HOME

TheInfoList



OR:

The False Claims Act (FCA), also called the "Lincoln Law", is an American
federal law Federal law is the body of law created by the federal government of a country. A federal government is formed when a group of political units, such as states or provinces join in a federation, delegating their individual sovereignty and many ...
that imposes liability on persons and companies (typically
federal contractor The Top 100 Contractors Report is a list developed annually by the U.S. General Services Administration as part of its tracking of U.S. federal government procurement, of the "Top 100" contractors in the United States. In fiscal year 2005, the f ...
s) who
defraud In law, fraud is intentional deception to secure unfair or unlawful gain, or to deprive a victim of a legal right. Fraud can violate civil law (e.g., a fraud victim may sue the fraud perpetrator to avoid the fraud or recover monetary compensa ...
governmental programs. It is the federal government's primary
litigation - A lawsuit is a proceeding by a party or parties against another in the civil court of law. The archaic term "suit in law" is found in only a small number of laws still in effect today. The term "lawsuit" is used in reference to a civil act ...
tool in combating fraud against the government. The law includes a ''
qui tam In common law, a writ of ''qui tam'' is a writ through which private individuals who assist a prosecution can receive for themselves all or part of the damages or financial penalties recovered by the government as a result of the prosecution. It ...
'' provision that allows people who are not affiliated with the government, called "relators" under the law, to file actions on behalf of the government. This is informally called "
whistleblowing A whistleblower (also written as whistle-blower or whistle blower) is a person, often an employee, who reveals information about activity within a private or public organization that is deemed illegal, immoral, illicit, unsafe or fraudulent. Whi ...
", especially when the relator is employed by the organization accused in the suit. Persons filing actions under the Act stand to receive a portion (15–30%, depending on certain factors) of any recovered
damages At common law, damages are a remedy in the form of a monetary award to be paid to a claimant as compensation for loss or injury. To warrant the award, the claimant must show that a breach of duty has caused foreseeable loss. To be recognised at ...
. As of 2019, over 71% of all FCA actions were initiated by whistleblowers. Claims under the law have typically involved health care, military, or other government spending programs, and dominate the list of largest pharmaceutical settlements. Between 1987 and 2019, the government recovered more than $62 billion under the False Claims Act.


