The False Claims Act

Judge signing papers with a gavel in the foreground, representing the False Claims Act and class actions and whistleblower retaliations

A Long and Storied History

The False Claims Act is over 160 years old, yet many people are unaware of its existence.  Even many of those who are familiar with the statute don’t know that it dates all the way back to the American Civil War.  The False Claims Act was signed into law by President Abraham Lincoln which is why it is also known as Lincoln’s Law.

The False Claims Act was originally enacted as a means for the government to sue unscrupulous contractors that sold substandard and defective goods to the Union Army.  At the time, the federal government was relatively small and had limited resources to bring lawsuits against fraudsters who enriched themselves at the government’s expense. To rectify this problem, Congress included a qui tam provision in the statute that provided a mechanism for private citizens, who had knowledge of fraud, to sue on behalf of the United States government. 

Qui tam is derived from the Latin phrase qui tam pro domino rege quam pro se ipso in hac parte sequitur, which translates to “who sues on behalf of the King as well as for himself.” The concept comes from English statutes that were originally enacted in the fourteenth century. The False Claims Act authorizes a private individual, known as a “relator,” to bring a cause of action on behalf of the United States government to recover monies lost due to fraud or related misconduct.  A relator who is successful in a qui tam action is entitled to receive a percentage of the recovered proceeds.

The False Claims Act has been amended three times since the Civil War. The most significant amendments occurred in 1986 which allowed the government to seek treble damages for violations of the Act.  The 1986 amendments also significantly increased the monetary incentives for whistleblowers. To this day, the False Claims Act remains the primary tool in the government’s arsenal to recover taxpayer dollars lost to fraud.

Billions of Dollars Recovered Annually

The Department of Justice (DOJ) issues a report each year summarizing the most significant cases and amounts recovered from settlements and judgments from the prior year. For Fiscal Year (FY) 2022, DOJ reported recoveries of over $2.2 billion from civil settlements and judgments in False Claims Act lawsuits.
Over $1.9 billion of the $2.2 billion recovered was the result of lawsuits filed by whistleblowers under the qui tam provisions of the False Claims Act. The government paid those whistleblowers over $488 million as a reward for their part in exposing the fraud and corruption that led to the $1.9 billion in recoveries.
Since the 1986 amendments to the False Claims Act, the government has recovered more than $72 billion in settlement and judgments.

Biggest Offenders by Industry

Based on trends over the past decade, it came as no surprise that the healthcare industry was responsible for the overwhelmingly largest percentage of the recoveries — $1.7 billion of the $2.2 billion recovered.

Unscrupulous healthcare providers engage in a variety of deceptive schemes that ultimately result in fraudulent claims that are submitted to government healthcare programs, such as Medicare, Medicaid and TRICARE.

In FY 2022, healthcare companies, pharmacies and laboratories entered into settlements with the government to resolve allegations involving: substandard skilled nursing services in nursing homes; providing medically unnecessary medical services and surgeries; enrolling patients for hospice services who were not terminally ill; unauthorized switching to higher cost medications without medical need or a valid prescription; and billing for for unnecessary urine drug, psychological, and genetic testing.

When a federal healthcare program is implicated, the payment of kickbacks can potentially lead to False Claims Act violations  as well as criminal liability.  One such case involved a pharmaceutical company that paid over $843 million to resolve allegations that it paid illegal kickbacks to physicians who spoke at or attended programs involving certain of the company’s drugs.

In another kickback case, a durable medical equipment manufacturer paid more than $24 million to resolve allegations that it paid unlawful kickbacks to suppliers to induce them to select the company’s respiratory equipment. The company allegedly provided the suppliers with physician prescribing data at no cost even though the company knew that it  was a valuable tool that helped suppliers market to physicians.

Fraud by defense contractors during the U.S. Civil War was the impetus for the enactment of the False Claims Act. More than a century and a half later, government contractors consistently remain near the top of the DOJ’s annual list of False Claims Act recoveries.

In FY 2022, a government contractor agreed to pay $8.4 million to resolve allegations that it failed to provide certified cost or pricing data when it negotiated rates with the Army Corps of Engineers for the repair and restoration of Puerto Rico’s power grid caused by a hurricane.  According to the government’s complaint, the Army Corps of Engineers paid inflated rates for labor, equipment and basecamp services due the alleged violations of the Truth in Negotiations Act.

In a separate action, seven South Korea-based companies agreed to pay $3.1 million to resolve allegations they engaged in a bid-rigging conspiracy involving construction and engineering contracts for U.S. military bases in South Korea.  According to the government’s allegations, the companies conspired to suppress and eliminate competition during the bidding process on 15 contracts which caused the Army Corps of Engineers to pay substantially more than if there been competitive bidding.  

