False Claims Acts are laws that set up public-private partnerships through which whistleblowers assist the government in recovering government funds that have been wrongfully obtained or retained.  The purpose of federal, state, and local False Claims Acts is threefold: to deter the submission of false and fraudulent claims; to reimburse the government; and to punish the wrongdoer.  Because requiring a cheating government contractor simply to repay what it wrongfully obtained or retained when it is caught would neither deter nor penalize, and would not compensate the government for its efforts to discover, investigate and prove the fraud, the contractor is required to do much more than repay what it stole.  Thus, a person or entity that submits a false claim is liable for treble damages—three times the government’s actual damages. In addition, the wrongdoer must pay civil penalties of $5,500 to $11,000 for each false claim or wrongful act.  Finally, the bad actor must pay the attorneys’ fees, expenses and costs incurred by any whistleblower, and under some state False Claims Acts, must also pay these fees, expenses and costs of the government lawyers.

The False Claims Acts are not anti-business, but rather are anti-fraud.  They do not punish accidental or negligent conduct, but rather are focused on “knowingly” false or fraudulent conduct.  A person acts “knowingly” under these statutes in three general circumstances: when he or she (1) has “actual knowledge” of the information; (2) acts in “deliberate ignorance” of the truth or falsity of the information; or (3) acts in “reckless disregard” of the truth or falsity of the information.  No proof of specific intent to defraud is necessary.

Generally, to violate a False Claims Act, the false claims, statements or records must be “material”; that is, they must have a natural tendency to influence or be capable of influencing the payment or receipt of money or property.

The term “claims” is generally defined as requests or demands for money or property, whether under contract or not, if government funds or property are to be spent or used.  Such claims include those for reimbursement with government funds, and include requests or demands made to the government and those made to others, such as contractors or grantees, if the money or property is to be spent or used on the government’s behalf or to advance a government program or interest.  The False Claims Acts also include “reverse false claims” provisions, prohibiting the wrongful retention of government funds.

Although generally the wrongdoers are government contractors, that is not always the case; they may also include government grantees or those with a fee-based relationship to the government or to subcontractors or suppliers of government contractors.

Examples of actions that violate False Claims Acts are:

  • claims by hospitals for payments under government contracts, such as Medicaid, Medicare, or other government healthcare programs, which are up-coded or based upon unnecessary services (unneeded tests or care that should have been provided on an outpatient basis rather than an inpatient admission);
  • claims for payments by government healthcare programs for prescription drugs that are based upon false pricing submitted to the government or off-label marketing by pharmaceutical manufacturers;
  • retaining government funds that were paid in error (as when both a government payor and a private payor paid the same claim) and failing to report or repay such funds to the government; and
  • claims for payments by the Department of Defense, Department of Labor or other government entities for services that are falsely represented as meeting contractual terms or statutory requirements.

The federal False Claims Act and various state and local False Claims Acts are linked on the Federal, State, and Local False Claims Acts page.