Congress has strengthened the Federal False Claims Act (31 U.S.C. §§ 3729–33) (FCA) over the last six years to crack down on fraud by government contractors and subcontractors as well as those who might conspire with them. Not only does the FCA impose liability for making or causing to be made false claims, but it also imposes liability for (a) conspiracy, even if a person never obtained federal funds through the fraud, (b) failure to report overpayments, and (c) failure to report fraud by others. While many cases brought under the FCA involve Medicare or Medicaid fraud, the law applies to any type of false or fraudulent claim submitted to the government for payment or approval.
The FCA provides that any person who knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval or a false record or statement material to a false or fraudulent claim, is liable to the U.S. Government for a civil penalty of not less than $5,500 and not more than $11,000, plus three times the amount of damages that the government sustained because of the act of that person. 31 U.S.C. § 3729(a)(1). The FCA’s knowledge requirement could be shown by having actual knowledge, acting “in deliberate ignorance of whether the information is true or false” or acting “in reckless disregard of the truth or falsity of the information.” A third party or qui tam whistleblower may bring suit on the government’s behalf and obtain a portion of the damages award. 31 U.S.C. § 3730.
FCA liability applies to contractors, subcontractors, and even co-conspirators who may not even receive federal funds. See United States ex rel. Folliard v. CDW Tech. Servs., Inc., 722 F.Supp.2d 20, 34–35 (D.D.C. 2010) (explaining that Congress intended section 3729(a) to attach “‘without regard to whether the wrongdoer deals directly with the Federal Government; with an agent acting on the Government’s behalf; or with a third party contractor, grantee, or other recipient of such money or property’”) (quoting S. Rep. 110-10 at 11); 31 U.S.C. § 3729(a)(1)(A) and (B). The conspiracy provision of the FCA provides liability for conspiring to commit any of the acts set forth in 31 U.S.C. § 3729(a)(1) (A), (B), (D), (E), (F), or (G). The Fraud Enforcement and Recovery Act, Pub. Law 111-21, 123 Stat. 1617 (2009) (FERA) amended the conspiracy provision in 2009 so that it does not require the person to have personally received any payment based on a false claim. Thus, a consultant who conspired with a contractor to defraud the government and personally did not receive any funds traceable to the government, could nonetheless be liable under the FCA.
FERA also added language for reverse claims. A reverse false claim is when a person “[k]nowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the State or a political subdivision.” 31 U.S.C. § 3729(a)(1)(G). An example would be discovering that a billing error had been made resulting in an overpayment from the government and failing to report it and repay it.
Federal regulation requires
[t]imely disclosure, in writing, to the agency [Office of Inspector General], with a copy to the Contracting Officer, whenever, in connection with the award, performance, or closeout of any Government contract performed by the Contractor or a subcontractor thereunder, the Contractor has credible evidence that a principal, employee, agent, or subcontractor of the Contractor has committed a violation of Federal criminal law involving fraud, conflict of interest, bribery, or gratuity violations found in Title 18 U.S.C. or a violation of the civil False Claims Act.
48 C.F.R. §52.203-13(b)(2)(ii)(F). Additionally, if an overpayment is in relation to the Affordable Care Act, i.e., a Medicare claim, it must be reported and returned within 60 days after the date on which the overpayment was identified. 42 U.S.C. §1320a-7k(d); accord 42 U.S.C. § 1320a-7a (Civil Monetary Penalties Act).
Heavy civil fines per claim and treble damages could be incurred, not only against those who perpetrate the fraud and receive the federal funds through fraud, but also against subcontractors or co-conspirators who might not have directly received any federal funds. Additionally, the FCA imposes liability for failure to follow reporting requirements.
In conclusion, the FCA comes with very sharp teeth, and it is advisable to (1) become familiar with the laws of the FCA, (2) know your duty to report, and, most of all, (3) know the companies with whom you are doing business, so that their wrongdoing does not become your legal liability.
—Carrie Parker, Snell & Wilmer L.L.P., Reno, NV