In another case, an Aircraft Parts Foundry agreed to pay $500,000 to resolve allegations that it failed to preform contractually required testing and falsified test results for parts used in military aircrafts.  According to the complaint allegations, the company failed to perform the required metallurgic tests on large metal castings that it supplied to prime defense contractors, including Bell Helicopter, Sikorsky Aircraft and Boeing.  The amount of the settlement was based on the company’s ability to pay.

To the surprise of no one, a significant portion of the $5 trillion spent by the government on COVID stimulus was lost to illicit schemes and fraud. The Small Business Administration’s Office of Inspector General has identified more than 70,000 loans totaling over $4.6 billion that potentially involve fraud.

DOJ has pursued a number of cases involving improper payments under the Paycheck Protection Program (PPP), including borrowers that improperly received duplicate or inflated loans or were otherwise ineligible for a PPP loan. In FY 2022, DOJ recovered over $6.8 million by resolving 35 separate actions brough under the False Claims Act.

In addition to borrowers, DOJ also brought an action against a lender that allegedly made a PPP loan to an applicant that it knew was ineligible. According to the allegations, the bank knew that the sole owner of a medical practice was facing criminal charges for prescribing opioids at the time he applied for the loan.

Another case involved the misuse other pandemic-related resources.  A Florida-based not-for-profit corporation paid $1.75 million to resolve allegations that it  arranged for hundreds of ineligible individuals to receive COVID-19 vaccinations, including the corporation’s board members; donors and potential donors; and 300 other ineligible individuals who were invited by the Vice Chairman of the Board of Directors and his brother.

Customs Fraud – two New York based apparel companies, and their owner, agreed to pay $6 million to settle civil fraud claims brought under the False Claims Act. The two clothing companies engaged in double invoicing schemes in which they fraudulently underreported the value of goods that were imported from China. As a result of their fraud, the companies avoided paying millions of dollars in customs duties for more than a decade. The owner of the company pled guilty for his role in the fraud and was sentenced to six months in prison. In addition to the False Claims Act settlement, the owner was ordered to forfeit $1.6 million in the criminal proceedings. The anonymous whistleblower who filed the qui tam complaint was awarded more than $1.2million from the recovered proceeds.

Education Fraud – a New Jersy based educational services provider agreed to pay $1.1 million to resolve False Claims Act allegations that it fraudulently obtained federal funds for afterschool tutoring services that it never provided. The program was intended to help underprivileged school students in the New York City public school system.  The program was funded entirely by the U.S. Department of Education through grants to the New York City Department of Education, and the provider was paid $72.80 per hour for each student that it tutored.

Under the terms of its contract, the company was required to certify the truthfulness and accuracy of its attendance records. When the company allegedly submitted false certifications of its attendance records as part of its requests for payment, it allegedly resulted in False Claims Act violations.  The government only became aware of the alleged fraud after a whistleblower had filed a qui tam complaint.

Mortgage Fraud – a mortgage company agreed to pay $24.9 million to resolve allegations that it violated the False Claims Act by knowingly approving ineligible loans that later defaulted which resulted in mortgage insurance claims to the Federal Housing Administration (FHA). The company also allegedly failed to self-report deficient loans that it had identified and failed to comply with rules requiring quality control programs to prevent underwriting deficiencies. The whistleblower who reported the fraud was the former head of quality control for the company. He received a reward of nearly $5 million from the government’s recovery.

In late 2021, DOJ announced the start of its Civil Cyber-Fraud Initiative which will hold accountable anyone that engages in fraud that places the government’s highly sensitive information and systems at risk.

DOJ intends to pursue contractors and grant recipients that provide deficient cybersecurity products or services; misrepresent their cybersecurity practices or protocols; or violate their obligations to monitor and report cybersecurity incidents and breaches. False Claims Act violations could potentially arise from the government’s procurement of information technology, software, and cloud-based storage.

One of the benefits of the Cyber-Fraud Initiative cited by DOJ is obtaining reimbursement for the government and taxpayers when losses result from a company’s failure to meet their cybersecurity obligations. The DOJ has made clear that it intends to utilize the False Claims Act in furtherance of this objective.

States False Claims Acts

Map of the United States with a magnifying glass
Civil FCA Qui Tam Provision Anti-Retaliation Provision Notes

 Ark. Code § 20-77-902

None, but Ark. Code § 20-77-911 allows for a discretionary award of up to 10% of any civil recovery for information provided.

