The History of the False Claims Act
Defining a Whistleblower
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.
The mechanism for this work is the U.S. False Claims Act, a law that protects whistleblowers from retaliation for reporting what they know and allows them to collect part of the government’s recovery.
The False Claims Act was originally enacted in 1863
The Law’s Wartime Origins
During the Civil War, private contractors supplying goods to the Union Army recognized that their products were in high demand and perceived that there were no real consequences for sending substandard goods at overly high prices or sending less than the amount ordered. (One war profiteer at the time had boasted, “You can sell anything to the government at almost any price if you’ve got the guts to ask.”)
In response to reports of the Union Army receiving moth-eaten blankets, diseased horses, or boxes of sand instead of boxes of guns, Congress—with strong support from President Lincoln—passed the False Claims Act on March 2, 1863. (The False Claims Act, in fact, is sometimes referred to as Lincoln’s Law.)
The original False Claims Act imposed a civil fine of up to $2,000 and a prison sentence of up to five years on offenders and allowed the government to recover up to twice of what it had lost from the fraud. The original Act also included a provision allowing private citizens to sue on behalf of the government. Those who brought successful lawsuits—“relators”—were entitled to receive 50% of the amount the government recovered.
The protections in the False Claims Act were reduced in 1943
The statute remained relatively untouched until 1943, at the height of World War II.
At that time, Congress drastically weakened the False Claims Act. It reduced the reward for relators, eliminating the original 50% share and allowing courts, instead, to award, at most, 25% of the government’s recovery. A relator could even receive nothing for their efforts. Congress also restricted the scope of cases that could be brought under the Act.
These amendments drastically reduced the incentive to report fraud.
Bringing The Law Into The 20th Century
The False Claims Act Was Modernized In The 1980s
In the 1980s, against a backdrop of increased federal expenditures (and an increased amount of fraud against the government), Congress revisited the False Claims Act, making it easier to investigate fraud. President Reagan signed an amended False Claims Act into law on October 27, 1986.
The new Act lowered the required burden of proof, imposed treble damages on those found to have committed fraud, lengthened the statute of limitations for filing whistleblower suits, increased relators’ potential awards to up to 30% of the government’s recovery, and gave relators protection against retaliation.
The False Claims Act was further strengthened in 2009 and 2010
In 2009, Congress revisited the False Claims Act yet again, enacting the Fraud Enforcement and Recovery Act, which broadened the scope of fraud covered by the False Claims Act, increased the government’s ability to investigate fraud, and expanded whistleblower protection against employer retaliation.
In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act imposed harsher penalties for kickbacks, established a timeframe for Medicare and Medicaid providers to return overpayments, and expanded the types of fraud covered by the False Claims Act.
Since 1986, the False Claims Act has allowed the government to recover more than $59 billion.
Breaking Down The Modern False Claims Act
Today, the False Claims Act is codified in five different statutes that collectively hold accountable any person who knowingly submits false claims to the government: (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.
Violations of the False Claims Act can result in civil penalties of up to $10,000 and three times the amount of damages that the government lost due to the fraud. One hundred and fifty years after it was first enacted, the False Claims Act remains one of the government’s most effective tools for fighting fraud.
In fact, the Department of Justice reported that $5.6 billion in False Claims Act settlements and judgments in the 2021 fiscal year alone. (More statistics can be found here.)
More information about the federal False Claims Act can be found here, and information about the North Carolina False Claims Act can be found here.
Miller Law Group Protects Those Doing The Right Thing
We Defend Our Clients Against Retaliation
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.
If you think that you have a claim under the False Claims Act, contact an experienced attorney from Miller Law Group for a free consultation as soon as possible.