Know 20 Facts History about False Claims Act FCA

Know 20 Facts History about False Claims Act FCA

Federal statute setting criminal and civil penalties for falsely billing the government, over-representing the amount of a delivered product, or under-stating an obligation to the government.  The False Claims Act may be enforced either by the Justice Department or by private individuals in a qui tam proceeding.

As of 2012, over 70 percent of all federal Government FCA actions were initiated by whistleblowers.
The government recovered $38.9 billion under the False Claims Act between 1987 and 2013 and of this amount, $27.2 billion or 70% was from qui tam cases brought by relators.

U.S. Senator Jacob M. Howard, who sponsored the legislation, justified giving rewards to whistle blowers, many of whom had engaged in unethical activities themselves. He said, “I have based the [qui tam provision] upon the old-fashioned idea of holding out a temptation, and ‘setting a rogue to catch a rogue,’ which is the safest and most expeditious way I have ever discovered of bringing rogues to justice.”

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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.

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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.

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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.

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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

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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.

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Tax claims exclusion -
In § 3729(d), the FCA states that the statute does not apply to tax claims under the Internal Revenue Code.

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Private Party can act as a government file a Suit –
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.”

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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.

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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.

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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.

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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).

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LIABILITY FOR CERTAIN ACTS.—

(1)     
IN GENERAL.—Subject to paragraph (2), any person who—

(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;

(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, 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.

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.

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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.

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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.

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.

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.

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RIGHTS OF THE PARTIES TO QUI TAM ACTIONS.—
If the Government proceeds with the action, it shall have the Primary responsibility for prosecuting the action, and shall not be Bound by an act of the person bringing the action. Such person
Shall have the right to continue as a party to the action, subject to The limitations set forth

The Government may dismiss the action notwithstanding  The objections of the person initiating the action if the Person has been notified by the Government of the filing of The motion and the court has provided the person with an Opportunity for a hearing on the motion.

The Government may settle the action with the defendant Notwithstanding the objections of the person initiating the Action if the court determines, after a hearing, that the Proposed settlement is fair, adequate, and reasonable under All the circumstances. Upon a showing of good cause, such
Hearing may be held in camera.

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If the Government elects not to proceed with the action, the person Who initiated the action shall have the right to conduct the action. If the Government so requests, it shall be served with copies of all Pleadings filed in the action and shall be supplied with copies of all Deposition transcripts (at the Government’s expense). When a Person proceeds with the action, the court, without limiting the
Status and rights of the person initiating the action, may Nevertheless permit the Government to intervene at a later date Upon a showing of good cause.

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AWARD TO QUI TAM PLAINTIFF.—
If the Government proceeds with an action brought by a person Under subsection (b), such person shall, subject to the second Sentence of this paragraph, receive at least 15 percent but not more
Than 25 percent of the proceeds of the action or settlement of the Claim, depending upon the extent to which the person substantially Contributed to the prosecution of the action. Where the action is
One which the court finds to be based primarily on disclosures of Specific information (other than information provided by the Person bringing the action) relating to allegations or transactions in
A criminal, civil, or administrative hearing, in a congressional, Administrative, or Government [General] Accounting Office report, Hearing, audit, or investigation, or from the news media, the court May award such sums as it considers appropriate, but in no case More than 10 percent of the proceeds, taking into account the Significance of the information and the role of the person bringing
The action in advancing the case to litigation. Any payment to a Person under the first or second sentence of this paragraph shall be Made from the proceeds. Any such person shall also receive an
Amount for reasonable expenses which the court finds to have been Necessarily incurred, plus reasonable attorneys’ fees and costs. All Such expenses, fees, and costs shall be awarded against the
Defendant.

If the Government does not proceed with an action under this Section, the person bringing the action or settling the claim shall Receive an amount which the court decides is reasonable for
Collecting the civil penalty and damages. The amount shall be not Less than 25 percent and not more than 30 percent of the proceeds Of the action or settlement and shall be paid out of such proceeds.
Such person shall also receive an amount for reasonable expenses Which the court finds to have been necessarily incurred, plus Reasonable attorneys’ fees and costs. All such expenses, fees, and
Costs shall be awarded against the defendant.

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Overview

The False Claims Act allows private parties to file qui tam actions alleging that defendants defrauded the federal government. 18 U.S.C. § 286, 18 U.S.C. § 287, 31 U.S.C. § 3279 et seq. If the suit succeeds, the private party may receive up to 30% of the government's award. In these suits, the government is the real party in interest, and thus is considered the plaintiff. The private party who initiates the suit is called a relator.

In a qui tam suit under the False Claims Act, the relator first files suit in federal District Court. The suit is filed under seal, so that only the relator and the government know about it. After the suit is filed, the Department of Justice, in conjunction with the local District Attorney, has 60 days to investigate and decide whether to intervene. The government can, and usually does, request an extension.

If the government intervenes, it takes over the case. If the government wins or settles, the relator receives between 15% and 25% of the government's award, depending on her involvement in the case. If the government does not intervene, the relator may choose to continue on her own. If she wins, she may recover up to 30% of the government's award. The court will reduce the relator's award if she was involved in the improper activities.

For example, if an employee of a defense contractor discovered that his boss was defrauding the government, the employee could file a False Claims Act qui tam suit against his employer. After filing the suit, the Department of Justice, in consultation with the local District Attorney, might choose to intervene. Then, if the employee and plaintiff win, the employee would be entitled to between 15% and 25% of the government's award.

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Some False Claim Act relators are entitled to whistleblower protection.

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In 2009, the American Civil Liberties Union (ACLU), Government Accountability Project (GAP) and OMB Watch filed suit against the Department of Justice challenging the constitutionality of the "seal provisions" of the FCA that require the whistleblower and the court to keep lawsuits confidential for at least 60 days. The plaintiffs argued that the requirements infringe the First Amendment rights of the public and the whistleblower, and that they violate the division of powers, since courts are not free to release the documents until the executive branch acts. The government moved for dismissal, and the district court granted that motion in 2009.The plaintiffs appealed, and in 2011 their appeal was denied.

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Sunday, February 08, 2015

Tags – USA Federal Law False Claims Act History Facts