None

Limited to Medicaid-related claims.
Civil FCA Qui Tam Provision Anti-Retaliation Provision Notes
Cal. Gov. Code § 12651 Cal. Gov. Code § 12652 Cal. Gov. Code § 12653
Civil FCA Qui Tam Provision Anti-Retaliation Provision Notes

Conn. Gen. Stat. § 4-275

Conn. Gen. Stat. § 4-277

Conn. Gen. Stat. § 4-284

Limited to Medicaid-related claims.
Civil FCA Qui Tam Provision Anti-Retaliation Provision Notes

6 Del. Code tit. § 1201

6 Del. Code tit. § 1203

Del. Code tit. 6 § 1208

 
Civil FCA Qui Tam Provision Anti-Retaliation Provision Notes

D.C. Code § 2-381.02

D.C. Code § 2-381.03

D.C. Code § 2-381.04

Effective March 16, 2021, the District’s False Claim Act allows claims for tax violations.
Civil FCA Qui Tam Provision Anti-Retaliation Provision Notes

Fla. Stat. § 68.082

Fla. Stat. § 68.083

Fla. Stat. § 68.088

 
Civil FCA Qui Tam Provision Anti-Retaliation Provision Notes

Ga. Code § 23-3-121 (TPA) Ga. Code § 49-4-168.1 (FMCA)

Ga. Code § 23-3-122 (TPA) Ga. Code § 49-4-168.2 (FMCA)

Ga. Code § 23-3-122 (TPA) Ga. Code § 49-4-168.4 (FMCA)

Georgia has two false claims acts: the Taxpayer Protection Act (TPA) and the False Medicaid Claims Act (FMCA).
Civil FCA Qui Tam Provision Anti-Retaliation Provision Notes

Haw. Rev. Stat. § 661-21 (FCA) Haw. Rev. Stat. § 46-171 (CFCA)

Haw. Rev. Stat. § 661-25 (FCA) Haw. Rev. Stat. § 46-175 (CFCA)

Haw. Rev. Stat. § 661-30 (FCA) Haw. Rev. Stat. § 46-180 (CFCA)

Hawaii has a state false claims act (FCA) and a corresponding statute applicable to its counties (CFCA).
Civil FCA Qui Tam Provision Anti-Retaliation Provision Notes

740 Ill. Comp. Stat. 175/3

740 Ill. Comp. Stat. 175/4

740 Ill. Comp. Stat. 175/4

Illinois’ False Claims Act allows claims for tax violations except for those covered under the Illinois Income Tax Act.
Civil FCA Qui Tam Provision Anti-Retaliation Provision Notes

Ind. Code § 5-11-5.5-2 (FCWPA) Ind. Code § 5-11-5.7-2 (MFCWPA)

Ind. Code § 5-11-5.5-4 (FCWPA) Ind. Code § 5-11-5.7-4 (MFCWPA)

Ind. Code § 5-11-5.5-8 (FCWPA) Ind. Code § 5-11-5.7-8 (MFCWPA)

Indiana has two false claims acts: the False Claims and Whistleblower Protection Act (FCWPA) and Medicaid False Claims and Whistleblower Protection Act (MFCWPA).
Civil FCA Qui Tam Provision Anti-Retaliation Provision Notes

Iowa Code § 685.2

Iowa Code § 685.3

Iowa Code § 685.3

 
Civil FCA Qui Tam Provision Anti-Retaliation Provision Notes

La. Stat. § 46:438.3

La. Stat. § 46:439.1

La. Stat. § 46:439.1

Limited to Medicaid-related claims.
Civil FCA Qui Tam Provision Anti-Retaliation Provision Notes
Md. Code, Gen. Provisions § 8-102 (FCA) Md. Code, Health-Gen. § 2-602 (FHCA) Md. Code, Tax-Gen. § 1-402 (WRP) Md. Code, Gen. Provisions § 8-104 (FCA) Md. Code, Health-Gen. § 2-604 (FHCA) Md. Code, Tax-Gen. § 1-402 (WRP) Md. Code, Gen. Provisions § 8-107 (FCA) Md. Code, Health-Gen. § 2-607 (FHCA) Md. Code, Tax-Gen. § 1-405 (WRP) Maryland has three false claims acts: the False Claims Act (FCA);  the False Health Claims Act (FHCA); and the Whistleblower Reward Program (WRP). The WRP applies to tax violations.
Civil FCA Qui Tam Provision Anti-Retaliation Provision Notes

Mich. Comp. Laws § 400.607

Mich. Comp. Laws § 400.610a

Mich. Comp. Laws § 400.610c

 
Civil FCA Qui Tam Provision Anti-Retaliation Provision Notes

Minn. Stat. § 15C.02

Minn. Stat. § 15C.05

Minn. Stat. § 15C.145

 
Civil FCA Qui Tam Provision Anti-Retaliation Provision Notes

Mo. Rev. Stat. § 191.905

None, but Mo. Rev. Stat. § 191.907 provides for a mandatory reward of 10% of any civil recovery for information provided.