History

''
Qui tam In common law, a writ of ''qui tam'' is a writ through which private individuals who assist a prosecution can receive for themselves all or part of the damages or financial penalties recovered by the government as a result of the prosecution. It ...
'' laws have history dating back to the
Middle Ages In the history of Europe, the Middle Ages or medieval period lasted approximately from the late 5th to the late 15th centuries, similar to the post-classical period of global history. It began with the fall of the Western Roman Empire ...
in
England England is a country that is part of the United Kingdom. It shares land borders with Wales to its west and Scotland to its north. The Irish Sea lies northwest and the Celtic Sea to the southwest. It is separated from continental Europe ...
. In 1318, King
Edward II Edward II (25 April 1284 – 21 September 1327), also called Edward of Caernarfon, was King of England and Lord of Ireland from 1307 until he was deposed in January 1327. The fourth son of Edward I, Edward became the heir apparent to ...
offered one third of the penalty to the relator when the relator successfully sued government officials who moonlighted as wine merchants. The Maintenance and Embracery Act 1540 of
Henry VIII Henry VIII (28 June 149128 January 1547) was King of England from 22 April 1509 until his death in 1547. Henry is best known for his six marriages, and for his efforts to have his first marriage (to Catherine of Aragon) annulled. His disa ...
provided that common informers could sue for certain forms of interference with the course of justice in legal proceedings that were concerned with the title to land. This act is still in force today in the
Republic of Ireland Ireland ( ga, Éire ), also known as the Republic of Ireland (), is a country in north-western Europe consisting of 26 of the 32 counties of the island of Ireland. The capital and largest city is Dublin, on the eastern side of the island. ...
, although in 1967 it was extinguished in England. The idea of a common informer bringing suit for damages to the Commonwealth was later brought to
Massachusetts Massachusetts (Massachusett: ''Muhsachuweesut Massachusett_writing_systems.html" ;"title="nowiki/> məhswatʃəwiːsət.html" ;"title="Massachusett writing systems">məhswatʃəwiːsət">Massachusett writing systems">məhswatʃəwiːsət'' En ...
, where "penalties for fraud in the sale of bread reto be distributed one third to inspector who discovered the fraud and the remainder for the benefit of the town where the offense occurred." Other statutes can be found on the colonial law books of
Connecticut Connecticut () is the southernmost state in the New England region of the Northeastern United States. It is bordered by Rhode Island to the east, Massachusetts to the north, New York (state), New York to the west, and Long Island Sound to the ...
,
New York New York most commonly refers to: * New York City, the most populous city in the United States, located in the state of New York * New York (state), a state in the northeastern United States New York may also refer to: Film and television * '' ...
,
Virginia Virginia, officially the Commonwealth of Virginia, is a state in the Mid-Atlantic and Southeastern regions of the United States, between the Atlantic Coast and the Appalachian Mountains. The geography and climate of the Commonwealth are ...
and
South Carolina )''Animis opibusque parati'' ( for, , Latin, Prepared in mind and resources, links=no) , anthem = " Carolina";" South Carolina On My Mind" , Former = Province of South Carolina , seat = Columbia , LargestCity = Charleston , LargestMetro = ...
. The
American Civil War The American Civil War (April 12, 1861 – May 26, 1865; also known by Names of the American Civil War, other names) was a civil war in the United States. It was fought between the Union (American Civil War), Union ("the North") and t ...
(1861–1865) was marked by fraud on all levels, both in the Union north and the Confederate south. During the war, unscrupulous contractors sold the
Union Army During the American Civil War, the Union Army, also known as the Federal Army and the Northern Army, referring to the United States Army, was the land force that fought to preserve the Union (American Civil War), Union of the collective U.S. st ...
decrepit horses and mules in ill health, faulty rifles and ammunition, and rancid rations and provisions, among other unscrupulous actions. In response, Congress passed the False Claims Act on March 2, 1863, . Because it was passed under the administration of President
Abraham Lincoln Abraham Lincoln ( ; February 12, 1809 – April 15, 1865) was an American lawyer, politician, and statesman who served as the 16th president of the United States from 1861 until his assassination in 1865. Lincoln led the nation throu ...
, the False Claims Act is often referred to as the "Lincoln Law". Importantly, a reward was offered in what is called the ''
qui tam In common law, a writ of ''qui tam'' is a writ through which private individuals who assist a prosecution can receive for themselves all or part of the damages or financial penalties recovered by the government as a result of the prosecution. It ...
'' provision, which permits citizens to sue on behalf of the government and be paid a percentage of the recovery. ''Qui tam'' is an abbreviated form of the Latin legal phrase ''qui tam pro domino rege quam pro se ipso in hac parte sequitur'' ("he who brings a case on behalf of our lord the King, as well as for himself"), 769 n.1 (2000). In a ''qui tam'' action, the citizen filing suit is called a "relator". As an exception to the general legal rule of
standing Standing, also referred to as orthostasis, is a position in which the body is held in an ''erect'' ("orthostatic") position and supported only by the feet. Although seemingly static, the body rocks slightly back and forth from the ankle in the s ...
, courts have held that ''qui tam'' relators are "partially assigned" a portion of the government's legal injury, thereby allowing relators to proceed with their suits.
U.S. Senator The United States Senate is the upper chamber of the United States Congress, with the House of Representatives being the lower chamber. Together they compose the national bicameral legislature of the United States. The composition and power ...
Jacob M. Howard Jacob Merritt Howard (July 10, 1805 – April 2, 1871) was an American attorney and politician. He was most notable for his service as a U.S. Representative and U.S. Senator from the state of Michigan, and his political career spanned the Amer ...
, who sponsored the legislation, justified giving rewards to whistle blowers, many of whom had engaged in unethical activities themselves. He said, "I have based the 'qui tam'' provisionupon the old-fashioned idea of holding out a temptation, and ‘setting a rogue to catch a rogue,’ which is the safest and most expeditious way I have ever discovered of bringing rogues to justice." In the massive military spending leading up to and during
World War II World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the World War II by country, vast majority of the world's countries—including all of the great power ...
, the
US Attorney General The United States attorney general (AG) is the head of the United States Department of Justice, and is the chief law enforcement officer of the federal government of the United States. The attorney general serves as the principal advisor to the p ...
relied on criminal provisions of the law to deal with fraud, rather than using the FCA. As a result, attorneys would wait for the
Department of Justice A justice ministry, ministry of justice, or department of justice is a ministry or other government agency in charge of the administration of justice. The ministry or department is often headed by a minister of justice (minister for justice in a ...
to file criminal cases and then immediately file civil suits under the FCA, a practice decried as "parasitic" at the time. Congress moved to abolish the FCA but at the last minute decided instead to reduce the relator's share of the recovered proceeds.Charles Doyle, Senior Specialist in American Public Law, for the Congressional Research Service. August 6, 200
Qui Tam: The False Claims Act and Related Federal Statutes
/ref> The law was again amended in 1986, again due to issues with military spending. Under President
Ronald Reagan Ronald Wilson Reagan ( ; February 6, 1911June 5, 2004) was an American politician, actor, and union leader who served as the 40th president of the United States from 1981 to 1989. He also served as the 33rd governor of California from 1967 ...
's military buildup, reports of massive fraud among military contractors had become major news, and Congress acted to strengthen the FCA.James B. Helmer Jr.
False Claims Act: Incentivizing Integrity for 150 Years for Rogues, Privateers, Parasites and Patriots
81 U. Cin. L. Rev.(2013)
The first qui tam case under the amended False Claims Act was filed in 1987 by an eye surgeon against an eye clinic and one of its doctors, alleging unnecessary surgeries and other procedures were being performed. The case settled in 1988 for a total of $605,000. However, the law was primarily used in the beginning against
defense contractor The arms industry, also known as the arms trade, is a global industry which manufactures and sells weapons and military technology. It consists of a commercial industry involved in the research and development, engineering, production, and se ...
s. By the late 1990s, health care fraud began to receive more focus, accounting for approximately 40% of recoveries by 2008 '' Franklin v. Parke-Davis'', filed in 1996, was the first case to apply the FCA to fraud committed by a pharma company against the government, due to bills submitted for payment by
Medicaid Medicaid in the United States is a federal and state program that helps with healthcare costs for some people with limited income and resources. Medicaid also offers benefits not normally covered by Medicare, including nursing home care and per ...
/ Medicare for treatments that those programs do not pay for as they are not FDA-approved or otherwise listed on a government formulary. FCA cases against pharma companies are often related to
off-label Off-label use is the use of pharmaceutical drugs for an unapproved indication or in an unapproved age group, dosage, or route of administration. Both prescription drugs and over-the-counter drugs (OTCs) can be used in off-label ways, although ...
marketing of
drugs A drug is any chemical substance that causes a change in an organism's physiology or psychology when consumed. Drugs are typically distinguished from food and substances that provide nutritional support. Consumption of drugs can be via inhalati ...
by drug companies, which is illegal under a different law, the
Federal Food, Drug, and Cosmetic Act The United States Federal Food, Drug, and Cosmetic Act (abbreviated as FFDCA, FDCA, or FD&C) is a set of laws passed by the United States Congress in 1938 giving authority to the U.S. Food and Drug Administration (FDA) to oversee the safety of ...
; the intersection occurs when off-label marketing leads to prescriptions being filled and bills for those prescriptions being submitted to Medicare/Medicaid. As of 2019, over 72% of all federal FCA actions were initiated by whistleblowers. The government recovered $62.1 billion under the False Claims Act between 1987 and 2019 and of this amount, over $44.7 billion or 72% was from ''qui tam'' cases brought by relators. In 2014, whistleblowers filed over 700 False Claims Act lawsuits. In 2014, the Department of Justice had its highest annual recovery in False Claims Act history, obtaining more than $6.1 billion in settlements and judgments from civil cases involving fraud and false claims against the government. In fiscal year 2019, the Department of Justice recovered over $3 billion under the False Claims Act, $2.2 billion of which were generated by whistleblowers. Since 2010, the federal government has recovered over $37.6 billion in False Claims Act settlements and judgments. In 2020, the DOJ recovered $2.2 billion from FCA cases: $1.6 billion of that total was from cases filed under the FCA. ''Qui tam'' whistleblowers received a total of $309 million in whistleblower rewards in 2020.


