What is the False Claims Act?
The False Claims Act is the U.S. Government’s primary weapon to combat fraud. It empowers whistleblowers to sue individuals or entities who are defrauding the Government, and to recover damages and penalties on the Government's behalf. This law not only provides financial rewards to whistleblowers but also protects them against retaliation from their employers.
The False Claims Act was enacted by President Abraham Lincoln in 1863 during the Civil War to address widespread fraud by contractors who were supplying the military with diseased horses, defective cannons and uniforms made of “shoddy cloth” which rotted away when the troops got wet. Since then, the Act has been amended to enhance the Government’s ability to recover losses caused by other fraudulent activities.
A crucial aspect of the False Claims Act is the qui tam (whistleblower) provision, which permits individuals or entities (called “relators”) with knowledge of fraud to file lawsuits under seal on the Government's behalf. If the case is successful, the relator can receive a share of the money the Government recovers, along with attorney’s fees and costs from the defendant. Congress introduced these financial incentives and protections against retaliation to encourage whistleblowers to come forward and motivate private lawyers to invest their time and resources representing whistleblowers.
The False Claims Act has proven to be a successful collaboration between the public and private sectors. In 1986 the act was strengthened, adding additional penalties and increasing incentives for whistleblowers to come forward. Between 1986 and 2023, Government recoveries surpassed $72 billion and whistleblowers received billions as rewards for exposing rampant fraud.
The False Claims Act is the U.S. Government’s primary weapon to combat fraud. It empowers whistleblowers to sue individuals or entities who are defrauding the Government, and to recover damages and penalties on the Government's behalf. This law not only provides financial rewards to whistleblowers but also protects them against retaliation from their employers.
The False Claims Act was enacted by President Abraham Lincoln in 1863 during the Civil War to address widespread fraud by contractors who were supplying the military with diseased horses, defective cannons and uniforms made of “shoddy cloth” which rotted away when the troops got wet. Since then, the Act has been amended to enhance the Government’s ability to recover losses caused by other fraudulent activities.
A crucial aspect of the False Claims Act is the qui tam (whistleblower) provision, which permits individuals or entities (called “relators”) with knowledge of fraud to file lawsuits under seal on the Government's behalf. If the case is successful, the relator can receive a share of the money the Government recovers, along with attorney’s fees and costs from the defendant. Congress introduced these financial incentives and protections against retaliation to encourage whistleblowers to come forward and motivate private lawyers to invest their time and resources representing whistleblowers.
The False Claims Act has proven to be a successful collaboration between the public and private sectors. In 1986 the act was strengthened, adding additional penalties and increasing incentives for whistleblowers to come forward. Between 1986 and 2023, Government recoveries surpassed $72 billion and whistleblowers received billions as rewards for exposing rampant fraud.
Liability Under the False Claims Act
Under the False Claims Act, liability arises when an individual or entity knowingly presents, or causes to be presented, a false or fraudulent claim to the Government for payment or approval or knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim. An individual or entity may also be liable for a “reverse” false claim if the individual or entity knowingly fails to repay the money or return the property to the Government that it should not have received. The key element, “knowingly”, does not require proof the individual or entity had a specific intent to defraud the Government. Rather, “knowingly” means that the individual or entity:
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Had actual knowledge that a statement or claim was false,
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Acted in deliberate ignorance of whether information was true or false, or,
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Acted in reckless disregard of truth or falsity.
False Claims Act Damages and Penalties
Penalties under the False Claims Act are substantial: a fine of three times the false claim and a civil penalty for each false claim (currently between $13,508 and $27,018 and are adjusted annually for inflation).
The Whistleblower’s Role
Whistleblowers play a crucial role in uncovering and remedying false claims. They are often insiders with firsthand knowledge of fraudulent activities within organizations that do business with the Government. These individuals step forward to report the wrongdoing and provide valuable information to the Government. Their actions help uphold the principles of transparency, integrity, and accountability in Government contracts and programs. In recognition of their pivotal role, the False Claims Act includes substantial rewards to whistleblowers who come forward and provide information that leads to a successful recovery.
