The False Claims Act: Everything You Need To Know
If you work in healthcare or as a government contractor, or if your business receives government funding, you must understand False Claims Act violations and how to report them.
Generally speaking, a whistleblower is typically an “insider” in a company (or sometimes a government agency) who uncovers instances of fraud, waste, abuse, or corruption in the company and discloses that wrongful conduct to someone capable of remedying the behaviors at issue. At Miller Law, we work with whistleblowers who know about fraud against the federal government, helping them bring their knowledge to the attention of government regulators who can stop it.
The mechanism for this work is the U.S. False Claims Act, a law enacted in 1863 during the Civil War. This law protects whistleblowers from retaliation for reporting what they know and allows them to collect part of the government’s recovery.
Fraud, waste, abuse, and corruption can affect both private companies and governments. It can occur at both the private level (e.g., against a specific company) and the federal level (e.g., against the federal government). In fact, submitting false information to the government is not only a bad idea; it’s also a federal crime and a False Claims Act (FCA) violation.
In the United States, whistleblowers who report fraud against the federal government—and, in certain states, against the state government—are entitled to protection from employer retaliation and may be eligible for monetary rewards under the federal FCA.
The most common form of fraud against government programs is healthcare fraud, such as improper billing for Medicaid or Medicare programs. The federal FCA also covers fraud involving government contracts, federal grants, or any other program that pays out money from the federal treasury.
What is the False Claims Act (FCA)?
The FCA is a set of statues that are the United States Government’s primary method for recovering money it lost due to fraud. It was originally signed into law in 1863 by President Lincoln. During the Civil War, it had been discovered that Union troops were receiving substandard goods and services by various suppliers, and the FCA was passed to combat this fraud.
Today, the FCA is, in fact, a collection of five different statutes: (1) 31 U.S.C. § 3729, (2) 31 U.S.C. § 3730, (3) 31 U.S.C. § 3731, (4) 31 U.S.C. § 3732, and (5) 31 U.S.C. § 3733. Collectively, these statutes hold accountable any person who has knowingly violated the FCA by submitting false claims to the government.
Here, the term “knowingly” means that the person:
- had actual knowledge of the information, and
- acted in deliberate ignorance of the truth or falsity of the information; or
- acted in reckless disregard of the truth or falsity of the information.
What Kinds Of Claims Are Covered By The False Claims Act?
The FCA is worded to be fairly broad in scope, but the FCA does explicitly identity at least seven different types of False Claims Acts violations:
- False claims (i.e., presenting, or causing to be presented, a false claim for payment) – 31 U.S.C. § 3729(a)(1)(A)
- False records or statements (i.e., making, using, or causing others to make or use a false record of statement that is material* to the fraud) – 31 U.S.C. § 3729(a)(1)(B)
- Conspiracy (i.e., conspiring to violate the FCA) – 31 U.S.C. § 3729(a)(1)(C)
- Conversion (i.e., failing to return government property) – 31 U.S.C. § 3729(a)(1)(D)
- False receipts (i.e., making or delivering a receipt of a government property without verifying the truth of the information in the receipt) – 31 U.S.C. § 3729(a)(1)(E)
- Unlawful purchases of government property (i.e., buying public property from a government employee who may not be able to lawfully sell the property) – 31 U.S.C. § 3729(a)(1)(F)
- Reverse false claims (i.e., making, using, or causing to be made or used a false record or statement material* to an obligation to pay money to the government OR concealing, avoiding, or decreasing an obligation to pay money to the government) – 31 U.S.C. § 3729(a)(1)(G)
For example, the FCA would hold liable a physician who submitted a bill to Medicare for services the physician knew had not been provided or for services the physician knew were not medically necessary. Likewise, the FCA would hold liable a healthcare facility who submitted a false record to Medicaid in order to receive reimbursement from federal funds, or who submitted a false end-of-year cost report to justify the receipt of federal funds by the facility throughout the year.
*For FCA purposes, “materiality” means that the fraud has a natural tendency to influence the government. For more information on that specifically, read Universal Health Services, Inc. v. Escobar.
What Happens to Someone Who Has Violated the False Claims Act?
Violations of the FCA can result in fairly significant fines and penalties.
If a party violates the FCA, that party will be liable to the government for a civil penalty of between $5,000 and $10,00 and three times the amount of damages that the government sustained.
Who Can Sue Under the False Claims Act?
The government can pursue perpetrators on its own, or private citizens can file suits on behalf of the United States. (A lawsuit by a private citizen on behalf of the government is called a “qui tam” suit, and the private citizen is referred to as a “qui tam relator.”)
There is no limit to the number of whistleblowers that may bring the claim, but it is important that all the whistleblowers work together to report the fraud at the same time. (More on this below!)
Relators who successfully bring qui tam suits can receive a percentage of the government’s recovery, and many lawsuits under the FCA arise from such qui tam suits. (For the 2021 fiscal year, the Department of Justice obtained more than $5.6 billion from civil cases involving fraud and false claims against the government.)
It should be noted that if the relator planned and initiated the fraud, the relator will be unable to participate in the recovery. If, however, the relator either participated in the fraud without knowledge of the fraud or was threatened or forced to participate, the whistleblower is still eligible to participate in the recovery. Consult a whistleblower lawyer if you have questions on your participation or recovery.
Does the False Claims Act Offer Any Protection to Whistleblowers?
Yes! Employees who report fraud and suffer harassment, demotion, suspension, termination, or any other form of discrimination as a result of their report may be awarded through the FCA. The awards may include:
- two times their back pay plus interest;
- reinstatement of their position with the same seniority; and
- compensation for costs or damages they incurred (e.g., litigation costs or reasonable attorney fees).
Are There Any Limits for Bringing a Suit Under the False Claims Act?
The two most important restrictions that may prevent a whistleblower from bringing (or maintaining) a qui tam suit are the “first to file rule” and the “public disclosure bar.”
Generally speaking, the “first to file rule” prevents a second individual from filing a qui tam suit (and being awarded as such) if someone else has already filed the same suit. This means that a potential whistleblower must be the first one to report the fraud. If there are multiple people reporting, this must be done carefully to prevent one person’s report from barring the others.
Similarly, the “public disclosure bar” prevents an individual from filing a qui tam suit involving allegations that have already been disclosed to the public (e.g., in the news) or the government (e.g., in a federal court proceeding of which the government is a party, in a government investigation, in a congressional report, etc.).
If you have information of False Claims Act violations and want to bring a claim, contact an experienced attorney from Miller Law Group for a free consultation as soon as possible.