Provisions

The Act establishes liability when any person or entity improperly receives from or avoids payment to the Federal government. The Act prohibits: # Knowingly presenting, or causing to be presented a false claim for payment or approval; # Knowingly making, using, or causing to be made or used, a false record or statement material to a false or fraudulent claim; #
Conspiring A conspiracy, also known as a plot, is a secret plan or agreement between persons (called conspirers or conspirators) for an unlawful or harmful purpose, such as murder or treason, especially with political motivation, while keeping their agr ...
to commit any violation of the False Claims Act; # Falsely certifying the type or amount of property to be used by the Government; # Certifying receipt of property on a document without completely knowing that the information is true; # Knowingly buying Government property from an unauthorized officer of the Government, and; # Knowingly making, using, or causing to be made or used a false record to avoid, or decrease an obligation to pay or transmit property to the Government. # The False Claims act does not apply to IRS Tax matters. The statute provides that anyone who violates the law "is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, as adjusted by the Federal Civil Penalties Inflation Adjustment Act of 1990, plus 3 times the amount of damages which the Government sustains because of the act of that person." The False Claims Act requires a separate penalty for each violation of the statute. Under the Civil Penalties Inflation Adjustment Act, False Claims Act penalties are periodically adjusted for inflation. In 2020, the penalties range from $11,665 to $23,331 per violation. Certain claims are not actionable, including: # certain actions against armed forces members, members of the
United States Congress The United States Congress is the legislature of the federal government of the United States. It is Bicameralism, bicameral, composed of a lower body, the United States House of Representatives, House of Representatives, and an upper body, ...
, members of the
judiciary The judiciary (also known as the judicial system, judicature, judicial branch, judiciative branch, and court or judiciary system) is the system of courts that adjudicates legal disputes/disagreements and interprets, defends, and applies the law ...
, or senior
executive branch The Executive, also referred as the Executive branch or Executive power, is the term commonly used to describe that part of government which enforces the law, and has overall responsibility for the governance of a state. In political systems ...
officials; () # claims, records, or statements made under the
Internal Revenue Code of 1986 The Internal Revenue Code (IRC), formally the Internal Revenue Code of 1986, is the domestic portion of federal statutory tax law in the United States, published in various volumes of the United States Statutes at Large, and separately as Title 26 ...
which would include tax fraud; There are unique procedural requirements in False Claims Act cases. For example: # a complaint under the False Claims Act must be filed under seal;31 U.S.C. § 3730(b)(2). # the complaint must be served on the government but must not be served on the defendant; # the complaint must be buttressed by a comprehensive memorandum, not filed in court, but served on the government detailing the factual underpinnings of the complaint. In addition, the FCA contains an anti-retaliation provision, which allows a relator to recover, in addition to his award for reporting fraud, double damages plus attorney fees for any acts of retaliation for reporting fraud against the Government. This provision specifically provides relators with a personal claim of double damages for harm suffered and reinstatement. Under the False Claims Act, the
Department of Justice A justice ministry, ministry of justice, or department of justice is a ministry or other government agency in charge of the administration of justice. The ministry or department is often headed by a minister of justice (minister for justice in a ...
is authorized to pay rewards to those who report fraud against the federal government and are not convicted of a crime related to the fraud, in an amount of between 15 and 25 (but up to 30% in some cases) of what it recovers based upon the whistleblower's report. The relator's share is determined based on the FCA itself, legislative history, Department of Justice guidelines released in 1997, and court decisions.


