False Claims Act: Knowing or Knowingly

video

When the False Claims Act refers to someone “knowing” certain information, or acting “knowingly,” so as to be liable under the Act, it includes a definition of these terms that differs from how these words are used in everyday conversation.

Specifically, the False Claims Act states that the terms “knowing” and “knowingly:

  1. mean that a person, with respect to information–
    1. has actual knowledge of the information;
    2. acts in deliberate ignorance of the truth or falsity of the information, or;
    3. acts in reckless disregard of the truth or falsity of the information, and;
  2. require no proof of specific intent to defraud.

An easy shorthand for this is to say that a person acted “knowingly” if he knew, or should have known, the information in question.

The knowledge requirement for liability under the Act is satisfied if a person has either actual knowledge or acts in deliberate ignorance or with reckless disregard for the truth. One of these elements established on its own is enough.

Actual Knowledge

A person has “actual knowledge” when that person knows that a particular activity occurred. This does not mean that the person actually witnessed the activity happening, merely that he or she received the information in a way that made that person believe it was true.

For example, anyone who sends the government two invoices for the same work has actual knowledge of double billing the government. A person also has actual knowledge that double billing occurred if two coworkers mention that they each sent out an invoice for a particular job.

Deliberate Ignorance

A person acts in “deliberate ignorance of the truth or falsity of the information” by intentionally avoiding learning whether a particular piece of information is true or false. A manager who refuses to look at a testing report, and instead simply certifies to the government that a product has passed all required tests, has acted in deliberate ignorance of the truth or falsity of the information.

Reckless Disregard

A person acts in “reckless disregard of the truth or falsity of the information” when that person has serious doubts about the truth or falsity of the information, or by failing to make simple inquiries to verify its truth or falsity. A manager who submits an invoice each week stating that five employees each worked 40 hours, but who never bothers to check the employees’ time sheets or otherwise verify that they actually worked those hours, has acted with reckless disregard to the truth or falsity of this claim.

No Proof of Specific Intent to Defraud

The statement that the False Claims Act requires “no proof of specific intent to defraud” means that a person who knowingly commits an action is liable for that action, even if the person didn’t know he or she was violating the False Claims Act.

Therefore, a manager who submits two invoices to the government for the same work does not need to know that double billing is illegal – to commit a “knowing” violation of the False Claims Act, he or she only needed to know that the two invoices were submitted. Similarly, a manufacturer who falsely certifies that its product meets all government safety regulations does not need to know that its products will eventually be used by government contractors – it is sufficient the manufacturer knows its certification is false.

The FCA imposes liability only on those who “knowingly” engage in conduct that is in violation of the Act. By defining knowledge to include deliberate ignorance and reckless disregard of truth or falsity, Congress imposed a duty on every person doing business with the government to make at least limited inquiries to ensure the accuracy of their claims and communications to the government, as well as the accuracy of their records.

On the other hand, this definition also ensures that people who make an honest effort to comply with the law are not held liable due to accident or negligence. A person who diligently checks records and attempts to comply with the law, but nevertheless presents a claim with material inaccuracies (such as by accidentally using the wrong Medicare procedure code), has not violated the False Claims Act.

Corporate Knowledge

For the purposes of the False Claims Act, the “acts” of a corporation are the actions that are done by its employees within the scope of their employment (i.e. the work and actions for which they are authorized). Likewise, a corporation is assumed to know the things that are known by its employees within the scope of their employment. When an employee of a corporation knowingly performs any duty of the job, then that action is considered to be “knowingly” performed by the corporation itself. If an employee of a corporation knowingly does something within the scope of employment that violates the FCA, the corporation is also liable for that violation.

The definition of “scope of employment” in this context is quite broad, and most courts have interpreted it to include virtually anything that an employee is authorized to do, either as part of their regular job, or at the direction of someone with authority to act on the company’s behalf. For example, if an in-house accountant prepares and delivers an invoice to the government for work that he or she knows the company did not perform, then the company has presented a false claim. Similarly, if the accountant had instead directed a secretary to prepare and present the invoice, the company would still have knowingly presented a false claim, even if preparing invoices was not part of the secretary’s normal job duties.

A corporation can also knowingly commit a fraudulent act even if the person doing the act is not the one who knows the act is fraudulent. If a floor manager knowingly falsifies the time sheets of his or her subordinates and the company’s accounting department then presents those time sheets to the government for payment on an hourly contract, the company has knowingly presented a false claim. Likewise, if the CEO of a mining company certifies to the government that the company was in compliance with all required environmental regulations, that statement will be knowingly false even if the CEO does not know that one of his or her employees had been falsifying water quality reports.