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Overview of the False Claims Act and Its Qui Tam Provisions

Overview of the False Claims Act and Its Qui Tam Provisions

Attempting to curb a rash of fraud against the government, Congress passed a law that created incentives for private individuals to report persons engaged in fraud against the government. President Lincoln signed the law, called the False Claims Act (“FCA”) on March 2, 1863. Also known as the “Informer’s Act” or “Lincoln’s Law,” the original FCA prohibited various acts designed to fraudulently obtain money from the government. Congress initially adopted the FCA with the intention of combating fraud against the United States Army during the Civil War.

Although the legislative history of the Act focused specifically on fraud committed by military contractors, the Act applied to fraud committed by all Government contractors. Under the original FCA, defendants were subject to both civil and criminal penalties. There was also a $2000 fine for each fraudulent claim in addition to a penalty of double the government’s actual damages. Under the 1863 Act, private individuals known as “relators” could pursue this remedy through a “qui tam” action, and the informer was entitled to half the total recovery.

The term “qui tam” refers to the Latin expression “qui tam pro domino rege quam pro se ipso in hae parte sequitur,” which means, “who sues on behalf of the King as well as for himself.” The justification for allowing qui tam litigation was to encourage citizens to report wrongdoing against the government, wrongdoing that---absent the qui tam provisions---would likely go unnoticed. In short, the government hoped that economic incentives would promote private enforcement of federal legislation.

Over the years, Congress has amended the FCA on three occasions. The most extensive changes occurred in 1986 when the FCA was amended to promote incentives for whistleblowing insiders and prevent opportunistic plaintiffs. The changes created greater incentives, both financial and procedural, for private citizens, or qui tam whistleblowers to "blow the whistle" against unlawful conduct.

In 2009, Congress enacted the Fraud Enforcement Recovery Act (“FERA”) to combat several court rulings limiting the effectiveness of the FCA, specifically the Supreme Court decision in Allison Engine v. United States ex rel. Sanders. In that case, the Court held that FCA liability is not triggered when a subcontractor submits a false claim to a contractor for work done on a federal project because the subcontractor intended to defraud and submitted a false claim to the contractor, not the government. As a result, a loophole was created allowing subcontractors to avoid FCA liability for a submission of a false claim to contractor, even if the contractor’s payment to the subcontractor was funded or reimbursed with federal funds. FERA acts as a legislative reversal of Allison Engine by amending the FCA to create subcontractor liability so long as (1) the subcontractor intended to defraud the contractor of a government project; and (2) at least a portion of the project has been or will be funded with federal funds. FERA also broadens the FCA’s anti-retaliation by providing a cause of action for employment discrimination against the whistleblower’s family and colleagues.

Below are links to more in-depth discussions on various provisions of the FCA.

For more information, email quitam@bafirm.com.


Notice

This website is designed to provide general information only. This information is not and should not be construed to be legal advice. The transmission of the information found on this website also does not result in the formation of a lawyer-client relationship.

You should be aware that qui tam claims are subject to a Statute of Limitations. The area of limitations periods is complex. There are also first to file rules, public disclosure bars, original source issues, and varying limitations in pursuing retaliation claims. If you wish to pursue your claims, you should promptly seek the opinion of an attorney regarding the merits of your qui tam claim and the applicable statute of limitations.