 2016

    February 16, 2011 | News and Blog

    What do you get when you mix two of the most pro-litigation tools in America today?... Read More

  5. In the News Today - November 2, 2016

    February 16, 2011 | News and Blog

    What do you get when you mix two of the most pro-litigation tools in America today?... Read More