Mo. Rev. Stat. § 191.908

Limited to Medicaid and healthcare-related claims.
Civil FCA Qui Tam Provision Anti-Retaliation Provision Notes

Mont. Code § 17-8-403

Mont. Code § 17-8-406

Mont. Code § 17-8-412

 
Civil FCA Qui Tam Provision Anti-Retaliation Provision Notes

Nev. Rev. Stat. § 357.040

Nev. Rev. Stat. § 357.080

Nev. Rev. Stat. § 357.250

 
Civil FCA Qui Tam Provision Anti-Retaliation Provision Notes

N.H. Rev. Stat. § 167:61-b

N.H. Rev. Stat. § 167:61-c

N.H. Rev. Stat. § 167:61-c

Limited to claims against companies based in New Hampshire or claims involving reimbursements from Medicaid with the prior year.
Civil FCA Qui Tam Provision Anti-Retaliation Provision Notes

N.J. Stat. Ann. § 2A:32C-1

N.J. Stat. § 2A:32C-5

N.J. Stat. § 2A:32C-10

 
Civil FCA Qui Tam Provision Anti-Retaliation Provision Notes

N.M. Stat. § 27-14-4 (MFCA) N.M. Stat. § 44-9-3 (FATA)

N.M. Stat. § 27-14-7 (MFCA) N.M. Stat. § 44-9-5 (FATA)

N.M. Stat. § 27-14-12 (MFCA) N.M. Stat. § 44-9-11 (FATA)

New Mexico has two false claims acts: the Medicaid False Claims Act (MFCA) and the Fraud Against Taxpayers Act (FATA).
Civil FCA Qui Tam Provision Anti-Retaliation Provision Notes

N.Y. State Fin. Law § 189

N.Y. State Fin. Law § 190

N.Y. State Fin. Law § 191

The New York False Claims Act also allows claims based on tax violations.
Civil FCA Qui Tam Provision Anti-Retaliation Provision Notes

N.C. Gen. Stat. § 1-607

N.C. Gen. Stat. § 1-608

N.C. Gen. Stat. § 1-613

 
Civil FCA Qui Tam Provision Anti-Retaliation Provision Notes

Okla. Stat. tit. 63 § 5053.1

Okla. Stat. tit. 63 § 5053.2

Okla. Stat. tit. 63 § 5053.5

Limited to Medicaid-related claims.
Civil FCA Qui Tam Provision Anti-Retaliation Provision Notes

R.I. Gen. Laws § 9-1.1-3

R.I. Gen. Laws § 9-1.1-4

R.I. Gen. Laws § 9-1.1-4

 
Civil FCA Qui Tam Provision Anti-Retaliation Provision Notes

Tenn. Code § 4-18-103 (FCA) Tenn. Code § 71-5-182 (MFCA)

Tenn. Code § 4-18-104 (FCA) Tenn. Code § 71-5-183 (MFCA)

Tenn. Code § 4-18-105 (FCA) Tenn. Code § 71-5-183 (MFCA)

Tennessee has two false claims acts: the False Claims Act (FCA) and the Medicaid False Claims Act (MFCA).
Civil FCA Qui Tam Provision Anti-Retaliation Provision Notes

Tex. Hum. Res. Code § 36.002 (TMFPA) The TWA waives sovereign immunity whenever a public employee alleges a violation of Chapter 554 of the Texas Gov’t Code.

Tex. Hum. Res. Code § 36.101 (TMFPA) The TWA does not have a qui tam provision. It provides relief for public employees who were subject to retaliation for reporting a violation by the agency that employs them.

Tex. Hum. Res. Code § 36.115 (TMFPA) Tex. Gov’t Code § 554.002 (TWA)

Texas has two false claims acts: the Texas Medicaid Fraud Prevention Act (TMFPA) and the Texas Whistleblower Act (TWA). The TWA only applies to state public employees.
Civil FCA Qui Tam Provision Anti-Retaliation Provision Notes

Vt. Stat. tit. 32 § 631

Vt. Stat. tit. 32 § 632

Vt. Stat. tit. 32 § 638

 
Civil FCA Qui Tam Provision Anti-Retaliation Provision Notes

Va. Code § 8.01-216.3

Va. Code § 8.01-216.5

Va. Code § 8.01-216.8

 
Civil FCA Qui Tam Provision Anti-Retaliation Provision Notes

Wash. Rev. Code § 74.66.020

Wash. Rev. Code § 74.66.050

Wash. Rev. Code § 74.66.090

Limited to Medicaid-related claims.

Over $ 1 Recovered

Over 1 Years Experience

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