THE FEDERAL FALSE CLAIMS ACT Overview The Federal False Claims

							                           THE FEDERAL FALSE CLAIMS ACT

Overview

        The Federal False Claims Act (“FCA”) imposes liability on any person who knowingly
presents or causes to be presented a false or fraudulent claim for payment or approval by the
Government. 31 U.S.C. §§ 3729, et seq. The purpose of the FCA is to discourage fraud against
the government and encourage those with knowledge of fraud to come forward with such
information. The FCA allows private individuals (“whistleblowers”) to file lawsuits on behalf of
the government against persons who have violated the FCA. Under the statute, these
“whistleblowers” generally are entitled to receive between 15-30% of the total amount of
recovery, and they are protected from any subsequent employer retaliation that may occur as a
result of initiating such an action.

                KEY PROVISIONS OF THE FEDERAL FALSE CLAIMS ACT

                                       FALSE CLAIMS

Liability for Certain Acts—§ 3729(a)

       Any of the following actions will constitute a violation of the FCA:

           1)     Knowingly presenting (or causing to be presented) a false or fraudulent claim
                  to the Government or member of the Armed Forces of the United States
                  (“Armed Forces”) for payment or approval;

           2)     Knowingly making or using (or causing to be made or used) a false record or
                  statement to get a false or fraudulent claim paid or approved by the
                  Government;

           3)     Conspiring to get a false or fraudulent claim allowed or paid by the
                  Government;

           4)     Possessing custody or control of property to be used by the Government and
                  intending to defraud the Government by willfully concealing the property or
                  delivering (or causing to be delivered) less property than the amount of the
                  certificate or receipt;

           5)     Making or delivering a receipt without completely knowing that the
                  information on the receipt is true, where the individual is authorized to make or
                  deliver a document certifying the receipt of property used (or to be used) by
                  the Government and intends to defraud the Government;

           6)     Knowingly buying or receiving as a pledge of an obligation or debt, public
                  property from an officer or employee of the Government, or a member of the
                  Armed Forces, who may not lawfully sell or pledge the property; or




                                            - 1 of 4 -
          7)      Knowingly making or using (or causing to be made or used) a false record or
                  statement to conceal, avoid, or decrease an obligation to pay or transmit money
                  or property to the Government.

Penalties—§ 3729(a)(A)-(C)

        Any person found to violate the FCA shall be liable to the Government for a civil penalty
of not less than $5,000, but not more than $11,000, plus three (3) times the amount of damages
which the Government sustains as a result of the violation. Such a person shall also be liable to
the Government for the costs of a civil action brought to recover such penalties or damages.
                                                                                                      Comment [F&J1]: Align this new
       Limitation of Liability for Voluntary Disclosure                                               header with the left margin. Add citation
                                                                                                      if necessary.

       Notwithstanding the above, the court may reduce the treble damage award if it finds:

          1)      The person committing the violation voluntarily disclosed all information
                  known to the person about the violation to Government officials responsible
                  for investigating false claims violations within 30 days after the date which the
                  person first obtained the information;

          2)      Such person fully cooperated with any Government investigation of such
                  violation; and

          3)      At the time such person disclosed such information about the violation, no
                  criminal prosecution, civil action, or administrative action had commenced and
                  the person did not have actual knowledge of the existence of an investigation
                  into such violation.

Definitions—§ 3729(b)-(c)

“Knowing” and “Knowingly”—§ 3729(b)

       Under the statute, “knowing” and “knowingly” mean that a person, with respect to
information:

          1)      Has actual knowledge of the information;

          2)      Acts in deliberate ignorance of the truth or falsity of the information; or

          3)      Acts in reckless disregard of the truth or falsity of the information, and no
                  proof of specific intent to defraud is required.

“Claim”—§ 3729(c)

       “Claim” includes any request or demand, whether under contract or otherwise, for money
or property which is made to a contractor, grantee, or other recipient, if the Government provides
any portion of the money or property which is requested or demanded, or if the Government will
reimburse any portion of the money or property which is requested or demanded.



