The False Claims Act (FCA) 31 U.S.C. §§ 3729 – 3733, was enacted during the Civil War in 1863 and amended several times over the years. It is a critical tool in the United States’ efforts to detect and punish fraud committed against federal programs and contracts. The FCA allows the government to bring legal action against individuals or organizations that knowingly submit false claims for payment from federal funds.
To encourage whistleblowers to come forward with information about fraudulent activities, the FCA includes financial incentives, known as “qui tam,” giving the informant a large cut of any funds recovered through the FCA.
False Claims Act
The FCA imposes liability on any person or entity that knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval to the federal government.
It is important to understand that “knowingly,” in the context of the FCA, is defined broadly to include actual knowledge, deliberate ignorance, or reckless disregard of the truth or falsity of the information. The Act covers a wide range of activities, from overbilling for goods and services to billing for goods and services not provided, and it applies to all federal programs, from healthcare to defense contracting.
Qui Tam Provisions and Whistleblower Incentives
A distinctive feature of the FCA is its qui tam provision, which allows private individuals, known as “relators” or whistleblowers, to file lawsuits on behalf of the government against entities defrauding it. If the lawsuit results in a recovery of funds, the whistleblower is entitled to receive a portion of the recovered amount, usually between 15% and 30%. The prospect of sharing in a large financial recovery of government funds has led to a large increase in FCA cases. There were 712 qui tam lawsuits filed in 2023, an average of 13 new lawsuits each week. The FCA cases resolved in 2023 resulted in judgments ordering the recovery of $2.68 billion, with whistleblowers receiving a large portion of those funds.
Penalties Under the False Claims Act
The penalties for violating the FCA can be very severe. They include treble (triple) damages, meaning that entities found liable under the Act may be required to pay three times the number of damages the government sustained due to the false claims.
The FCA also imposes civil penalties for each false claim, with the amount adjusted periodically for inflation. As of 2024, the penalties range from approximately $13,946 to $27,894 per claim. These substantial financial penalties are indications of the seriousness with which the government views fraud against federal programs.
However, bringing an FCA qui tam lawsuit requires the whistleblower to engage an experienced law firm knowledgeable in financial fraud. Stechschulte Nell, Attorneys at Law in Tampa have been involved in representing clients in fraud litigation for many years, often acting as criminal defense counsel. It is the comprehensive knowledge gleaned from decades of working with fraud law that is required of attorneys involved with FCA whistleblowers.
Anyone considering becoming an FCA whistleblower must understand, however, that the person or entity they accuse of defrauding the government is often extremely well-financed and able to defend against civil accusations for several years in the federal courts. Unless the government joins the legal action as plaintiffs, this type of litigation requires a very deep pocket to finance the whistleblower-plaintiff’s case and the defense case. In addition, the government may opt not to join the plaintiff’s qui tam lawsuit until months or years after the litigation commences.
Defenses to Allegations Under the False Claims Act
Defending against FCA charges involves navigating complex legal and factual issues. Several defenses may be available to those accused of violating the Act:
Lack of Knowledge
Given that the FCA requires a defendant to have acted “knowingly,” demonstrating that any false claims were the result of a mistake, misunderstanding, or negligence, rather than intentional fraud, can be an effective defense. The defense argues that the defendant did not have the level of knowledge or intent required for FCA liability.
Government Knowledge
Another defense is based on the government’s knowledge of the facts involved in the allegedly false claims at the time they were submitted. If the defendant can prove that the government was aware of the information and still approved the claim, it can argue that the claims were not false or that there was no intent to deceive.
Reasonable Interpretation
In situations where the falsity of a claim depends on the interpretation of ambiguous contract terms, regulations, or program requirements, a defendant might argue that they had a reasonable interpretation of those terms. If this interpretation led to the claims that are in dispute, the defense could argue that the claims were not knowingly false.
Materiality
The Supreme Court’s 2016 decision in Universal Health Services, Inc. v. United States ex rel. Escobar introduced a “materiality” standard to FCA cases. This required the false statement to be material to the government’s decision to pay out. A statement is material if it can influence the government’s decision to pay the allegedly false claim. Defendants can argue that even if inaccuracies existed, they were not material to the government’s payment decision.
Statute of Limitations
The FCA has a variable statute of limitations that applies differently to different sets of facts. An FCA action must be commenced against the person or entity filing the false claim no later than 6 years after the violation of the FCA occurred, but no later than 3 years if material facts permitting an FCA enforcement action is known or reasonably should be known to a government official responsible to act. In no case can an FCA enforcement action be brought 10 years after the date of the last act constituting the violation of the statute.
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Protect Your Rights with Stechschulte Nell
For more information about bringing an FCA action against a person or entity that filed a false claim with the government, or to discuss defending FCA enforcement litigation, contact Stechschulte Nell, Attorneys at Law today.