1986 changes

(False Claims Act Amendments () # The elimination of the "government possession of information" bar against ''qui tam'' lawsuits; # The establishment of defendant liability for "deliberate ignorance" and " reckless disregard" of the truth; # Restoration of the " preponderance of the evidence" standard for all elements of the claim including damages; # Imposition of treble damages and civil fines of $5,000 to $10,000 per false claim; # Increased rewards for ''qui tam'' plaintiffs of between 15–30% of the funds recovered from the defendant; # Defendant payment of the successful plaintiff's expenses and attorney's fees, and; # Employment protection for whistleblowers including reinstatement with seniority status, special damages, and double back pay.


2009 changes

On May 20, 2009, the Fraud Enforcement and Recovery Act of 2009 (FERA) was signed into law. It includes the most significant amendments to the FCA since the 1986 amendments. FERA enacted the following changes: # Expanded the scope of potential FCA liability by eliminating the "presentment" requirement (effectively overruling the Supreme Court's opinion in '' Allison Engine Co. v. United States ex rel. Sanders'', 128 S. Ct. 2123 (2008)); # Redefined "claim" under the FCA to mean "any request or demand, whether under a contract or otherwise for money or property and whether or not the United States has title to the money or property" that is (1) presented directly to the United States, or (2) "to a contractor, grantee, or other recipient, if the money or property is to be spent or used on the Government's behalf or to advance a Government program or interest" and the government provides or reimburses any portion of the requested funds; # Amended the FCA's intent requirement, and now requiring only that a false statement be "material to" a false claim; # Expanded conspiracy liability for any violation of the provisions of the FCA; # Amended the "reverse false claims" provisions to expand liability to "knowingly and improperly avoid ngor decreas ngan obligation to pay or transmit money or property to the Government;" # Increased protection for qui tam plaintiffs/relators beyond employees, to include contractors and agents; # Procedurally, the government's complaint will now relate back to the qui tam plaintiff/relator's filing; # Provided that whenever a state or local government is named as a co-plaintiff in an action, the government or the relator "shall not epreclude .. from serving the complaint, any other pleadings, or the written disclosure of substantially all material evidence;" # Increased the
Attorney General In most common law jurisdictions, the attorney general or attorney-general (sometimes abbreviated AG or Atty.-Gen) is the main legal advisor to the government. The plural is attorneys general. In some jurisdictions, attorneys general also have exec ...
's power to delegate authority to conduct Civil Investigative Demands prior to intervening in an FCA action. With this revision, the FCA now prohibits knowingly (changes are in bold): # Submitting for payment or reimbursement a claim known to be false or fraudulent. # Making or using a false record or statement material to a false or fraudulent claim or to an ‘obligation’ to pay money to the government. # Engaging in a conspiracy to defraud by the improper submission of a false claim. # Concealing, improperly avoiding or decreasing an ‘obligation’ to pay money to the government.


2010 changes under the Patient Protection and Affordable Care Act

On March 23, 2010, the
Patient Protection and Affordable Care Act The Affordable Care Act (ACA), formally known as the Patient Protection and Affordable Care Act and colloquially known as Obamacare, is a landmark U.S. federal statute enacted by the 111th United States Congress and signed into law by Pres ...
(also referred to as the health reform bill or PPACA) was signed into law by President
Barack Obama Barack Hussein Obama II ( ; born August 4, 1961) is an American politician who served as the 44th president of the United States from 2009 to 2017. A member of the Democratic Party (United States), Democratic Party, Obama was the first Af ...
. The Affordable Care Act made further amendments to the False Claims Act, including: # Changes to the Public Disclosure Bar. Under the previous version of the FCA, cases filed by private individuals or "relators" could be barred if it was determined that such cases were based on a public disclosure of information arising from certain proceedings, such as civil, criminal or administrative hearings, or news media reports. As a result, defendants frequently used the public disclosure bar as a defense to a plaintiff's claims and grounds for dismissal of the same. PPACA amended the language of the FCA to allow the federal government to have the final word on whether a court may dismiss a case based on a public disclosure. The language now provides that "the court shall dismiss an action unless opposed by the Government, if substantially the same allegations or transaction alleged in the action or claim were publicly disclosed." ''See'' 31 U.S.C. 3730(e)(4)(A). # Original Source Requirement. A plaintiff may overcome the public disclosure bar outlined above if they qualify as an "original source," the definition of which has also been revised by PPACA. Previously, an original source must have had "direct and independent knowledge of the information on which the allegations are based." Under PPACA, an original source is now someone who has "knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions." See 31 U.S.C. 3730(e)(4)(B). # Overpayments. FERA redefined "obligation" under the FCA to include "retention of any overpayments." Accordingly, such language imposed FCA liability on any provider who received Medicare/Medicaid overpayments (accidentally or otherwise) and fails to return the money to the government. However, FERA also raised questions as to what exactly is involved in the "retention of overpayments" – for example, how long a provider had to return monies after discovering an overpayment. PPACA clarified the changes to the FCA made by FERA. Under PPACA, overpayments under Medicare and Medicaid must be reported and returned within 60 days of discovery, or the date a corresponding hospital report is due. Failure to timely report and return an overpayment exposes a provider to liability under the FCA. # Statutory Anti-Kickback Liability. The federal Anti-Kickback Statute, 42 U.S.C. 1320a-7b(b) (AKS) is a criminal statute which makes it improper for anyone to solicit, receive, offer or pay remuneration (monetary or otherwise) in exchange for referring patients to receive certain services that are paid for by the government. Previously, many courts had interpreted the FCA to mean that claims submitted as a result of AKS violations were false claims and therefore gave rise to FCA liability (in addition to AKS penalties). However, although this was the "majority rule" among courts, there were always opportunities for courts to hold otherwise. Importantly, PPACA changed the language of the AKS to provide that claims submitted in violation of the AKS automatically constitute false claims for purposes of the FCA. Further, the new language of the AKS provides that "a person need not have actual knowledge … or specific intent to commit a violation" of the AKS. Accordingly, providers will not be able to successfully argue that they did not know they were violating the FCA because they were not aware the AKS existed.


