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Originally enacted during the Civil War to fight profiteering by suppliers to the Union Army, the False Claims Act has evolved into a sweeping statute covering nearly every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

 

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All Results for False Claims Act (FCA)

  1. In the News Today - November 18, 2013

    November 18, 2013 | News and Blog

    Irvington, NJ is moving forward with a plan to use eminent domain to seize mortgages that are in foreclosure, becoming the second city to do so.... Read More

  2. Time to Fix the False Claims Act

    November 15, 2013 | News and Blog

    A new ILR report argues that the False Claims Act, while good at encouraging frivolous litigation, is simply ineffective at preventing fraud. ... Read More

  3. In the News Today - November 5, 2013

    November 05, 2013 | News and Blog

    Johnson & Johnson agreed to pay $2.2 billion to settle a DOJ investigation into the marketing of its antipsychotic drug Risperdal. ... Read More

  4. In the News Today - November 5, 2013

    November 05, 2013 | News and Blog

    Johnson & Johnson agreed to pay $2.2 billion to settle a DOJ investigation into the marketing of its antipsychotic drug Risperdal.... Read More

  5. Is FIRREA a Gamechanger?

    October 29, 2013 | News and Blog

    Analysis from Reuters says that a recent verdict against Bank of America could have profound implications for Wall Street.... Read More

  6. Curing What Ails the False Claims Act: Promoting Compliance and Taxpayer Savings

    October 24, 2013 | Video | Watch

  7. Litigation Trends, Targets, and Players

    October 24, 2013 | News and Blog

    ILR released its "New Lawsuit Ecosystem" report at the 14th Annual Legal Reform Summit on Wednesday.... Read More

  8. New Research on Lawsuit Trends Headlines Chamber's Legal Reform Summit

    October 23, 2013 | Press Release

    ILR today identified asbestos, class-action, data privacy, and False Claims Act lawsuits among the leading lawsuit trends, in a paper released at its 14th Annual Legal Reform Summit. ... Read More

  9. Legal Reformers Must Act to Heal the Lawsuit System

    October 23, 2013 | News and Blog

    By being proactive and persistent, we can achieve a healthy lawsuit system.... Read More

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

    October 23, 2013 | Research

    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.... Read More