False Claims Act Cases

Identifying a false claim is seldom straightforward, therefore a false claim filing may take a variety of forms. Generally, however, there are two main elements seen in every false claim: a claim made by an individual or company for government money or funds which is somehow fraudulent or false. This may seem like an obvious definition, but in practice the false claim is both key to the case and it can be difficult to prove or identify.

What is a Claim?

The legal definition of a “claim” under the federal False Claims Act (pdf link here) is several paragraphs long. It, however, 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 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. It doesn’t even have to be an attempt to get money, it can also be 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.

A claim is made to the government, or to someone who spends government money on its behalf. Of course, it is not enough to assert a right to government money. That assertion has to be made to someone who actually has access to government money. This includes invoices or other demands for payment to an agency official. It also includes demands by subcontractors to general contractors on a government project. 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.

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 false claims could be liable under the False Claims Act, even if no government money was paid out.

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.
  • An expert witness who presents an invoice to the U.S. Department of Justice for giving testimony in a federal lawsuit.

What are False or Fraudulent Claims?

The False Claims Act does not actually 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 simply 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 mean that the government necessarily would have refused to pay, only that it could have.

Materiality is therefore very fact specific. 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 the 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. This belief is still prevalent in many courts, and practitioners are advised to make a point of referencing the 2009 amendments.

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 improper, but is not expressly forbidden by the contract. According to this theory, when a contractor submits a claim to the government, he implicitly certifies that he has complied with all material contract terms and all relevant laws and regulations, including those not actually mentioned in the contract.

Thus, a construction contractor who installs insulation containing asbestos or some other illegal material in a government building, then bills the government for the work, has likely presented an implicit false claim. In this scenario, even though the contract may not have specifically forbidden the contractor from using asbestos, and even though the contractor did not actually lie about using asbestos (because he was never asked), his use of asbestos is nevertheless 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, whether it was in the contract or not. Because he did not comply with that law, his claim was implicitly false.

Similarly, if a contract explicitly 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 who does not know that it is false, has not violated the False Claims Act and will not be liable for any damages. The person who caused a false claim to be presented, such as a subcontractor, will be liable.

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 who is dedicated to pursuing False Claims Act cases.