The Federal False Claims Act is an important whistleblowing tool

Key Takeaway:

The Federal False Claims is an important step in preventing and regulating fraud in the federal government. The Act has come a long way from being a grossly underutilized one to being a powerful tool for checking fraud.

The Federal False Claims Act is a Congressional Act that is aimed at fighting fraud at the federal government level. Although the spirit of such legislation goes back to medieval England, in the US, it was enacted during the Civil War to check fraud in supplies to the Union Army. Because of this reason, the Federal False Claims Act earned the sobriquet, "Lincoln Law". For more than 120 years since its inception, it was considered ineffective in dealing with the aim it sought to accomplish, until it was dramatically overhauled in 1986.

Provisions of the strengthened Federal False Claims Act inflict liability on those who carry out fraud against government programs. These could include persons or companies, the latter of which are normally referred to as federal contractors. Federal False Claims Act is considered an important weapon in the federal Government's arsenal in fighting fraud.

The qui tam provision

The Federal False Claims Act is based on the jurisprudential principle of qui tam and contains provisions relating to it. Qui tam essentially means, as described in the original Latin phrase, suing for both the king and one's own self. That is, this legal principle means suing on behalf of oneself while suing for the government. In fact, one of the other names of the Federal False Claims Act is "Qui Tam Statute".

The qui tam principle allows private individuals, that is, non-government associated people, to file actions on behalf of the government, even though they are not part of it. Such people are defined as "relators" in this Act. This is what is in normal parlance referred to as whistleblowing. This is a reason for which the Act is also called "Informer's Act".

Share in the spoils

The Federal False Claims Act allows such people who have successfully filed and claimed whistleblowing charges to receive a significant part of the recovered damages. This ranges usually between 15 and 25 percent of the total proceeds.

Among the major industries the Federal False Claims Act has initiated proceedings and recovered damages, the following top the list:

  • Pharmaceuticals
  • Healthcare
  • Military
  • Other government spending programs, primarily in the areas of construction, natural disaster recovery, housing, energy, and reconstruction during the Iraq War

Proof of the pudding...

The Federal False Claims Act, which was considered impotent till it was given teeth by the 1986 amendment, has been successful in preventing fraud and recovering claims to the extent of nearly $40 billion in a little over a quarter of a century since this amendment.

When a person commits the following acts, they qualify as being unlawful under the Federal False Claims Act:

  • When a false claim is knowingly presented for approval or payment, or caused to be so
  • When a false record or statement amounting to a fraudulent or false claim is made or caused to be made
  • When a conspiracy is made for committing a violation of any provisions of the False Claims Act
  • When the amount or kind of property meant for use by the government is falsely valued or certified
  • Not ascertaining the truth of information contained in a document relating to the certifying receipt of property is also unlawful according to the Federal False Claims Act
  • Willful purchase of government property from an unauthorized officer of the government
  • When false records are made or used or caused to be made or used with the intention of avoiding or decreasing the legally obliged payment or transmit property to the government knowingly, this is also considered unlawful by the Federal False Claims Act.
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