Practical application of the law

The False Claims Act has a detailed process for making a claim under the Act. Mere complaints to the government agency are insufficient to bring claims under the Act. A complaint (lawsuit) must be filed in a U.S. District Court (Federal court) ''in camera'' (under seal). The
Department of Justice A justice ministry, ministry of justice, or department of justice is a ministry or other government agency in charge of the administration of justice. The ministry or department is often headed by a minister of justice (minister for justice in a ...
(DOJ) must thence investigate within 60 days, but it often enjoys several months' worth of extensions by the Court. In this time, the Department decides whether it will pursue the case. If the case is pursued by DOJ, the amount of the reward is less than if the Department of Justice had decided not to pursue the case and the plaintiff/relator continues the lawsuit himself. However, the success rate is higher in cases that the Department of Justice decides to pursue. Technically, the government has several options in handing cases. These include: # intervene in one or more counts of the pending ''qui tam'' action. This intervention expresses the Government's intention to participate as a plaintiff in prosecuting that count of the complaint. The Department intervenes in fewer than 25% of filed ''qui tam'' actions. # decline to intervene in one or all counts of the pending ''qui tam'' action. If the United States declines to intervene, the relator (i.e., plaintiff) may prosecute the action alone and thus on behalf of the United States, but the United States is not a party to the proceedings apart from its right to any recovery. This option is frequently used by relators and their attorneys. # move to dismiss the relator's complaint, either because there is no case, or the case conflicts with significant statutory or policy interests of the United States. In practice, there are two other options for the Department of Justice: # settle the pending ''qui tam'' action with the defendant prior to the intervention decision. This usually, but not always, results in a simultaneous intervention and settlement with the Department of Justice (and is included in the 25% intervention rate). # advise the relator that the Department of Justice intends to decline intervention. This usually, but not always, results in dismissal of the ''qui tam'' action, according to the U.S. Attorney's Office of the Eastern District of Pennsylvania. There is case law where claims may be prejudiced if disclosure of the alleged unlawful act has been reported in the press, if complaints were filed to an agency instead of filing a lawsuit, or if the person filing a claim under the act is not the first person to do so. Individual states in the U.S. have different laws regarding whistleblowing involving state governments.


Federal income taxation of awards under FCA in the United States

The U.S.
Internal Revenue Service The Internal Revenue Service (IRS) is the revenue service for the United States federal government, which is responsible for collecting U.S. federal taxes and administering the Internal Revenue Code, the main body of the federal statutory t ...
(IRS) takes the position that, for Federal income tax purposes, ''qui tam'' payments to a relator under FCA are
ordinary income Under the United States Internal Revenue Code, the ''type'' of income is defined by its character. Ordinary income is usually characterized as income other than long-term capital gains. Ordinary income can consist of income from wages, salar ...
and not
capital gain Capital gain is an economic concept defined as the profit earned on the sale of an asset which has increased in value over the holding period. An asset may include tangible property, a car, a business, or intangible property such as shares. A ...
s. The IRS position was challenged by a relator in the case of ''Alderson v. United States;'' and, in 2012, the U.S. Court of Appeals for the Ninth Circuit upheld the IRS' stance. As of 2013, this remained the only circuit court decision on tax treatment of these payments.


