If you’re like a lot of government contractors, you probably feel inundated with trainings and bulletins. At some point, the tendency may become to skim or send these materials straight to the, ahem, circular file.
I understand that impulse, but there are some trainings that do merit attention, if for no other reason than to protect yourself. One of them is regarding the False Claims Act, which generally makes it unlawful for anyone to:
- Knowingly submit, or cause another to submit, a false claim for payment to the federal government;
- Make statements or records in support thereof;
- Do either of the preceding to avoid paying the government money owed; or
- Conspire to violate the False Claims Act.
Understanding the False Claims Act
The statute defines knowledge of falsity as being (1) actual knowledge, (2) deliberate ignorance of the truth or falsity of the information, or (3) reckless disregard of the truth or falsity of the information. It also defines what a claim is and says that it is a demand for money or property made directly to the Federal Government or to a contractor, grantee, or other recipient if the money is to be spent on the government’s behalf and if the Federal Government provides any of the money demanded or if the Federal Government will reimburse the contractor or grantee.[1]
Hypothetical Violations of the Act
If all that sounds abstract, consider this hypothetical: you work for defense contractor ABC Industries manufacturing widgets for the U.S. military. The government’s contract specifications call for your widgets to be made of a certain metal composition and entirely in America; but to save money, ABC Industries secretly outsources production of a costly component to another country and/or lies about the metal composition of the widget. Both scenarios would likely constitute a violation of the False Claims Act.
Alternatively, imagine that you work for a healthcare provider. Your employer, XYZ Healthcare, is unhappy with the amount of money they are paid for treating federal employees or Medicare beneficiaries, so they begin billing the government for unnecessary medical tests, products, or services. This would likely also constitute a violation of the False Claims Act.
The Role of Whistleblowers
Hopefully, you get the general idea: fleecing the taxpayers is illegal. Where it gets interesting is how the government finds out about it. In many cases, it is an employee of a government contractor like fictional ABC Industries or XYZ Healthcare who becomes aware of the fraud and files a lawsuit in federal court. Even though the employee isn’t personally being harmed by the conduct, s/he acts as a “relator” and stands temporarily in the government’s stead. The government must then investigate the allegations and decide whether to intervene in the lawsuit. If the government does intervene, they take over the case and most defendants opt to settle. If they decline to take over the case, the employee can still proceed with the lawsuit on his or her own; the case may settle or go to trial.
Potential Rewards and Compliance Emphasis
In a somewhat unique feature of law, a prevailing employee in either situation is entitled to a cut of the government’s financial recovery, provided certain conditions are met. That can translate into six-figure or even seven-figure payouts for the reporting employee, who is protected by law against retaliation from the employer.
However, before any reader begins searching for a payday at work, it is worth noting that False Claims Act compliance is a top priority for most contracting company legal departments. While calendar year 2023 saw the largest number of False Claims Act settlements and judgements in history at 543, that’s still a tiny fraction of the more than 205,000 reported U.S. government contractors employing some 3.7 million people. The greater value of understanding the False Claims Act is thus perhaps to ensure one’s own activities in the workplace do not invite liability.
For more on the False Claims Act, see the U.S. Department of Justice’s primer in the footnote, along with this fascinating look inside some of DOJ’s recent False Claims Act cases.
This article is intended as general information only and should not be construed as legal advice. Although the information is believed to be accurate as of the publication date, no guarantee or warranty is offered or implied. Laws and government policies are subject to change, and the information provided herein may not provide a complete or current analysis of the topic or other pertinent considerations. Consult an attorney regarding your specific situation.
[1] The False Claims Act: A Primer. U.S. Department of Justice webpage. Accessed July 24, 2024.
