The False Claims Act: New Fangs For an Old Law

June 2010
The National Law Journal
George J. Terwilliger III

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In 1863, Congress enacted the False Claims Act (FCA) as a response to abuses by private supply contractors during the Civil War. Although the statute has been in effect for almost 150 years, its modern use stems from changes in 1986 that put teeth in its provisions by broadening its reach. Since then, plaintiffs have used the FCA to reach an ever-wider scope of activity by companies in contract parity with the federal government.

Recently, Congress has fashioned those teeth into fangs by removing restrictions that limited the scope of private persons who could act as FCA plaintiffs, expanding the range of conduct that can form the basis of a false claim allegation and paring back previously available defenses created by years of court decisions. A parallel criminal provision, 18 U.S.C. 287, can render some false claims felony violations; thus, the basis for an FCA claim can also spur criminal investigations of violations alleged in civil pleadings.

The FCA allows private citizens, known formally as "relators" but commonly as whistleblowers, to bring qui tam suits on behalf of the government and receive a portion of the government's recovery. Since 1986, the government has recovered more than $24 billion in FCA suits; in fiscal year 2009, recoveries totaled $2.4 billion. Qui tam suits initiated by relators accounted for $2 billion of those 2009 recoveries, and successful relators received more than $255 million. Additional resources and continued congressional support ensure that the FCA will still be aggressively enforced, and companies dealing with the government, even indirectly, should give careful consideration to its expanded reach and more limited defenses.