Relevant decisions by the United States Supreme Court

In a 2000 case, '' Vermont Agency of Natural Resources v. United States ex rel. Stevens'', 529 U.S. 765 (2000), the
United States Supreme Court The Supreme Court of the United States (SCOTUS) is the highest court in the federal judiciary of the United States. It has ultimate appellate jurisdiction over all U.S. federal court cases, and over state court cases that involve a point o ...
held that a private individual may not bring suit in federal court on behalf of the United States against a State (or state agency) under the FCA. In ''Stevens'', the Supreme Court also endorsed the "partial assignment" approach to ''qui tam'' relator
standing Standing, also referred to as orthostasis, is a position in which the body is held in an ''erect'' ("orthostatic") position and supported only by the feet. Although seemingly static, the body rocks slightly back and forth from the ankle in the s ...
to sue, which had previously been articulated by the Ninth Circuit Federal Court of Appeals and is an exception to the general legal rule for standing. In a 2007 case, '' Rockwell International Corp. v. United States'', the
United States Supreme Court The Supreme Court of the United States (SCOTUS) is the highest court in the federal judiciary of the United States. It has ultimate appellate jurisdiction over all U.S. federal court cases, and over state court cases that involve a point o ...
considered several issues relating to the "original source" exception to the FCA's public-disclosure bar. The Court held that (1) the original source requirement of the FCA provision setting for the original-source exception to the public-disclosure bar on federal-court jurisdiction is jurisdictional; (2) the statutory phrase "information on which the allegations are based" refers to the relator's allegations and not the publicly disclosed allegations; the terms "allegations" is not limited to the allegations in the original complaint, but includes, at a minimum, the allegations in the original complaint as amended; (3) relator's knowledge with respect to the pondcrete fell short of the direct and independent knowledge of the information on which the allegations are based required for him to qualify as an original source; and (4) the government's intervention did not provide an independent basis of jurisdiction with respect to the relator. In a 2008 case, '' Allison Engine Co. v. United States ex rel. Sanders'', the
United States Supreme Court The Supreme Court of the United States (SCOTUS) is the highest court in the federal judiciary of the United States. It has ultimate appellate jurisdiction over all U.S. federal court cases, and over state court cases that involve a point o ...
considered whether a false claim had to be presented directly to the Federal government, or if it merely needed to be paid with government money, such as a false claim by a subcontractor to a prime contractor. The Court found that the claim need not be presented directly to the government, but that the false statement must be made with the intention that it will be relied upon by the government in paying, or approving payment of, a claim. The Fraud Enforcement and Recovery Act of 2009 reversed the Court's decision and made the types of fraud to which the False Claims Act applies more explicit. In a 2009 case, '' United States ex rel. Eisenstein v. City of New York'', the
United States Supreme Court The Supreme Court of the United States (SCOTUS) is the highest court in the federal judiciary of the United States. It has ultimate appellate jurisdiction over all U.S. federal court cases, and over state court cases that involve a point o ...
considered whether, when the government declines to intervene or otherwise actively participate in a ''qui tam'' action under the False Claims Act, the United States is a "party" to the suit for purposes of Federal Rule of Appellate Procedure 4(a)(1)(A) (which requires that a notice of appeal in a federal civil action generally be filed within 30 days after entry of a judgment or order from which the appeal is taken). The Court held that when the United States has declined to intervene in a privately initiated FCA action, it is not a "party" for FRAP 4 purposes, and therefore, petitioner's appeal filed after 30 days was untimely. In a 2016 case, '' Universal Health Services, Inc. v. United States ex rel. Escobar'', the
United States Supreme Court The Supreme Court of the United States (SCOTUS) is the highest court in the federal judiciary of the United States. It has ultimate appellate jurisdiction over all U.S. federal court cases, and over state court cases that involve a point o ...
sought to clarify the standard for materiality under the FCA. The court unanimously upheld the implied certification theory of FCA liability and strengthened the FCA's materiality requirement.


State False Claims Acts

As of 2020, 29 states and the District of Columbia have false-claims laws modeled on the federal statute to protect their publicly funded programs from fraud by including
qui tam In common law, a writ of ''qui tam'' is a writ through which private individuals who assist a prosecution can receive for themselves all or part of the damages or financial penalties recovered by the government as a result of the prosecution. It ...
provisions, which enables them to recover money at state level. Some of these state False Claims Act statutes provide similar protections to those of the federal law, while others limit recovery to claims of fraud related to the
Medicaid Medicaid in the United States is a federal and state program that helps with healthcare costs for some people with limited income and resources. Medicaid also offers benefits not normally covered by Medicare, including nursing home care and per ...
program. The California False Claims Act was enacted in 1987, but lay relatively dormant until the early 1990s, when public entities, frustrated by what they viewed as a barrage of unjustified and unmeritorious claims, began to employ the False Claims Act as a defensive measure. In 1995, the State of Texas passed the Texas Medicaid Fraud Prevention Act (TMFPA), which specifically aims at combating fraud against the Texas Medicaid Program, which provides healthcare and prescription drug coverage to low-income individuals. The Texas law enacts state qui tam provisions that allow individuals to report fraud and initiate action against violations of the TMFPA, imposes consequences for noncompliance and includes whistleblower protections.


Influence on other countries

In Australia, The Treasury Laws Amendment (Enhancing Whistleblower Protections) Act, was passed in December 2018 and went into effect in 2019. The law expanded protections for whistleblowers, allowing them to report misconduct anonymously, as well as applying anti-retaliation protections to additional kinds of whistleblowers. Importantly, the law does not provide for rewards for whistleblowers. There have been calls since 2011 for legislation modeled on the False Claims Act and for their application to the tobacco industry and
carbon pricing Carbon pricing (or pricing), also known as cap and trade (CAT) or emissions trading scheme (ETS), is a method for nations to reduce global warming. The cost is applied to greenhouse gas emissions in order to encourage polluters to reduce the co ...
schemes. In October 2013, the UK Government announced that it is considering the case for financially incentivising individuals reporting fraud in economic crime cases by private sector organisations, in an approach much like the US False Claims Act. The 'Serious and Organised Crime Strategy' paper released by the UK's Secretary of State for the Home Department sets out how that government plans to take action to prevent serious and organised crime and strengthen protections against and responses to it. The paper asserts that serious and organised crime costs the UK more than £24 billion a year. In the context of anti-corruption, the paper acknowledges that there is a need to not only target serious and organised criminals but also support those who seek to help identify and disrupt serious and organised criminality. Three UK agencies, the Department for Business, Innovation & Skills, the Ministry of Justice and the Home Office were tasked with considering the case for a US-style False Claims Act in the UK. In July 2014, the Financial Conduct Authority and the Bank of England Prudential Regulation Authority recommended Parliament enact strong measure to encourage and protect whistleblowers, but without offering whistleblower rewards – rejecting the US model.


