False Claims Act Amendments – Leading The Fight on Fraud Into the 21st Century

03/26/2013 // San Francisco, California, US // Justice News Flash: Featured Column // Kathleen Scanlan // (press release)

The False Claims Act, passed during the Civil War, remained essentially the same law until World War II. Repeated efforts to narrow its scope and reach failed. As one court noted in 1885, “The statute is a remedial one. It is intended to protect the treasury against the hungry and unscrupulous host that encompasses it on every side, and should be construed accordingly.” U.S. v. Griswold, 24 F. 361, 365-66 (D.Or. 1885).

During World War II, the government found itself again surrounded by contractors who took the opportunity of a war effort to defraud the government for their own personal gain. And just as it had during the Civil War, the government turned to the False Claims Act to prosecute these war profiteers to the fullest extent possible. However, through certain wartime amendments and subsequent cases interpreting it, the False Claims Act became noticeably less effective as a fraud fighting tool. While False Claims Act enforcement during the Cold War era dramatically decreased, fraud flourished. Indeed, by 1980, the Department of Justice estimated that “between 1 percent and 10 percent of the entire federal budget [was] lost to fraud every year.” S. Rep. No. 345, 99th Cong., 2nd Sess. 3 (1986).

Amid calls to curb such rampant fraud, Congress could have enacted new legislation. Significantly it did not. Rather, Congress recognized the False Claims Act as its primary tool for combating fraud against the Government and set about reversing the earlier amendments and case authority which had crippled cold war era enforcement efforts. Most significant among these amendments were efforts to bolster the qui tam provisions which would incentivize those with knowledge of fraud to come forward. In 1986 Congress passed the False Claims Act Amendments and thereby renewed the public private partnership between the government and qui tam plaintiffs as “the eyes and the ears of the government” that President Lincoln had originally envisioned. It also ushered in a new era of fraud fighting.

Before the Amendments, government recovery was measured in the tens of millions each year. In the twenty-five years since the modern amendments, the federal government has exponentially increased recoveries under the Act. From 1987 until the end of fiscal year 2011, total civil and criminal recoveries net whistleblower awards were a staggering $31,919,866,405. Whistleblower payouts meanwhile totaled $3,418,672,503. (see http://www.taf.org/DoJ-fraud-stats-FY2011.pdf). In 2011 alone, the government secured more than $3 billion in settlements under the False Claims Act of which more than 90 percent resulted from qui tam actions brought by private relators. (see http://www.taf.org/public/drupal/publications/reports/Importance%20of%20Whistleblowers%20to%20Reducing%20Fraud%20-%20June%206%2C%202012.pdf). The 150 year old False Claims Act stands strong as the best weapon to respond to the changing schemes that lead to fraud on the government – even in the 21st Century.

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