The False Claims Act is one of the most effective fraud fighting tools in the government’s arsenal. In fact, over the last 30 years, the False Claims Act has succeeded in recovering over $40 billion of fraudulently obtain money.
False Claims Act History
Let’s begin with the False Claims Act history. President Abraham Lincoln signed the False Claims Act into law in 1863. The law was enacted during the Civil War.
At this time, the Union army was using third parties to provide goods and services. As it turned out, the government paid third parties for substandard goods. In other words, the third parties were defrauding the government. Specifically, they were providing decrepit horses, shoddy uniforms that fell apart in the rain, and rotten food.
The Commander and Chief needed to solve this problem. But he did not have enough government resources to investigate and bring cases. As a result, Congress passed into law the False Claims Act. This law allowed individuals to become “private attorney generals” and come forward if they had knowledge of fraud against the government. As a reward for coming forward, if the case was successful, the whistleblower received a portion of the recovery.
False Claims Act Legislation
The federal False Claims Act is codified at 31 U.S.C. 3729, et seq.
As discussed above, the United States federal government enacted a federal False Claims Act. Subsequently, the District of Columbia and 29 states passed similar state-specific False Claims Acts. The State False Claims Acts are modeled after the federal FCA.
In sum, the state and federal False Claims Acts place power within the hands of private citizens. These laws allow individuals to become “private attorney generals.” With the assistance of an attorney, individuals can file a False Claims Act lawsuit if they have knowledge of fraud or dishonesty in transactions with the government.
The following actions are violations under the False Claims Act:
- Knowingly presenting (or causing to be presented) to the federal government a false or fraudulent claim for payment;
- Knowingly using (or causing to be used) a false record or statement to get a claim paid by the federal government;
- Conspiring with others to get a false or fraudulent claim paid by the federal government; and
- Knowingly using (or causing to be used) a false record or statement to conceal, avoid, or decrease an obligation to pay money or transmit property to the federal government.
Legal Elements of False Claims Act Lawsuit
There are four legal elements required to allege, and eventually prove, a False Claims Act case. These legal elements are:
- defendant made a false statement or engaged in a fraudulent course of conduct;
- defendant acted “knowingly” (this means actual knowledge, deliberate ignorance, or reckless disregard);
- the statement or conduct was material; and
- the statement or conduct caused the Government to pay out money or to forfeit money due.
Who Can File a False Claims Act Suit?
The answer to this question sis simple: anyone with knowledge of fraud, waste or abuse. Any individual, groups of individuals, even entities can file a False Claims Act case.
Typically, the individuals that file False Claims Act cases are employees of companies committing fraud. But the individual does not have to be a current employee. He/She can be a former employee, a consultant, a competitor, or simply have the information and evidence.
People who end up being whistleblowers can be low- or mid-level employees. Sometimes they hold the following positions at companies:
- office manager;
- physician’s assistant;
- fraud examiner;
- financial analyst;
- compliance officer; or
As you can see, many of these potential whistleblowers work in healthcare. That is because of the billions of dollars the government pays for healthcare. Thus, many individuals will be seeking to report Medicare fraud.
Evidence Needed to File A False Claims Act Case
Whistleblowers are typically employed by the company that is the subject of their False Claims Act case. Furthermore, as an employee the whistleblower may have access to proof of the illegal conduct. This evidence may be in the form of documents, emails, or testimony.
Specifically regarding documents and emails, it is important that the whistleblower be careful about any evidence gathering. First, this may tip the company off that he/she is seeking to file a False Claims Act case. Second, the whistleblower should not access information outside the scope of their employment. In other words, if the whistleblower does not come across the evidence in the ordinary course of business, he/she should not seek to obtain it. Thus, no breaking into offices and no accessing accounts or files that he/she would not normally have access to. Additionally, the whistleblower should not produce information that is the subject of attorney-client privilege.
It is important to note that some whistleblowers are unable to obtain or save written evidence of the fraud. That is not a case killer. It is enough evidence if the whistleblower has credible first-hand testimony to support his/her allegations.
False Claims Act Traps for the Unweary
It is important to keep some miscellaneous items in mind when filing a False Claims Act case.
- legally gather evidence (gather evidence that comes across your view in the ordinary course of business);
- avoid obtaining voice recordings (in some states it is a criminal act if both parties do not consent to the recordings);
- do not provide privileged information;
- try to avoid signing a severance agreement that contains a “release of claims;”
- if you are not the “first-to-fie” you could be barred from obtaining a recovery if the case is successful;
- consult an attorney prior to filing for bankruptcy if you have or may file a False Claims Act case; and
- do not breach the seal, if you do you could have a reduced recovery.
It is important to consult an experienced False Claims Act lawyer prior to filing a case.
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