Rule 9(b) circuit split

Under Rule 9(b) of the
Federal Rules of Civil Procedure The Federal Rules of Civil Procedure (officially abbreviated Fed. R. Civ. P.; colloquially FRCP) govern civil procedure in United States district courts. The FRCP are promulgated by the United States Supreme Court pursuant to the Rules Enablin ...
, allegations of fraud or mistake must be pleaded with particularity. All appeals courts to have addressed the issue of whether Rule 9(b) pleading standards apply to qui tam actions have held that the heightened standard applies. The
Fifth Circuit The United States Court of Appeals for the Fifth Circuit (in case citations, 5th Cir.) is a federal court with appellate jurisdiction over the district courts in the following federal judicial districts: * Eastern District of Louisiana * Mi ...
, the Sixth Circuit, the Seventh Circuit, the Eighth Circuit, the Tenth Circuit, and the
Eleventh Circuit The United States Court of Appeals for the Eleventh Circuit (in case citations, 11th Cir.) is a federal court with appellate jurisdiction over the following U.S. district courts: * Middle District of Alabama * Northern District of Alabama * ...
have all found that plaintiffs must allege specific false claims. In 2010, the First Circuit decision in ''U.S. ex rel. Duxbury v. Ortho Biotech Prods., L.P.''(2009) and the Eleventh Circuit ruling in ''U.S. ex rel. Hopper v. Solvay Pharms., Inc.''(2009) were both appealed to the U.S. Supreme Court. The Court denied ''
certiorari In law, ''certiorari'' is a court process to seek judicial review of a decision of a lower court or government agency. ''Certiorari'' comes from the name of an English prerogative writ, issued by a superior court to direct that the record of ...
'' for both cases, however, declining to resolve the divergent appeals court decisions.


ACLU et al. v. Holder

In 2009, the
American Civil Liberties Union The American Civil Liberties Union (ACLU) is a nonprofit organization founded in 1920 "to defend and preserve the individual rights and liberties guaranteed to every person in this country by the Constitution and laws of the United States". T ...
(ACLU),
Government Accountability Project The Government Accountability Project (GAP) is a nonprofit whistleblower protection and advocacy organization in the United States. It was founded in 1977. Activities In 1992, GAP represented Aldric Saucier, who had lost his job and security cl ...
(GAP) and OMB Watch filed suit against the Department of Justice challenging the constitutionality of the "seal provisions" of the FCA that require the whistleblower and the court to keep lawsuits confidential for at least 60 days. The plaintiffs argued that the requirements infringe the
First Amendment First or 1st is the ordinal form of the number one (#1). First or 1st may also refer to: *World record, specifically the first instance of a particular achievement Arts and media Music * 1$T, American rapper, singer-songwriter, DJ, and reco ...
rights of the public and the whistleblower, and that they violate the
division of powers Separation of powers refers to the division of a state's government into branches, each with separate, independent powers and responsibilities, so that the powers of one branch are not in conflict with those of the other branches. The typ ...
, since courts are not free to release the documents until the executive branch acts. The government moved for dismissal, and the district court granted that motion in 2009. The plaintiffs appealed, and in 2011 their appeal was denied.


