The Whistleblowing Details

The False Claims Act in Practice

By By: Tod A. Lewis, J.D., CFE, CPA, CIA, CGFM

"Now as through this world I ramble
I see lots of funny men,
Some will rob you with a six-gun,
And some with a fountain pen."
- Woody Guthrie1 

The civil False Claims Act richly deserves its reputation as the primary workhorse in the fight against fraud in all federal programs. The act takes on the world ™s second oldest profession “ thievery. Its special weapon is its reward provision, known as "qui tam,"2 which allows whistleblowers to file suit on the government ™s behalf. By permitting this it combines the traditional federal role in law enforcement with an incentive structure similar to private litigation. The act ™s triple damages and massive penalties make defendants pay dearly for their wrongdoing.

This article will: (1) analyze the liability portion of the act, (2) identify the five most common types of prosecuted cases and give several examples of how the act assists the government in recovering money taken fraudulently by its contractors, (3) analyze the progress and success of the "qui tam" whistleblower provisions since the Act ™s 1986 amendments, and (4) identify the various states that have adopted similar statutes.

The Act ™s Liability Provision

The Act prohibits seven different types of conduct, all of which involve submission of false claims to the government.

  1. The most common "act" which creates liability is the knowing submission of a false claim.3 For example, seeking reimbursement for goods or services never provided or falsely describing the goods or services that were provided is a section 3729(a)(1) action. (False Claim)
  2. Also, a person may not knowingly make or use a false record to obtain a false claim.4 Section 3729(a)(2) is aimed at those who supply false documentation in support of a false claim. Examples of false documentation include invoices, results of inspections, safety or performance tests, and evidence of eligibility to contract. (False Record)
  3. Conspiracy to defraud the government through false claims is a separate violation.5 The elements of this offense are (1) the defendant conspired with one or more persons to get a false claim allowed or paid, (2) one or more conspirators performed an act to effectuate the conspiracy, and (3) as a result of the claim the [government] suffered damages. It ™s not necessary to show that a false claim was presented to or paid by the government as a result of the conspiracy. Each co-conspirator is jointly and severally liable for the damages and penalties resulting from this violation. (Conspiracy)
  4. It is also a violation to knowingly deliver less property than the amount listed on a certificate or receipt.6 This section is intended to cover any fraudulent concealment of property resulting in a financial loss to the government. Essentially, it prohibits embezzlement of government property by delivery contractors. (Delivery of Less Property)
  5. A person, intending to defraud the government, may not issue a receipt for less than what the government actually receives.7 This subsection is aimed primarily against public officials or contractors acting on the government ™s behalf. It encourages those who receive or make deliveries to the government to verify that the delivery is complete. (False Receipt)
  6. Another violation occurs where one knowingly buys government property from a government employee who is not authorized to sell it.8 This section reaches those who buy "black market" goods from government employees. (False Purchase)
  7. Finally, the "reverse" false claim provision prohibits the knowing use of a false record to decrease an obligation to the government.9 This provision is targeted at those who fraudulently reduce the amount they owe to the government.10 (Reverse False Claim)

The "Delivery of Less Property," "False Receipt," and "False Purchase" provisions are seldom prosecuted because it ™s much more difficult to misappropriate large amounts of money through these three types of schemes.

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