What is the False Claims Act?
The False Claims Act is a federal law that allows a whistleblower to bring a lawsuit on behalf of the government to recover money that was lost due to fraud.
It’s also called a Qui Tam lawsuit – Qui Tam is short for “qui tam pro domino rege quam pro se ipso in hac parte sequitur,” which is Latin for, “[he] who sues in this matter for the king as well as for himself.”
The king, in this case, is the US government. Anyone who has knowledge of fraud against the government can sue the person or business responsible for the fraud, recover the funds on behalf of the government, and keep a percentage of the recovery as a reward.
But what is a false claim?
Below, I’ll discuss what constitutes a false claim under the False Claims Act and the amount of damages a whistleblower may recover on behalf of the US government.
What is the False Claims Act?
31 USC § 3729 of the False Claims Act lays out what a false claim is and when a private citizen can bring a Qui Tam action on behalf of the government.
What is a False Claim Under the False Claims Act?
If you have knowledge that someone has defrauded the federal government, you may have a potential Qui Tam lawsuit under the False Claims Act. But what type of fraudulent activity qualifies under the False Claims Act?
31 USC § 3729(a)(1) says that a person is liable under the False Claims Act if they:
(A) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval;
(B) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim;
(C) conspires to commit a violation of subparagraph (A), (B), (D), (E), (F), or (G);
(D) 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;
(E) 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;
(F) 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
(G) 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…
Two obvious defenses to a Qui Tam lawsuit under the False Claims Act are that the person did not knowingly make a false claim or that the person did not make a claim as defined by the Act – how does the False Claims Act define “knowingly” and “claim?”
What Does “Knowingly” Mean in the False Claims Act?
Under 31 USC § 3729(b)’s definition of “knowingly,” it is not necessary to prove that a person had actual knowledge of the fraud, as long as they acted in “deliberate ignorance” or “reckless disregard” of the truth or falsity of the claim:
(1) 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…
The False Claims Act also does not require proof of a “specific intent to defraud.”
What is a “Claim” in the False Claims Act?
What types of “claims” fall under the False Claims Act? First, it includes any demand for payment presented to “an officer, employee, or agent of the United States:”
(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—
(i) is presented to an officer, employee, or agent of the United States; or…
But it also applies to contractors where the US government has provided any portion of the money demanded or where the US government will ultimately pay the bill:
(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—
(I) provides or has provided any portion of the money or property requested or demanded; or
(II) will reimburse such contractor, grantee, or other recipient for any portion of the money or property which is requested or demanded…
What are the Damages that a False Claims Act Defendant Must Pay?
You’ve identified fraud committed against the US government, and you’re prepared to file a lawsuit to force the individual or company to reimburse the government and collect your reward, but what are the damages?
31 USC § 3729(a)(1)(G) provides for a civil penalty as well as payment of three times the amount of damages caused by the fraud:
…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.
The defendant is also “liable to the United States Government for the costs of a civil action brought to recover any such penalty or damages.”
When Can a False Claims Acts Defendant Pay Reduced Damages
Under 31 USC § 3729(a)(2), if a defendant cooperates with the government and provides all information about the fraud to the government “within 30 days after the date on which the defendant first obtained the information,” their liability can be reduced somewhat, but they will still be required to pay no less than two times the amount of damages caused by the fraud:
(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.
Federal Qui Tam and False Claims Act Lawyer in Columbia, SC
Elizabeth Franklin-Best is a federal white collar criminal defense and federal appeals lawyer located in Columbia, SC.
For more information, call us at (803) 331-3421 or send us an email to set up a consultation about your case.