Examples

In 2004, the billing groups associated with the University of Washington agreed to pay $35 million to resolve civil claims brought by whistleblower Mark Erickson, a former compliance officer, under the False Claims Act. The settlement, approved by the UW Board of Regents, resolved claims that they systematically overbilled Medicaid and Medicare and that employees destroyed documents to hide the practice. The fraud settlement, the largest against a teaching hospital since the University of Pennsylvania agreed to pay $30 million in 1995, ended a five-year investigation that resulted in guilty pleas from two prominent doctors. The whistleblower was awarded $7.25M. In 2010, a subsidiary of
Johnson & Johnson Johnson & Johnson (J&J) is an American multinational corporation founded in 1886 that develops medical devices, pharmaceuticals, and consumer packaged goods. Its common stock is a component of the Dow Jones Industrial Average and the company i ...
agreed to pay over $81 million in civil and criminal penalties to resolve allegations in a FCA suit filed by two whistleblowers.US Department of Justice Press Release. April 29, 201
Two Johnson & Johnson Subsidiaries to Pay Over $81 Million to Resolve Allegations of Off-Label Promotion of Topamax
/ref> The suit alleged that Ortho-McNeil-Janssen Pharmaceuticals, Inc. (OMJPI) acted improperly concerning the marketing, promotion and sale of the anti-convulsant drug Topamax. Specifically, the suit alleged that OMJPI "illegally marketed Topamax by, among other things, promoting the sale and use of Topamax for a variety of psychiatric conditions other than those for which its use was approved by the Food and Drug Administration, (i.e., "
off-label Off-label use is the use of pharmaceutical drugs for an unapproved indication or in an unapproved age group, dosage, or route of administration. Both prescription drugs and over-the-counter drugs (OTCs) can be used in off-label ways, although ...
" uses)." It also states that "certain of these uses were not medically accepted indications for which State Medicaid programs provided coverage" and that as a result "OMJPI knowingly caused false or fraudulent claims for Topamax to be submitted to, or caused purchase by, certain federally funded healthcare programs. In response to a complaint from whistleblower Jerry H. Brown II, the US Government filed suit against Maersk for overcharging for shipments to US forces fighting in Iraq and Afghanistan. In a settlement announced on 3 January 2012, the company agreed to pay $31.9 million in fines and interest, but made no admission of wrongdoing. Brown was entitled to $3.6 million of the settlement. The largest healthcare fraud settlement in history was made by GlaxoSmithKline in 2012 when it paid a total of $3 billion to resolve four qui tam lawsuits brought under the False Claims Act and related criminal charges. The claims include allegations Glaxo engaged in off-label marketing and paid kickbacks to doctors to prescribe certain drugs, including Paxil, Wellbutrin and Advair. In 2013, Wyeth Pharmaceuticals Inc., a pharmaceutical company acquired by
Pfizer, Inc Pfizer Inc. ( ) is an American multinational pharmaceutical and biotechnology corporation headquartered on 42nd Street in Manhattan, New York City. The company was established in 1849 in New York by two German entrepreneurs, Charles Pfizer ...
. in 2009, paid $490.9 million to resolve its criminal and civil liability arising from the unlawful marketing of its drug
Rapamune Sirolimus, also known as rapamycin and sold under the brand name Rapamune among others, is a macrolide compound that is used to coat coronary stents, prevent organ transplant rejection, treat a rare lung disease called lymphangioleiomyomatosis, ...
for uses that were not FDA-approved and potentially harmful. The case, ''U.S. ex rel. Sandler and Paris v. Wyeth Pharmaceuticals and Pfizer, Inc.'' was brought by multiple
whistleblower A whistleblower (also written as whistle-blower or whistle blower) is a person, often an employee, who reveals information about activity within a private or public organization that is deemed illegal, immoral, illicit, unsafe or fraudulent. Whi ...
s and culminated in one of the largest False Claims Act recoveries for a single drug. In 2014, CareFusion paid $40.1 million to settle allegations of violating the False Claims Act by promoting off label use of its products in the case United States ex rel. Kirk v. CareFusion et al., No. 10-2492. The government alleged that
CareFusion CareFusion was a medical company specializing in two areas: reducing medication errors and prevention of health care-associated infections. Spinoff CareFusion was created in 2009 as a spinoff of medical technology businesses from Cardinal Heal ...
promoted the sale of its drug ChloraPrep for uses that were not approved by the FDA. ChloraPrep is the commercial name under which CareFusion produced the drug
chlorhexidine Chlorhexidine (CHX) (commonly known by the salt forms chlorhexidine gluconate and chlorhexidine digluconate (CHG) or chlorhexidine acetate) is a disinfectant and antiseptic that is used for skin disinfection before surgery and to sterilize surgi ...
, used to clean the skin before surgery. In 2017, this case was called into question and was under review by the DOJ because the lead attorney for the DOJ serving as Assistant Attorney General in the case, Jeffery Wertkin, was arrested by the FBI on January 31, 2017 for allegedly attempting to sell a copy of a complaint in a secret whistleblower suit that was under seal. In 2017, bio-pharmaceutical giant Celgene Corporation paid $240 million to settle allegations it sold and marketed its drugs
Thalomid Thalidomide, sold under the brand names Contergan and Thalomid among others, is a medication used to treat a number of cancers (including multiple myeloma), graft-versus-host disease, and a number of skin conditions including complications of ...
and
Revlimid Lenalidomide, sold under the trade name Revlimid among others, is a medication used to treat multiple myeloma, smoldering myeloma, and myelodysplastic syndromes (MDS). For multiple myeloma, it is used after at least one other treatment and gen ...
off-label in ''U.S. ex rel. Brown v. Celgene'', CV 10-03165 (RK) (C.D. Cal.). The case, brought by former Celgene sales representative, Beverly Brown, alleged violations under the False Claims Act including promoting Thalomid and Revlimid off-label for uses that were not FDA-approved and, in many cases, unsafe and not medically necessary, offered illegal kickbacks to influence healthcare providers to select its products, and concealed potential
adverse event An adverse event (AE) is any untoward medical occurrence in a patient or clinical investigation subject administered a pharmaceutical product and which does not necessarily have a causal relationship with this treatment. An adverse event can ther ...
s related to use of its drugs. In 2021, A South Carolina pain management company was ordered to pay $140 million under the False Claims Act after a judge in U.S. district court found it in default after fraud schemes.


See also


Civil Cyber-Fraud Initiative
ref>
*
Making false statements Making false statements () is the common name for the United States federal process crime laid out in Section 1001 of Title 18 of the United States Code, which generally prohibits knowingly and willfully making false or fraudulent statements, ...
* Medicare Fraud * Private attorney general *
War profiteering A war profiteer is any person or organization that derives profit from warfare or by selling weapons and other goods to parties at war. The term typically carries strong negative connotations. General profiteering, making a profit criticized a ...


References


External links


The False Claims Act overview
{{Webarchive, url=https://web.archive.org/web/20170902024701/http://www.delaneykester.com/FalseClaimsAct.html , date=2017-09-02
Blog covering developments in the False Claims ActBlog covering False Claims Act and Qui Tam developments

Department of Justice Presentation on University of Washington Overbilling Case from UW public website (pdf)

Taxpayers Against Fraud Education Fund

What is the False Claims Act?

masslawyersweekly.comFederal False Claims and State False Claims Act Laws
37th United States Congress 1863 in law 1863 in the United States United States federal government administration legislation Fraud legislation Fraud in the United States Whistleblower reward programs United States federal legislation articles without infoboxes Whistleblowing in the United States