Reverse False Claims Act Lawyer

Section 3729(a)(1)(G) applies to what are commonly called “reverse false claims.” Rather than using fraud to obtain government money, a person in this type of False Claims case uses fraud to avoid paying money that he or she owes to the government.

Reverse False Claims: Section 3729(a)(1)(G)

Specifically, a person violates section 3729(a)(1)(G) when he or she “knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government.” The key to a violation of this subsection of the False Claims Act is to determine what the obligation was to the government.

What is an Obligation?

The False Claims Act defines “obligation” as “an established duty, whether or not fixed, arising from an express or implied contractual, grantor-grantee, or licensor-licensee relationship, from a fee-based or similar relationship, from statute or regulation, or from the retention of any overpayment.”

Put more simply, an “obligation” is a duty to pay money or property to the government. This includes duties that are “fixed,” which a person owes no matter what, as well as “contingent” duties, which may or may not arise depending on certain circumstances. So, when, a person makes a false statement to avoid incurring an obligation in the first place (such as by lying in order to avoid paying a fine), courts have held this to be a violation.

Knowingly Making, Using, or Causing a False Record or Statement Material to an Obligation

A person “knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government” when:

  1. there is an obligation to pay money or property to the government;
  2. the person knowingly creates, uses, or causes a record or statement that he knows is false, and*;
  3. the false record or statement is material to (i.e. could influence) the obligation to pay the government.

*For the distinctions between making, using, and causing a false record or statement, see annotations for section 3729(a)(1)(B).

This type of False Claims Act violation targets people who use false statements to avoid paying money or property to the government. For example, this provision is violated when a person makes a false statement in order to avoid paying fees, such as by forging a certificate of origin to avoid paying tariffs on products manufactured in certain foreign countries. Similarly, this provision is violated when a person knowingly makes a false statement in order to avoid fines or penalties, such as when a person falsely certifies compliance with environmental regulations to avoid fines for noncompliance.

A person also violates this section when he or she knowingly makes, uses, or causes a false statement material to someone else’s obligation to pay the government. If a printing shop creates false certificates of origin that it knows its customer will use to avoid tariffs, the printing shop has violated the FCA (as well as almost certainly engaged in a conspiracy).

While it certainly is an obligation to pay taxes, a person who makes false statements on their tax returns has not violated this provision. This is because the False Claims Act explicitly does not apply to tax fraud. A person who commits tax fraud of any kind has instead violated IRS regulations. If you have information about tax fraud, please refer to the IRS Whistleblower page.

Knowingly Concealing or Improperly Avoiding/Decreasing an Obligation

A person “knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government” when:

  1. there exists an obligation to pay money or property to the government, and;
  2. the person knowingly conceals or improperly avoids or decreases this obligation.

This provision targets people who avoid paying money or property to the government without making false statements, typically by concealing the existence of the obligation in the first place. A mining company that knows it has violated federal safety regulations, but hides evidence of these violations during a government inspection to avoid paying a fine, has knowingly concealed an obligation to pay. Similarly, a person who omits expensive items from a customs declaration to decrease the amount they owe in import duties has also knowingly concealed an obligation to pay.

This type of false claim also occurs when a person conceals or avoids an obligation to return government money. If a doctor accidentally presents a claim to Medicare with an incorrect procedure code, but realizes the mistake and then submits a corrected claim, there is a chance that the government will pay both of them. In this situation, the doctor is required to return the overpayment. If the doctor fails to do this, then he or she has improperly avoided an obligation to pay.

The False Records or Statements do not have to be provided to the Government

In any of these cases, the conduct that triggers liability is knowingly creating a false statement or record that is material to an obligation to pay the government, or knowingly concealing or avoiding such an obligation. A contractor who creates false records that it does not transmit to the government could still be liable. The contractor could be liable if those records are material to an obligation to pay the government, including if the contractor created false records regarding an obligation owed by someone else. On the other hand, a contractor who creates false records that would not influence the government’s decision to pay a false claim, such as when the records relate purely to private transactions, has not violated the False Claims Act, even if those records are sent to the government. The records have to be material to the government’s decision to pay.

Knowledge Requirement

In order to violate the False Claims Act, a person who makes, uses, or causes a false statement must do so knowingly. However, this does not mean that the person must know about the False Claims Act, or how these actions specifically might violate it. Rather it means that the person has to know that the statement he or she made, used, or caused was false, or that he or she concealed or avoided an obligation to pay the government.

The Government does not have to Know about the Obligation

Regardless of the type of 3729(a)(1)(G) violation, the conduct that triggers liability is the creation of a false statement material to an obligation to pay the government, or conduct that otherwise conceals or decreases or avoids such an obligation. It does not matter whether the government ever knew about the obligation, all that is required is for the obligation to exist.

Liability for Making, Using, or Causing a False Record or Statement

A person who knowingly makes or uses a false record or statement, or knowingly causes a false record or statement to be made or used, that is material to an obligation to pay the government, is liable for three times the amount of the obligation to which those false records or statements are material. That person is also liable for civil penalties of between $5,500 and $11,000 for each false statement. These fines have been increased as a result of legislation, which adjusts all civil penalties for inflation.

However, when a false statement is made to conceal or avoid a fine, damages can be more difficult to prove because fines are often assessed on a sliding scale. A statute might specify that noncompliance carries a penalty “not to exceed $10,000 per violation.” In such a case, it is impossible to conclusively determine the amount of fines that were avoided, and it will likely be up to the jury to decide.