The Scope of the False Claims Act

While the Federal False Claims Act was first enacted to fight defense contractor fraud, it can be — and it is now used — to fight fraud in any kind of business where government funds are at stake. Indeed, the recent amendments to the law make it more possible to succeed in cases against subcontractors. Amendments also expanded the kinds of claims which could be held liable under the law. Prior to these amendments, a non-government agency or quasi-government agency being defrauded, such as Amtrak, may not have been the proper subject of a False Claims Act suit.

The Broadening Scope of the False Claims Act

Indeed, a famous holding by Chief Justice John Roberts before his appointment to the Supreme Court and back when he was serving on the DC Court of Appeals, went against the whistleblower, declaring bluntly “…Amtrak is not the government.”  Roberts, therefore, held the False Claims Act could not be used to recovery money for the government when Amtrak was defrauded. See U.S. Ex Rel Totten v. Bombardier, 388 F. 3rd 488 (D.C. Cir. 2004).

The decision debated legislative intent and the plain language of the Act and almost invited Congress to improve the plain meaning of the law. Which Congress eventually was able to do.

Amendments to the law make clear now that if, for example, Amtrak’s money comes from the government and Amtrak is defrauded, it could be possible to sue under the False claims Act.

Now, any time any government funds are at stake and the potential defendant has committed fraud it may be possible for a whistleblower to prevail.

The most common kind of successful cases and the types of cases that involve the largest recoveries are those that apply to the health care industry. This is true, if for no other reason, because the United States spends so much money on health care through programs such as Medicare, Medicaid, and Tri-care. The False Claims Act has been used successfully not only in collecting large rewards from pharmaceutical manufacturers illegally marketing drugs and large hospitals charging for medically unnecessary services, but has also led to some reforms within those industries. Obviously this is extremely beneficial to society as a whole because when fraud invades the health care system more than money may be at stake.

Empowering change and oversight

The law has been employed to shut down unsafe practices involving drugs that were not properly manufactured, or sold for unapproved uses. It has also been used to combat medical facilitates that provide worthless, substandard, and even dangerous care to their patients. Defense contractor fraud is still an area in which many cases are being filed and there is a new concern, as a result of the financial crisis, for cases in the area of mortgage fraud. The government is involved in many businesses and so there is virtually no limit to the kinds of cases which may be filed and pursued under this law.

The False Claims Act empowers whistleblowers to take action because it has several special provisions. First, the Act created a new right of action in American law. Under the False Claims Act whistleblowers not only can sue on behalf of themselves, but can also maintain a court action on behalf of the United States.

The law does not limit this right to reporting an issue to the government, but actually allows the whistleblower to file a case in court. This idea is sometimes called qui tam, a Latin term that is derived from a phrase which translates to “he who will sue for himself as well as the king.” The idea of suing on behalf of the “king,” or government, goes back to the Middle Ages in England and was first imported here by the False Claims Act. It is also sometimes referred to as the right to act as a private attorney general.

It is a special right because, typically, in order to sue anybody a plaintiff must be injured or directly affected by an injury. Anyone not affected directly, either financially or even emotionally, by the act of another is usually thought not to have the legal standing needed to bring the matter to court. The False Claims Act offers individual people “standing” to bring a case on behalf of the United States.

As a result, the United States is sometimes called the “real party in interest” in these cases. Still, the individual plaintiff who brings the case, or the whistleblower, can pursue the action in court on behalf of the government.