The False Claims Act (FCA) is a federal law that imposes civil penalties on persons that “knowingly” submit false or fraudulent claims for reimbursement to the federal government. Specific intent to defraud is not necessary to trigger a violation; rather, the “knowing” requirement can be met by (1) actual knowledge, (2) deliberate ignorance of the truth or falsity of information in the claim, or (3) reckless disregard for the truth or falsity of information in the claim. While this is the most common violation, the government can also pursue actions for reverse false claims, implied false certification, and conspiracy to violate the FCA. The FCA applies to all government contracts or submissions to the government for reimbursement except for tax claims. Violating the FCA can result in civil fines ranging from $5,500 to $11,000 for each claim, plus triple the amount of the government’s damages.
Initiating an Action
Two parties have the power to bring an action for violation of the Act: (1) the federal government, and (2) qui tam relators. Qui tam relators are private parties that have direct knowledge of the fraud—that is, they did not acquire knowledge of the infringing activity through public disclosure, such as news reports. If the Department of Justice decides to pursue the cause of action after the qui tam relator files suit in federal court, then the qui tam relator may receive a share of the government’s monetary recovery against the violator.
Nontraditional Liability
Reverse false claims
FCA liability can arise when an established duty to pay or transmit money or property to the United States exists, and a party knowingly and improperly conceals, avoids, or decreases that obligation. In other words, the Act prohibits withholding money from the United States that it has a right to under an existing obligation, such as a statute or regulation, or due to a contractual, grantor-grantee, licensor-licensee, or fee-based relationship. Retention of overpaid funds can also give rise to liability unless doing so is permitted by a statutory or regulatory process for reconciliation.
Implied false certification
The Supreme Court established in Universal Health Servs., Inc. v. Escobar (2016) that implied false certification—the theory that a party impliedly warrants compliance with ancillary requirements whenever it submits a claim to the government, and thus can be liable under the FCA for failing to actually meet those requirements—can provide a basis for FCA liability when (1) the claim makes specific representations about the goods and services provided, and (2) the defendant’s failure to disclose non-compliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths. Whether or not a requirement is material depends on the effect that the implied misrepresentation would have on the government’s decision to pay.
Even if a particular statutory, regulatory, or contractual requirement is an express condition of payment, noncompliance with such requirement does not automatically lead to liability, nor will insubstantial violations lead to liability. Relevant areas of inquiry in the materiality analysis include (1) whether the requirement is an express condition of payment, (2) whether the government typically refuses to pay claims that do not comply with the requirement, and (3) whether the government typically pays claims that do not comply with the requirement despite the government’s actual knowledge of noncompliance. Thus, meeting the rigid materiality standard for implied false certification liability requires an examination of all relevant factors surrounding claim submission and payment.
Conspiracy
The FCA also imposes liability for conspiracy to violate the FCA. While the FCA never defines “conspiracy,” federal courts generally look for (1) a plan shared among multiple conspirators to obtain money from the United States using fraud or fraudulent information, and (2) an act of a conspirator committed in furtherance of that plan. Some courts require an additional element of proof that the United States suffered damages as a result of the conspiratorial act. While traditional violations of the FCA require that the defendant have had actual knowledge, reckless disregard, or deliberate ignorance of the fraud, courts vary on the state of mind the defendant must have to be liable for a conspiracy charge under the FCA.
White Collar Defense Attorneys
Freeman Law represents companies, executives, and individuals in regulatory and white-collar government investigations and prosecutions. We employ a proactive approach to defend vigorously and strategically position our clients. White-collar matters often involve parallel regulatory and civil proceedings. Freeman Law can navigate the complexities and collateral consequences of multiple proceedings. And when it comes to the court of public opinion, we employ ethical and strategic tactics to manage publicity. Schedule a consultation or call (214) 984-3000 to discuss your allegations and investigations concerns.
