Identifying a false claim is seldom straightforward, so a False Claims Act case filing may take a variety of forms. Generally, however, there are three main elements seen in every false claim case: 1). a claim made by an individual or 2) for government money or funds and 3) which is somehow fraudulent or false. This may seem like an obvious definition, but in practice defining the false claim can be as key to the case as it can be difficult to prove or identify.
What Makes a Valid Claim?
The legal definition of a “claim” under the federal False Claims Act (pdf link here) is several paragraphs long, but it can be boiled down to the following: a claim is an assertion of a right to government money or property. One way or another, every false claim involves someone asserting dishonestly that they have some right to obtain government money.
This can be as straightforward as presenting an invoice for goods or services, or it can be as subtle as a phone call certifying that a subcontractor is owed a quarterly payment. A case can also involve a reverse claim—an assertion that a person is entitled to keep money that the government has already paid. Claims are generally made in writing, though this is not required by the law.
The money also does not have to issue directly from the government. If a subcontractor presents a false claim to a general contractor and is paid, and the general contractor then presents a claim to the government for reimbursement, the subcontractor is still liable.
Finally, the government does not actually have to pay the claim. The relevant conduct for violating the False Claims Act is the act of presenting a claim, not the actual payment that resulted from the fraudulent claim. A person who has presented a false claim could be technically liable under the False Claims Act even if no government money was paid out, although of course the amount of damages resulting may not be worth pursuing.
Examples of Claims:
- An automobile manufacturer who presents an invoice to the government for trucks sold to the General Services Administration
- An electronics manufacturer who presents an invoice to an aerospace company for electronics that will be used in a NASA satellite
- A contractor who presents an invoice to the government for laundry services at a military base
- A subcontractor who presents an invoice for soap to a general contractor who provides laundry services on a military base
- A doctor who presents a reimbursement form to Medicare or Medicaid
- A scientist who requests a renewal of a federal research grant
What Are False or Fraudulent Claims?
The False Claims Act does not explicitly define what it means for a claim to be “false or fraudulent.” However, courts have interpreted these terms very broadly.
The Supreme Court of the United States has stated that the phrase “false or fraudulent claim” reaches “all types of fraud, without qualification, that might result in financial loss to the Government.” Therefore, any claim that contains some sort of misrepresentation is potentially a false claim. In fact, a claim need not even contain a specific false statement in order to be a false claim. In some cases, a claim can be false because it implies that something is true when it actually is not.
False Claims and Materiality
So when does a misrepresentation make a claim false or fraudulent? The key concept here is the idea of materiality. A misrepresentation is materially false when it might influence the government’s decision to pay the claim. So, a misrepresentation is material if the government’s discovery of its falsity might cause the government to refuse to pay some or all of the claim. This does not necessarily mean that the government would have refused to pay, only that it could have.
Materiality is therefore very fact-dependent in False Claims Act cases. For example, if a government contractor is paid hourly, then a claim that he worked 200 hours when he only worked 150 is a materially false claim. Whether he actually worked the hours he claimed will obviously influence whether the government will pay him. On the other hand, if the contract is for a fixed price, and the contractor will be paid the same regardless of how many hours he works, then claiming he worked 200 hours when he only worked 150 is probably not materially false, since the number of hours worked will not influence the government’s decision to pay the claim.
The definition of “material” was added to the False Claims Act in 2009, as part of the Fraud Enforcement and Recovery Act or FERA. Prior to 2009, many courts used a more stringent definition of materiality, examining whether a particular misrepresentation would have made the government refuse payment. For example, several courts have ruled that a contractor’s failure to comply with a particular contract term or regulation was only material if the contract or regulation explicitly stated that noncompliance would result in nonpayment.
Implied Certification False Claims
There are also certain circumstances when a claim can be materially false, even though it does not contain any false statement at all. These types of claims are known as “implied certification,” and usually involve submitting a claim when the contractor has done something that is improper, but does not state something expressly false in such a claim.
According to this theory, when a contractor submits a claim to the government, he implicitly certifies that he has complied with something material a laws or regulations, or contract termt. Thus, a construction contractor who installs insulation containing asbestos or some other illegal material in a government building and then bills the government for the work has likely presented an implied false claim.
In this scenario, even though the contractor may not have specifically stated something false, but hid the fact that they used asbestos, when a law said that contractor could not use asbestos that may b material to the government’s decision to pay his claim. By presenting a claim for payment, the contractor implicitly certified that he had complied with the law that bans asbestos in buildings. Because he did not comply with that law, his claim would be implicitly false.
Similarly, if a contract requires a manufacturer to perform quality control testing on its products before delivering them to the government, then presenting a claim for such products implicitly certifies that such testing took place. If the manufacturer did not in fact perform such testing, then the certification would be false.
Knowledge of a Claim’s Falsity
Whether a claim is false does not depend on whether the person submitting the claim knows of its falsity. It is entirely possible for a person to present a false claim and have no idea that it is false, particularly if it is false because of the actions of a third party.
A person who presents a false claim but does not know that it is false has not violated the False Claims Act and would not be liable for any damages. Instead, the person who caused a false claim to be presented, such as a subcontractor, would be liable.
Seek Legal Help with False Claims Act Cases
Given the various ways in which a claim can be legally defined as false and the number of parties that can potentially be held liable, it is important to discuss these issues with an attorney in the District of Columbia who is dedicated to pursuing False Claims Act cases.