The False Claims Act and Its "Quitam" Provision-A Primer

THE FALSE CLAIMS ACT AND ITS QUIT TAM PROVISION--A PRIMER In the battle against fraud, the government has an effective weapon called the civil False Claims Act (the Act). The Act takes aim at the world's second oldest profession-stealing. The United States has been using the Act to fight fraud since the Civil War. The Act encourages whistleblowers,2 through its qui tam enforcement provisions, to report fraud. Qui tar3 enforcement has existed for hundreds of years and allows persons with evidence of wrong-- doing to sue dishonest government contractors on behalf of the government and share in any recovery obtained. The Act imposes triple damages and large penalties against companies and individuals that defraud the government. The Act has been particularly effective in the battle against defense and health care fraud but it can be used whenever a false claim is submitted to the government. Since the Act was amended in 1986, the amount of fraud exposed and dollars recovered has exploded and will undoubtedly continue to rise. ORIGINS OF THE FALSE CLAIMS ACT AND QUI TAM English Common and the Founding Fathers Qui tam actions arose from 13th century English common law as a legal method to supplement the King's power. Qui tam actions have existed in this country ever since the beginning of our government. In fact, the first Congress authorized qui tarn suits in at least 10 of the first 14 statutes imposing penalties. Currently, there are at least five qui tam provisions in the United States Code. The Civil War and In 1863, America was engulfed in civil war but the War Department found itself inept in its own ongoing battle against unscrupulous and corrupt government contractors. The crooked contractors diminished the Union soldiers' ability to fight by depleting its resources through fraud. For example, when the War Department paid [flor sugar it often got sand; for coffee, rye; for leather, something no better than brown paper; for sound horses and mules, spavined beasts and dying donkeys; and for serviceable muskets and pistols, the experimental and failures of sanguine inventors, or the refuse of shops and foreign armories.4 Consequently, the unethical contractors became notoriously rich. Congress and decided that the government needed additional citizen soldiers, including the private bar, to do battle against scheming government contractors. As a result, at urging, Congress passed the False Claims Act in 1863 and it was nicknamed the Lincoln Law. The New and Improved Lincoln Law In modern days, fraud against the government again became big business as the budget expanded. Congress galvanized around a burgeoning federal deficit and its belief that defense contractors and others were-to hum an old tune-swindling the government. Thus, in 1986, Congress reinvigorated Lincoln's Law with the express intention of encouraging more private enforcement by giving whistleblowers increased incentives to come forward. When it amended the Act, Congress expanded the whistleblower's role in the action and increased the bounty provision. Congress allowed whistleblowers to play an active role in the litigation. Whistleblowers were even given the opportunity to challenge the fairness and adequacy of a govemment-negotiated settlement. Most important, whistleblowers were guaranteed a minimum 15 percent of the amount received by the government in a successful action. Consequently, the Act has become the federal weapon of first choice and our nation's most effective resource in the fight against fraud in nearly every federal program. LIABILITY The Act forbids anyone from knowingly submitting, or causing someone else to submit, false claims for payment of federal funds. Violators of the Act are liable for three times the government's damages plus civil penalties of $5,000 to $10,000 for each false claim. …