False Claims Act

The False Claims Act, also called the 'Lincoln Law', is an American federal law that imposes liability on persons and companies (typically federal contractors) who defraud governmental programs. It is the federal Government's primary litigation tool in combating fraud against the Government. The law includes a qui tam provision that allows people who are not affiliated with the government, called 'relators' under the law, to file actions on behalf of the government (informally called 'whistleblowing' especially when the relator is employed by the organization accused in the suit). Persons filing under the Act stand to receive a portion (usually about 15–25 percent) of any recovered damages. As of 2012, over 70 percent of all federal Government FCA actions were initiated by whistleblowers. Claims under the law have typically involved health care, military, or other government spending programs, and dominate the list of largest pharmaceutical settlements. 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. The False Claims Act, also called the 'Lincoln Law', is an American federal law that imposes liability on persons and companies (typically federal contractors) who defraud governmental programs. It is the federal Government's primary litigation tool in combating fraud against the Government. The law includes a qui tam provision that allows people who are not affiliated with the government, called 'relators' under the law, to file actions on behalf of the government (informally called 'whistleblowing' especially when the relator is employed by the organization accused in the suit). Persons filing under the Act stand to receive a portion (usually about 15–25 percent) of any recovered damages. As of 2012, over 70 percent of all federal Government FCA actions were initiated by whistleblowers. Claims under the law have typically involved health care, military, or other government spending programs, and dominate the list of largest pharmaceutical settlements. 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. Qui tam laws have history dating back to the Middle Ages in England. In 1318, King Edward II offered one third of the penalty to the relator when the relator successfully sued government officials who moonlighted as wine merchants. The Maintenance and Embracery Act 1540 of Henry VIII provided that common informers could sue for certain forms of interference with the course of justice in legal proceedings that were concerned with the title to land. This act is still in force today in the Republic of Ireland, although in 1967 it was extinguished in England. The idea of a common informer bringing suit for damages to the Commonwealth was later brought to Massachusetts, where 'penalties for fraud in the sale of bread to be distributed one third to inspector who discovered the fraud and the remainder for the benefit of the town where the offense occurred.' Other statutes can be found on the colonial law books of Connecticut, New York, Virginia and South Carolina. The American Civil War (1861–1865) was marked by fraud on all levels, both in the Union north and the Confederate south. During the war, unscrupulous contractors sold the Union Army decrepit horses and mules in ill health, faulty rifles and ammunition, and rancid rations and provisions, among other unscrupulous actions. In response, Congress passed the False Claims Act on March 2, 1863, 12 Stat. 696. Because it was passed under the administration of President Abraham Lincoln, the False Claims Act is often referred to as the 'Lincoln Law'. Importantly, a reward was offered in what is called the qui tam provision, which permits citizens to sue on behalf of the government and be paid a percentage of the recovery. Qui tam is an abbreviated form of the Latin legal phrase qui tam pro domino rege quam pro se ipso in hac parte sequitur ('he who brings a case on behalf of our lord the King, as well as for himself') In a qui tam action, the citizen filing suit is called a 'relator'. As an exception to the general legal rule of standing, courts have held that qui tam relators are 'partially assigned' a portion of the government's legal injury, thereby allowing relators to proceed with their suits. 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 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.' In the massive military spending leading up to and during World War II, the US Attorney General relied on criminal provisions of the law to deal with fraud, rather than using the FCA. As a result, attorneys would wait for the Department of Justice to file criminal cases and then immediately file civil suits under the FCA, a practice decried as 'parasitic' at the time. Congress moved to abolish the FCA but at the last minute decided instead to reduce the relator's share of the recovered proceeds.:1267–1271:6 The law was again amended in 1986, again due to issues with military spending. Under President Ronald Reagan's military buildup, reports of massive fraud among military contractors had become major news, and Congress acted to strengthen the FCA.:1271–77 The law has always primarily been used against defense contractors but by the late 1990s, health care fraud began to receive more focus, accounting for approximately 40% of recoveries by 2008:1271 Franklin v. Parke-Davis, filed in 1996, was the first case to apply the FCA to fraud committed against the government, due to bills submitted for payment by Medicaid/Medicare for treatments that those programs do not pay for as they are not FDA-approved or otherwise listed on a government formulary. FCA cases in the field of health care are often related to off-label marketing of drugs by drug companies, which is illegal under a different law, the Federal Food, Drug, and Cosmetic Act; the intersection occurs when off-label marketing leads to prescriptions being filled and bills for those prescriptions being submitted to Medicare/Medicaid. As of 2012, over 70 percent of all federal FCA actions were initiated by whistleblowers.:229 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. In 2014, whistleblowers filed over 700 False Claims Act lawsuits. In 2016, the Department of Justice had its third highest annual recovery in False Claims Act history, obtaining more than $4.7 billion in settlements and judgments from civil cases involving fraud and false claims against the government. Since 2009 alone, the federal government has recovered $31.3 billion in False Claims Act settlements and judgments.