The False Claims Act: A Primer Justice.gov
Federal False Claims Act
The False Claims Act (FCA), 31 U.S.C. §§ 3729 – 3733 was enacted in 1863 by a Congress concerned that suppliers of goods to the Union Army during the Civil War were defrauding the Army. The FCA provided that any person who knowingly submitted false claims to the government was liable for double the government’s damages plus a penalty of $2,000 for each false claim. Since then, the FCA has been amended several times. In 1986, there were significant changes to the FCA, including increasing damages from double damages to treble damages and raising the penalties from $2,000 to a range of $5,000 to $10,000. The FCA has been amended three times since 1986. Over the life of the statute it has been interpreted on hundreds of occasions by federal courts (which sometimes issue conflicting interpretations of the statute). The purpose of this primer is not to explain how the FCA evolved over the decades or to discuss judicial interpretations of its provisions. Rather, in this primer we simply explain the most significant elements of the FCA to give one new to the statute an introductory understanding of the FCA and how it works. The complete text of the False Claims Act is provided at the end of this primer.
The statute begins, in § 3729(a), by explaining the conduct that creates FCA liability. In very general terms, §§ 3729(a)(1)(A) and (B) set forth FCA liability for any person who knowingly submits a false claim to the government or causes another to submit a false claim to the government or knowingly makes a false record or statement to get a false claim paid by the government. Section 3729(a)(1)(G) is known as the reverse false claims section; it provides liability where one acts improperly – not to get money from the government, but to avoid having to pay money to the government. Section 3729(a)(1)(C) creates liability for those who conspire to violate the FCA. Sections 3729(a)(1)(D), (E), and (F) are rarely invoked.
Damages and penalties
After listing the seven types of conduct that result in FCA liability, the statute provides that one who is liable must pay a civil penalty of between $5,000 and $10,000 for each false claim (those amounts are adjusted from time to time; the current amounts are $5,500 to $11,000) and treble the amount of the government’s damages. Where a person who has violated the FCA reports the violation to the government under certain conditions, the FCA provides that the person shall be liable for not less than double damages.
The knowledge requirement
A person does not violate the False Claims Act by submitting a false claim to the government; to violate the FCA a person must have submitted, or caused the submission of, the false claim (or made a false statement or record) with knowledge of the falsity. In § 3729(b)(1), knowledge of false information is defined as being (1) actual knowledge, (2) deliberate ignorance of the truth or falsity of the information, or (3) reckless disregard of the truth or falsity of the information.
Definition of a claim
The FCA also defines what a claim is and says that it is a demand for money or property made directly to the Federal Government or to a contractor, grantee, or other recipient if the money is to spent on the government’s behalf and if the Federal Government provides any of the money demanded or if the Federal Government will reimburse the contractor or grantee.
Tax claims exclusion
In § 3729(d), the FCA states that the statute does not apply to tax claims under the Internal Revenue Code.
The qui tam provisions
The FCA allows private persons to file suit for violations of the FCA on behalf of the government. A suit filed by an individual on behalf of the government is known as a “qui tam” action, and the person bringing the action is referred to as a “relator.”
- Filing a qui tam complaint
The qui tam provisions begin at § 3730(b) of the FCA; § 3730(b)(1) states that a person may file a qui tam action. Section 3730(b)(2) provides that a qui tam complaint must be filed with the court under seal. The complaint and a written disclosure of all the relevant information known to the relator must be served on the U.S. Attorney for the judicial district where the qui tam was filed and on the Attorney General of the United States.
- Government investigation
The qui tam complaint is initially sealed for 60 days. The government is required to investigate the allegations in the complaint; if the government cannot complete its investigation in 60 days, it can seek extensions of the seal period while it continues its investigation. The government must then notify the court that it is proceeding with the action (generally referred to as “intervening” in the action) or declining to take over the action, in which case the relator can proceed with the action.
- Rights of the parties in a qui tam action
If the government intervenes in the qui tam action it has the primary responsibility for prosecuting the action. § 3730(c)(1). It can dismiss the action, even over the objection of the relator, so long as the court gives the relator an opportunity for a hearing (§ 3730(c)(2)(A)) and it can settle the action even if the relator objects so long as the relator is given a hearing and the court determines that the settlement is fair. § 3730(c)(2)(B). If a relator seeks to settle or dismiss a qui tam action, it must obtain the consent of the government. § 3730(b)(1). When the case is proceeding, the government (§ 3730(c)(2)(C)) and the defendant (§ 3730(c)(2)(D)) can ask the court to limit the relator’s participation in the litigation.
- Award to the relator
If the government intervenes in the qui tam action, the relator is entitled to receive between 15 and 25 percent of the amount recovered by the government through the qui tam action. If the government declines to intervene in the action, the relator’s share is increased to 25 to 30 percent. Under certain circumstances, the relator’s share may be reduced to no more than ten percent. If the relator planned and initiated the fraud, the court may reduce the award without limitation. The relator’s share is paid to the relator by the government out of the payment received by the government from the defendant. If a qui tam action is successful, the relator also is entitled to legal fees and other expenses of the action by the defendant. All of these provisions are in § 3730(d) of the FCA. The FCA also provides that if the government chooses to obtain a recovery from the defendant in certain types of proceedings other than the relator’s FCA suit, this is known as an alternate remedy and the relator is entitled to the same share of the recovery as if the recovery was obtained through the relator’s FCA suit. §3730(c)(5).
- Statutory bars to qui tam actions
The FCA provides several circumstances in which a relator cannot file or pursue a qui tam
FCA violation. § 3730(d)(3).
