What is the False Claims Act? 31 U.S.C. 3729

What is the False Claims Act 31 USC 3729

The Federal False Claims Act 31 USC 3729 is used by federal law enforcement agents to investigate, charge and convict small businesses and large federal contractors. Learning to combat these charges up front is critical to avoiding criminal charges or hefty civil fines during false claims and qui tam litigation. Companies and individuals face horrific criminal charges and civil fines for two reasons. First, engaging with federal agents with the idea that “we have nothing to hide.”

Even though it is a plausible position to take, the reality is that many False Claims Act cases start later when the OIG or DOJ finally gets enough evidence against you. Their goal is not primarily to weed out those who have not violated the law. Instead, it is to prosecute those that they believe have violated the law.

What is the False Claims Act – Definition?

The Federal False Claims Act, 31 U.S.C. 3729 avoids fraudulent activity against the federal government.  Investigations or adverse actions against government contractors can arise for several reasons. The most common is when an employee blows the whistle and alleges wrongdoing and some level of criminal activity. There are ways to prevent these occurrences.

The Act “was originally aimed principally at stopping the substantial amounts of fraud perpetrated by large government contractors during the Civil War.” United States v. Bornstein, 423 U.S. 303, 309, 96 S.Ct. 523, 46 L.Ed.2d 514 (1976). “[A] series of sensational *182 congressional investigations” prompted hearings where witnesses “painted a sordid picture of how the United States had been billed for nonexistent or worthless goods, charged exorbitant prices for goods delivered, and generally robbed in purchasing the necessities of war.” United States v. McNinch, 356 U.S. 595, 599, 78 S.Ct. 950, 2 L.Ed.2d 1001 (1958). Congress responded by imposing civil and criminal liability for 10 types of fraud on the Government, subjecting violators to double damages, forfeiture, and up to jailtime five years’. Act of Mar. 2, 1863, ch. 67, 12 Stat. 696.
Since then, Congress has repeatedly amended the Act, but its focus remains on those who present or directly induce the submission of false or fraudulent claims. See 31 U.S.C. § 3729(a) (imposing civil liability on “any person who … knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval”). A “claim” now includes direct requests to the Government for payment as well as reimbursement requests made to the recipients of federal funds under federal benefits programs. See 31 U.S.C. 3729(b)(2)(A). The Act’s scienter requirement defines “knowing” and “knowingly” to mean that a person has “actual knowledge of the information,” “acts in deliberate ignorance of the truth or falsity of the information,” or “acts in reckless disregard of the truth or falsity of the information.” § 3729(b)(1)(A). And the Act defines “material” to mean “having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property.” § 3729(b)(4).
Congress also has increased the Act’s civil penalties so that liability is “essentially punitive in nature.” Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765, 784, 120 S.Ct. 1858, 146 L.Ed.2d 836 (2000). Defendants are subjected to False Claims Act treble damages plus civil penalties of up to $10,000 per false claim. § 3729(a); 28 CFR § 85.3(a)(9) (2015) (adjusting penalties for inflation).

As a federal contractor under 31 u.s.c. § 3729, you must ensure that you have the requisite policies and training programs to avoid penalties for violating FCA regulations. Contractor policies should focus on preventing fraud, waste, and abuse. At all costs, you must train your staff to prevent making false or fraudulent claims or information to Government officials. 

  • This reduces the likelihood of an adverse impact on you or your company’s future.
  • Learn how to rebut false Qui TAM whistleblower accusations.

The FCA Statute also provides for liability when you intentionally receive overpayments or submit invoices with the intent of receiving payment from the United States Government.

Who Can File a False Claims Act Lawsuit – Civil or Criminal ?  Any person (called a qui tam plaintiff or relator) who is an original source of information, can file a lawsuit for violations of the False Claims Act. Under the federal Act, a qui tam relator can receive between 15-25% of the total amount recovered if the government intervenes and prosecutes and 25-30% if litigated by the qui tam plaintiff. Federal prosecutors initial criminal cases.

AVOID JAIL TIME AND HUGE FINES IN FALSE CLAIMS ACT CASES - PREPARE A SOLID LEGAL DEFENSE HERE

What Does the Federal False Claims Act 31 USC 3729 Prohibit?

The following gives a general idea of what 31 USC 3729 is intended to prohibit under the Federal False Claims Act.

  1. Any person from knowingly presenting, or causing to be presented a false claim for payment or approval;
  2. Knowingly making, using, or causing to be made or used, a false record or statement material to a false or fraudulent claim;
  3. Conspiring to commit any violation of the  False Claims Act;
  4. Falsely certifying the type or amount of property to be used by the Government;
  5. Certifying receipt of property on a document without completely knowing that the information is true;
  6. Knowingly buying Government property from an unauthorized officer of the Government, and;
  7. Knowingly making, using, or causing to be made or used a false record to avoid, or decrease an obligation to pay or transmit property to the Government.
  8. Some other method or scheme that avoids or decreases an obligation to pay or transmit money or property to the government.

Under the False Claims Act otherwise known as the Whistleblower Act, prime contractors are not the only businesses that stand to be held liable for submitting false information under the statute. Subcontractors are also on the hook under Qui Tam regulations.

The biggest problem in the FCA actions arises when you try to perform services or sell products of a flawed nature, or are not in compliance with the contract terms and conditions. Also, improperly submitted invoices can create a problem under False Claims Act lawsuits.

What is the False Claims Statute when it applies to people who tell on you? Under the statute, the Department of Justice gets involved and can even pay rewards to employees or other contractors that blow the whistle on you.

