The False Claims Act: The Risks of Doing Business with the U.S. Government

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Jason B. Freeman

Jason B. Freeman

Managing Member


Mr. Freeman is the founding member of Freeman Law, PLLC. He is a dual-credentialed attorney-CPA, author, law professor, and trial attorney.

Mr. Freeman has been named by Chambers & Partners as among the leading tax and litigation attorneys in the United States and to U.S. News and World Report’s Best Lawyers in America list. He is a former recipient of the American Bar Association’s “On the Rise – Top 40 Young Lawyers” in America award. Mr. Freeman was named the “Leading Tax Controversy Litigation Attorney of the Year” for the State of Texas for 2019 and 2020 by AI.

Mr. Freeman has been recognized multiple times by D Magazine, a D Magazine Partner service, as one of the Best Lawyers in Dallas, and as a Super Lawyer by Super Lawyers, a Thomson Reuters service. He has previously been recognized by Super Lawyers as a Top 100 Up-And-Coming Attorney in Texas.

Mr. Freeman currently serves as the chairman of the Texas Society of CPAs (TXCPA). He is a former chairman of the Dallas Society of CPAs (TXCPA-Dallas). Mr. Freeman also served multiple terms as the President of the North Texas chapter of the American Academy of Attorney-CPAs. He has been previously recognized as the Young CPA of the Year in the State of Texas (an award given to only one CPA in the state of Texas under 40).

The False Claims Act (FCA) was passed by Congress during the Civil War to punish defense contractors for fraud. Under the FCA, a government contractor who submits fraudulent invoices or induces the government to grant a contract through fraud may face substantial monetary damages.

The FCA poses a challenge for businesses that perform work or supply goods to the U.S. government. These government contractors must implement internal controls and conduct periodic investigations to identify potential fraudulent claims. This obligation, of course, increases both the cost and risk of acting as a government contractor.

Acts Prohibited by the False Claims Act

When a firm becomes a government contractor, it faces a host of regulations. From labor standards to environmental rules, government contractors step into a virtual minefield of legislation, many of which are designed to carry a potential penalty if they are not upheld.

The FCA prohibits a contractor from “knowingly” committing a prohibited act. Under the act, “knowingly” means that the contractor:

The actions prohibited by the FCA can include:

A government contractor must implement internal controls and audits to detect these activities—or risk penalties under the FCA.

Actions Under the False Claims Act

Under the FCA, a government contractor can face a lawsuit by the U.S. government or a private citizen acting on behalf of the U.S. government. A lawsuit initiated by a private person is known as a qui tam action.

The FCA incentivizes qui tam actions by providing the private person with a share of the damages awarded in the lawsuit. The share ranges from 10% to 30%, depending on whether the government chose to become a party to the lawsuit or left the private party to carry out the lawsuit alone.

Qui tam lawsuits usually come from whistleblowers. This can provide whistleblowers with additional actions beyond typical labor claims.

In addition to retaliation, breach of contract, or whistleblower protection claims, a whistleblower who discovers fraud by a government contractor can file a qui tam lawsuit.

False Claims Act Penalties and Damages

A contractor can face substantial penalties for violating the FCA—penalties that are designed to discourage contractor fraud.

When a government contractor loses an FCA action, the court can award treble damages to the government, plus a civil penalty of $5,000 to $10,000 per false claim. Thus, for example, a contractor who submits five false invoices totaling $100,000 could face damages of up to $300,000, plus penalties of up to $50,000.

A government contractor can attempt to reduce the damages. When a government contractor self-reports an FCA violation and cooperates with the government, the FCA caps the damages at two times the amount of the fraud.


Expert Defense Attorneys 

Freeman Law assists companies and individuals with responding to False Claims Act allegations and qui tam plaintiffs. Necessary actions may include conducting internal investigations of suspected FCA violations and counseling with respect to potential actions under the FAR’s Contractor Code of Business Ethics and Conduct regulations. FCA cases often require forensic analysis and detailed review of disputed transactions. The attorneys at Freeman Law bring a unique forensic and white-collar background, along with substantial government-litigation experience—and can assist those involved in FCA or anticipate FCA disputes. Schedule a consultation or call (214) 984-3000 to discuss your allegations or concerns.