- The relator was convicted of criminal conduct arising from his or her role in the
- Another qui tam concerning the same conduct already has been filed (this is known as the “first to file bar”). §3730(b)(5).
- The government already is a party to a civil or administrative money proceeding concerning the same conduct. §3730(e)(3).
- The qui tam action is based upon information that has been disclosed to the public through any of several means: criminal, civil, or administrative hearings in which the government is a party, government hearings, audits, reports, or investigations, or through the news media (this is known as the “public disclosure bar.”) §3730(e)(4)(A). There is an exception to the public disclosure bar where the relator was the original source of the information.
We repeat that this primer does not discuss every section of the False Claims Act and is not intended to provide legal advice or take formal positions. It is intended only to provide a general introduction to the False Claims Act to those new to the area.
Below is the complete text of the False Claims Act:
- 3729. False claims
(a) LIABILITY FOR CERTAIN ACTS.—
(1) IN GENERAL.—Subject to paragraph (2), any person who—
(A) (B) (C) (D)
knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval;
knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent;
conspires to commit a violation of subparagraph (A), (B), (D), (E), (F), or (G);
has possession, custody, or control of property or money used, or to be used, by the Government and knowingly delivers, or causes to be delivered, less than all of that money or property;
is authorized to make or deliver a document certifying receipt of property used, or to be used, by the Government and, intending to defraud the Government, makes or delivers the receipt without completely knowing that the information on the receipt is true;
knowingly buys, or receives as a pledge of an obligation or debt, public property from an officer or employee of the Government, or a member of the Armed Forces, who lawfully may not sell or pledge property; or
knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government,
is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, as adjusted by the Federal Civil Penalties Inflation Adjustment Act of 1990 (28 U.S.C. 2461 note; Public Law 104-410), plus 3 times the amount of damages which the Government sustains because of the act of that person.
- (2) REDUCED DAMAGES.—If the court finds that—
- (A) the person committing the violation of this subsection furnished officials of the United States responsible for investigating false claims violations with all information known to such person about the violation within 30 days after the date on which the defendant first obtained the information;
- (B) such person fully cooperated with any Government investigation of such violation; and
- (C) at the time such person furnished the United States with the information about the violation, no criminal prosecution, civil action, or administrative action had commenced under this title with respect to such violation, and the person did not have actual knowledge of the existence of an investigation into such violation,
the court may assess not less than 2 times the amount of damages
which the Government sustains because of the act of that person.
- (3) COSTS OF CIVIL ACTIONS.—A person violating this subsection shall
also be liable to the United States Government for the costs of a civil action brought to recover any such penalty or damages.
(b) DEFINITIONS.—For purposes of this section—
the terms “knowing” and “knowingly”—
- (A) mean that a person, with respect to information—
- (i) has actual knowledge of the information;
- (ii) acts in deliberate ignorance of the truth or falsity of the information; or
- (iii) acts in reckless disregard of the truth or falsity of the information,; and
- (B) require no proof of specific intent to defraud;
the term “claim”—
(A) means any request or demand, whether under a contract or otherwise, for money or property and whether or not the United States has title to the money or property, that—
does not include requests or demands for money or property that the Government has paid to an individual as compensation for Federal employment or as an income subsidy with no restrictions on that individual’s use of the money or property;
- (i) is presented to an officer, employee, or agent of the United States; or
- (ii) is made to a contractor, grantee, or other recipient, if the money or property is to be spent or used on the Government’s behalf or to advance a Government program or interest, and if the United States Government —
provides or has provided any portion of the money or property requested or demanded; or
will reimburse such contractor, grantee, or other recipient for any portion of the money or property which is requested or demanded; and
- (3) the term “obligation” means an established duty, whether or not fixed, arising from an express or implied contractual, grantor- grantee, or licensor-licensee relationship, from a fee-based or similar relationship, from statute or regulation, or from the retention of any overpayment; and
- (4) the term “material” means having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property.
(c) EXEMPTION FROM DISCLOSURE.—Any information furnished pursuant to subsection (a)(2) shall be exempt from disclosure under section 552 of title 5.
(d) EXCLUSION.—This section does not apply to claims, records, or statements made under the Internal Revenue Code of 1986.
- 3730. Civil actions for false claims
- (a) RESPONSIBILITIES OF THE ATTORNEY GENERAL.—The Attorney General diligently shall investigate a violation under section 3729. If the Attorney General finds that a person has violated or is violating section 3729, the Attorney General may bring a civil action under this section against the person.
- (b) ACTIONS BY PRIVATE PERSONS.—
- (1) A person may bring a civil action for a violation of section 3729 for the person and for the United States Government. The action shall be brought in the name of the Government. The action may be dismissed only if the court and the Attorney General give written consent to the dismissal and their reasons for consenting.
- (2) A copy of the complaint and written disclosure of substantially all material evidence and information the person possesses shall be served on the Government pursuant to Rule 4(d)(4) of the Federal Rules of Civil Procedure. The complaint shall be filed in camera, shall remain under seal for at least 60 days, and shall not be served on the defendant until the court so orders. The Government may elect to intervene and proceed with the action within 60 days after it receives both the complaint and the material evidence and information.
- (3) The Government may, for good cause shown, move the court for extensions of the time during which the complaint remains under seal under paragraph (2). Any such motions may be supported by affidavits or other submissions in camera. The defendant shall not be required to respond to any complaint filed under this section until 20 days after the complaint is unsealed and served upon the defendant pursuant to Rule 4 of the Federal Rules of Civil Procedure.
- (4) Before the expiration of the 60-day period or any extensions obtained under paragraph (3), the Government shall—
- (A) proceed with the action, in which case the action shall be conducted by the Government; or
- (B) notif