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Originally enacted during the Civil War to fight profiteering by suppliers to the Union Army, the False Claims Act has evolved into a sweeping statute covering nearly every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. In the News Today - June 18, 2018

    June 18, 2018 | News

    Associate Attorney General Cites Importance of Corporate Compliance Culture; Australian Attorney General Backs Licensing as "Sensible Approach" to Regulation of Third Party Litigation Funding... Read More

  2. ILR Research Review - Spring 2018

    May 31, 2018 | Research

    The Spring 2018 ILR Research Review explores a wide range of long-standing and emerging issues in legislation, regulation, and litigation, including artificial intelligence and other emerging technologies, state qui tam False Claims Acts, West Virginia legal reforms, and asbestos bankruptcy trusts.... Read More

  3. Plaintiffs' Lawyers Looking for Absurd Attorneys' Fees Had a Rough Week

    May 14, 2018 | Blogs

    If two's a coincidence and three's a trend, what would you call six headlines in one week?... Read More

  4. In the News Today - April 26, 2018

    April 26, 2018 | News

    Firms To Pay $800K More Amid Billable Hour Probe; The False Claims Act in 2017 and What to Watch in 2018... Read More

  5. The Great Myths of State False Claims Acts

    February 28, 2018 | Research

    The 2018 update to "Great Myths of State False Claims Acts" shows that the whistleblowers' bar is continuing to capitalize on state qui tam False Claims Acts (FCAs), harvesting windfall awards from states and the federal government. The paper also points out that the dubious benefits of implementing a state FCA turn into a clear financial net negative when states allow their FCAs to fall out of compliance with federal standards.... Read More

  6. In the News Today - February 27, 2018

    February 27, 2018 | News

    DOJ Memo Addresses 'Parasitic' Whistleblower Cases Under False Claims Act; GKC Founders, Burford Execs Launch Plaintiff-Side Litigation Firm... Read More

  7. Customs Laws Could Be Next False Claims Act Front

    January 30, 2018 | News

    The Wall Street Journal reports that whistleblower lawyers may have found a new angle to pursue False Claims Act (FCA) lawsuits: customs and import cases.... Read More

  8. In the News Today - January 30, 2018

    January 30, 2018 | News

    Debate Continues About WV Intermediate Appeals Court; Orange Juice Decision Shows the True Silliness of Many Food Lawsuits; False Claims Act Teleforum on February 1... Read More

  9. Justice Dept. Memo: "Meritless" and "Parasitic" Whistleblower Lawsuits Should be Dismissed

    January 26, 2018 | News

    A new U.S. Department of Justice memo advised attorneys to consider dismissing "meritless" or "parasitic" whistleblower lawsuits filed under the False Claims Act (FCA), Reuters reports.... Read More

  10. In the News Today - January 10, 2018

    January 10, 2018 | News

    Florida Appeals Court, Regulator Reject Curbing "Assignment of Benefits" Lawsuit Abuse; Attorneys Duel Over Fee Split In $785M Pfizer FCA Settlement... Read More