Although the False Claims Act (1863) (FCA) has been around for many decades, it wasn’t used that much until the government recognized its potential to become a major tool to combat fraud relating to their contracting processes. In a nutshell, the FCA states a that business is liable when it makes a fraudulent or false claim and it either knows the claim is false or is deliberately indifferent or reckless in its regard to the claim being false.
This writ is still active in the US under the False Claims Act, which lets a private individual (whistleblower or relator) with information of past of present fraud perpetrated against the federal government to bring a lawsuit on behalf of the government. Many qui tam plaintiffs are rewarded handsomely for their initiative in bringing fraud suits like this on behalf of the government.
In a tough economic climate, those running a company need to be painfully aware of the possible consequences of a fired employee bringing a whistleblower lawsuit. The law relating to the FCA has changed in recent years and the scope of the Act expanded. Statistics show the number of these lawsuits is on the rise. Companies need to know that qui tam plaintiffs may receive from 15% to 30% of the damages even if the case doesn’t make its way into court, and many of them don’t go to trial.
The FCA doesn’t just stop there. It also has something referred to as reverse liability. This happens when a contractor knowingly uses a false statement to avoid, decrease or conceal any obligation to the US government.
A False Claims Act prosecution is filed under seal. The case may be reviewed at several levels by the government and the Department of Justice. In many instances, government auditors are sent out to perform a forensic audit. The process continues from there. It’s important to understand that even if the government declines to intervene in the case, the qui tam plaintiff may still pursue the case.
The Fraud Enforcement and Recovery Act (FERA)(2009) which in essence widens the definition of major fraud to extend beyond procurement fraud and include commodities fraud, mortgage fraud, fraud relating to the Trouble Asset Relief Program and the American Recovery and Re-Investment Act, expanded the scope of FCA violations. With the expansion of the scope of the FCA came the broader definition of fraud that means false claims dealing with government spending in any form.
As you can see, the False Claims Act is something you definitely need to know about and be aware of if you are running a business in the United States. Knowledge or the FCA is crucial to a robust compliance plan. Failure to understand the FCA could result in tremendous financial loss to a company on top of other civil and criminal sanctions.
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