FALSE CLAIMS ACT – OUTLOOK FOR 2014

CD: Can you provide a brief overview of the background and key provisions of the False Claims Act (FCA)?

Chizewer: The federal FCA was passed during Abraham Lincoln’s presidency to enhance the government’s ability to detect and remedy fraud committed against the public fisc. The inspiration for the Act was provided by a contractor who supplied the Union Army with supposedly waterproof uniforms that disintegrated in the rain. The Act prohibits ‘false claims’ – requests by a government contractor for payment from the government in excess of the amount to which the contractor knows it is entitled. A person who violates or causes a violation of the Act must pay the government three times the actual damages suffered plus a mandatory penalty ranging from $5500-$11,000 for each false claim submitted. The Act may be enforced not only by the government, but also by any other person who has knowledge of the false claims. The Act allows such whistleblower to file a case against the party who violates the Act and then present the case to the government, which then can proceed with the case or defer to the private litigant, who would bring the case on behalf of the government. In case of a recovery, the whistleblower – known under the Act as a ‘relator’ – is entitled to 15-30 percent of the recovery, depending on the circumstances.

Wolosz: The FCA was enacted during the American Civil War to address concerns that suppliers were misappropriating funds. Suppliers were accused of an assortment of fraudulent activities, including trying to pass off barrels of sawdust as gunpowder and selling the same mules to the Army over and over again. Today, the FCA is used to address a much broader array of legal theories. In light of the federal government’s success with the FCA, many states have chosen to enact their own false claims acts.

Apr-Jun 2014 issue

Goldberg Kohn Ltd.

Kelley Drye & Warren LLP

Ropes & Gray LLP

Stradling Yocca Carlson & Rauth