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The False Claims Act

24. What is the “False Claims Act”?

The False Claims Act (FCA) is a federal law that provides criminal and civil sanctions for those who commit fraud against the US Government. It is well known for authorizing a special type of civil action, “Qui Tam” or “Whistleblowing”, which allows a civil plaintiff to bring an action against a company on behalf of the Federal Government. The criminal and civil provisions of the FCA prohibit the following conduct:

•    Knowingly presenting, or causing to be presented a false claim for payment or approval;

•    Knowingly making, using, or causing to be made or used, a false record or statement material to a false or fraudulent claim;

•    Conspiring to commit any violation of the False Claims Act;

•    Falsely certifying the type or amount of property to be used by the Government;

•    Certifying receipt of property on a document without completely knowing that the information is true;

•    Knowingly buying Government property from an unauthorized officer of the Government, and;

•    Knowingly making, using, or causing to be made or used a false record to avoid, or decrease an obligation to pay or transmit property to the Government; and

•    Retaliation based upon reporting any of the above infractions.

The unique aspect of the FCA is that it allows individuals reporting criminal fraud against the government and those bringing Qui Tam actions to receive a portion of the proceeds recovered by the government.

•    Discussion: What do you think is the justification for allowing civilians to bring an action on behalf of the government? What do you think about awarding a whistleblowing civilian a portion of the civil damages recovered against a company? What is the reasoning behind allowing these types of actions?

•    Practice Question: Ron works in the manufacturing services unit for ABC, Inc. ABC has a large contract with the Federal Government to manufacture steel storage containers. The contract allows ABC to charge the government for all materials used in manufacturing and for the labor costs. Ron noticed that ABC was routinely ordering shipments of steel fittings at $25,000 each as part of the materials order for the government contract. In reality, ABC was only using a small portion of the fittings on the contract, and was selling the remaining units to third parties. Ron decides to inform the government that it is being routinely over charged by ABC. Has ABC committed a crime? What rights and protections does Ron have in reporting ABC’s conduct?

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