The False Claims Act is the single most important tool U.S. taxpayers have to recover the billions of dollars stolen through fraud by U.S. government contractors every year.
Under the False Claims Act those who knowingly submit, or cause another person or entity to submit, false claims for payment of government funds are liable for three times the governments damages plus civil penalties of $5,500 to $11,000 per false claim.
The False Claims Act explicitly excludes tax fraud, but there are other laws that deal with tax fraud.
Qui TamWhistleblower Provisions
The False Claims Act contains qui tam, or whistleblower, provisions. Qui tam is a unique mechanism in the law that allows citizens with evidence of fraud against government contracts and programs to sue, on behalf of the government, in order to recover the stolen funds. In compensation for the risk and effort of filing a qui tam case, the citizen whistleblower or "relator" may be awarded a portion of the funds recovered, typically between 15 and 25 percent. A qui tam suit initially remains under seal for at least 60 days during which the Department of Justice can investigate and decide whether to join the action
A Public-Private Partnership
Congress recognized that the Government alone, with its limited resources, was over matched in the fight against rampant fraud. In response to widespread reports that the U.S. Treasury was being repeatedly bilked, in 1986 Congress rejuvenated a Civil War-era lawthe False Claims Act. The 1986 amendments strengthened the False Claims Acts qui tam provisions, creating incentives for private citizens with evidence of fraud to commit their time and resources to supplement the Governments efforts. By doing so, Congress put into play a powerful public-private partnership for uncovering fraud against the federal fisc and obtaining the maximum recovery for American taxpayers.
Changing the Culture of Fraud
The False Claims Act is about more than money. It is also about discouraging fraud and changing the culture of corporate America. As Sen. Charles Grassley (R-IA) and Rep. Howard Berman (D-CA) have noted:
"Studies estimate the fraud deterred thus far by the qui tam provisions runs into the hundreds of billions of dollars. Instead of encouraging or rewarding a culture of deceit, corporations now spend substantial sums on sophisticated and meaningful compliance programs. That change in the corporate culture -- and in the values-based decisions that ordinary Americans make daily in the workplace -- may be the law's most durable legacy."
Who the Law Applies To
In general, the False Claims Act covers fraud involving any federally funded contract or program.
While many qui tam actions in the late 1980s and early 1990s involved Department of Defense contracts, in recent years most qui tam actions have been used to fight Medicare fraud and fraud against other federally funded health care programs. A broad array of scenarios can constitute FCA violations. Some examples include the following:
Types of Fraud Prosecuted Under the FCA
It is impossible to list all of the frauds that have been prosecuted under the False Claims Act, but the following list gives some idea of the scope of the false claims on the Government that have been uncovered to date:
In addition to the Federal False Claims Act, a number of states also have False Claims Acts that work to discourage frauds perpetrated against state governments.