What is the penalty for violating the False Claims Act ?

What is the penalty for violating the False Claims Act – civil or criminal? Liability that imposes damages and penalties under the statute can be brutal including treble damages. The penalty for violating the False Claim Act means that you can be liable in a civil action for penalties of between $5,000 and $10,000 for each incident (those amounts are adjusted from time to time; the current amounts are $5,500 to $11,000) and False Claims Act treble damages in certain cases. As a government contractor, if you are found in violation of the FCA, you will be liable for no less than double damages.

There Are Seven Types of FCA Violations

The Federal False Claims Act lists seven types of violation:

  1. False Claims – Presenting, or causing the presentment, of a false claim for payment or approval. 31 U.S.C. §§ 3729(a)(1)(A).
  2. Conspiracy – Conspiring to violate the False Claims Act. 31 U.S.C. §§ 3729(a)(1)(C).
  3. Conversion –  Failing to return government property. 31 U.S.C. §§ 3729(a)(1)(D)
  4. Unlawful purchase of Government Property – Buying public property from a government employee who may not lawfully sell it. 31 U.S.C. §§ 3729(a)(1)(F).
  5. Reverse False Claims – Making, using, or causing to be made or used, a false record or statement material to an obligation to pay money to the government; or conceals, avoids, or decreases an obligation to pay money to the government. 31 U.S.C. §§ 3729(a)(1)(G).
  6. False Receipts – Making or delivering a receipt of government property without completely knowing that the information in it is true. 31 U.S.C. §§ 3729(a)(1)(E).
  7. False Records or Statements – Making, using, or causing others to make or use, a false record or statement that is material to a false or fraudulent claim. 31 U.S.C. §§ 3729(a)(1)(B).

Small businesses that conduct business with the federal government must be mindful of these violations and seek experienced legal counsel when charged.

AVOID JAIL TIME AND HUGE FINES IN FALSE CLAIMS ACT CASES - PREPARE A SOLID LEGAL DEFENSE HERE

Actual Knowledge Requirement When Litigating False Claims Act Cases

What is the Federal False Claims Act statutory knowledge requirement? Contractors do not violate the statute by merely submitting a false claim to the government or some other request or demand; to violate the law, you must have submitted or caused the submission of, the false claim (or made a false statement or record) with knowledge of the falsity.  With that said, federal prosecutors will compile facts that prove the following elements of the actual knowledge requirement. It would be up to a false claims defense attorney to show facts that disprove those legal elements.

Under the False Claims Act, knowledge of false information is defined 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.

Things You Can Do To Overcome False Claims Allegations & Whistleblower Allegations

To avoid expensive Federal False Claims Act and qui tam litigation, adopt a few of the following tips:

  • Train Your People and Document
  • Develop Disclosure Policies
  • Implement Contract Ethics Policies
  • Act promptly when there is evidence of false claims violations
  • Ensure that you have access to counsel
  • Conduct frequent internal investigations for compliance

31 USC 3729 False Claims Violation Prevention Tips

Other things you can do to prevent litigation when looking at what is the penalty for submitting false claims to the government include getting clarification upfront about the terms and conditions of the contract. As 31 USC 3729 FCA defense lawyers, we also suggest that you keep accurate and complete records to combat allegations from a whistleblower about misrepresentation to the government. Communication between you and Government Contracting personnel is critical to the outcome of your defense in Federal False Claims Act and qui tam litigation. See information about the False Claims Statute of Limitations.

Drafting policies not enough: To reduce the impact of 31 USC 3729 False Claims law litigation, you should not only implement effective internal policies and controls. You should also train your staff on those policies. Many Government Contractors have no problem drafting policies. However, when they are sued in a Qui Tam case, they lack a credible defense if they do not train their staff members.

Continuous monitoring: Government contractors should also ensure a process for monitoring compliance with invoicing regulations and correcting continuing problems that can lead to civil orcriminal false claims act penalties. Such monitoring should intend to prevent fraud waste and abuse.

What are False Claims Act & Government Fraud Indicators in Defective Pricing? The following are but a few examples of defective pricing indicators:

  • Falsifications or alterations of supporting data – this is considered a false misrepresentation;
  • Failure to update cost or pricing data when recent activity indicates price decreases;
  • Failure to completely disclose data known to responsible contractor personnel;
  • Distortion of overhead accounts or baseline information by transferring charges or accounts that have a material impact on government contracts;
  • A protracted delay in the release of facts to the government to prevent possible price reductions;
  • Repeated denials by responsible contractor employees of the existence of historical records that are later found;
  • Submitting false documents and false statements;
  • Failing to show internal documents on vendor discounts 

Whistleblower Protection Under the False Claims Act

The federal False Claims Act does allow for legal protection for employees who allege or even plan to file for a violation under the False Claims Act from discrimination, harassment, suspension and or termination of employment resulting from reporting potential fraud. If a government contractor employee reports fraud and consequently suffers discrimination, he or she may be awarded (1) two times their back pay plus interest, (2) reinstatement of their position without loss of seniority and (3) compensation for any costs or damages they incurred.

AVOID JAIL TIME AND HUGE FINES IN FALSE CLAIMS ACT CASES - PREPARE A SOLID LEGAL DEFENSE HERE

For help rebutting and defending false whistleblower accusations in Federal False Claims Act and qui tam litigation under 31 USC 3729, contact our False Claims lawyers & Whistleblower defense attorneys for Additional help. Call 1-866-601-5518.

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