                                             - 2 of 4 -
Exclusion—§ 3729(e)

      The FCA does not apply to claims, records, or statements made under the Internal
Revenue Code of 1986.

                          CIVIL ACTIONS FOR FALSE CLAIMS

Responsibilities of the Attorney General--§ 3730(a)

       The Attorney General must diligently investigate any false claims violations and is
authorized to bring a civil action against any person who has violated the FCA.

Private or Qui Tam Actions—§ 3730(b)

        A private individual may bring a civil action on his behalf and on behalf of the
Government. The suit is filed and served on the Government, and the complaint and all related
information must be filed under seal and must remain under seal for at least 60 days. The action
must be brought in the name of the Government and can only be dismissed if the court and
Attorney General give written consent and state their reasons for dismissal. Once a qui tam suit
is filed, no other person, other than the Government, may bring a related action based on the
same underlying facts as the pending action.

Award to Qui Tam Plaintiff—§ 3730(d)(1)-(2)

         If the Government prosecutes an action brought by a qui tam plaintiff, that individual
may receive between 15-25% of the total amount recovered (plus reasonable expenses and
attorney’s fees). In cases where the Government does not prosecute and the qui tam plaintiff
litigates or settles the action on his or her own, the qui tam plaintiff may receive between 25-30%
of the total amount recovered (plus reasonable expenses and attorney’s fees).

Protection for Whistleblowers—§ 3730(h)

        Under the FCA, any employee who initiates an investigation, provides testimony or
assistance in an action filed or to be filed under the FCA and consequently suffers retaliation,
will be entitled to all relief necessary to make the employee whole, including reinstatement with
the same seniority status as the employee would have had but for the discrimination, two (2)
times the amount of back pay, plus interest, and compensation for any special damages sustained
(plus reasonable costs and attorney’s fees).

Frivolous Lawsuits—§ 3730(d)(4)

        If the Government does not proceed with the action and the person bringing the action
conducts the action, the court may award the defendant reasonable attorney’s fees and expenses
if the defendant prevails in the action and the court finds that the action was based on a clearly
frivolous or vexatious claim or the action was brought primarily for purposes of harassment.

         ADMINISTRATIVE REMEDIES FOR FALSE CLAIMS AND STATEMENTS



                                             - 3 of 4 -
Liability for False Claims—31 U.S.C. § 3802(a)(1)

       Any person who makes, presents, or submits, or causes to be made, presented, or
submitted, a claim that that person knows (or has reason to know):

          1)          Is false, fictitious, or fraudulent;

          2)          Includes or is supported by any written statement which asserts a material fact
                      which is false, fictitious, or fraudulent;

          3)          Includes or is supported by any written statement that:

               i.          Omits a material fact;

               ii.         Is false, fictitious, or fraudulent as a result of such omission; and

               iii.        Is a statement in which the person making, presenting, or submitting such
                           a statement has a duty to include such material fact; or

          4)          Is for payment for the provision of property or services which the person has
                      not provided as claimed;

        Shall be subject to, in addition to any other remedy prescribed by law, a civil penalty of
not more than $5,000 for each claim. Except in cases where the Government has not made
payment on a false claim, any person who submits a false claim is subject to an assessment, in
lieu of damages sustained as a result of such claim, of not more than twice the amount of such
claim or portion of such claim, to be determined by the court.

Liability for False Statements—§ 3802(a)(2)

       Any person who makes, presents, or submits, or causes to be made, presented, or
submitted, a written statement that:

          1)          The person knows or has reason to know:

               i.          Asserts a material fact which is false, fictitious, or fraudulent; or

               ii.         Omits a material fact and the person has a duty to include such a material
                           fact, but instead submits an affirmation of the truthfulness and accuracy of
                           the contents of the statement; and

               iii.        Is false, fictitious, or fraudulent as a result of such omission;

       Shall be subject to, in addition to any other remedy prescribed by law, a civil penalty of
not more than $5,000 for each statement.




                                                    - 4 of 4 -