New Legislation Proposed to “Beef Up” the False Claims Act

False Claims Act Enhancement

The world’s first whistleblower law was enacted by the Continental Congress on July 30, 1778, after two jailed men alleged the commander-in-chief of the Navy was corrupt. When government contract fraud became widespread during the Civil War, Congress passed the False Claims Act (FCA) on March 2, 1863, to encourage people to come forward with information on corrupt contractors. Congress then revamped the FCA in 1986 after learning about abuses (primarily) in the defense contracting industry.

Under the 1986 amendments, the role of whistleblowers was magnified. Financial incentives were increased. Barriers to bringing actions against persons or entities alleged to have engaged in fraud against the federal government were reduced.

Now, the FCA is about to be changed up again. This time, to increase whistleblower protection.

What’s Happened?

The Senate Judiciary Committee’s referral of new legislation, the False Claims Amendments Act of 2021 (FCAA), to the Senate looks to toughen up the already tough law. The legislation, first introduced by Senator Chuck Grassley and a bipartisan group of senators on July 26, 2021, would make FCA cases more difficult to defeat on materiality grounds, setting a new standard for Department of Justice-initiated dismissals, and expanding the FCA’s anti-retaliation provisions to apply to post-employment retaliation.

What Are the Proposed Changes?

Below is a summary of significant changes.

  1. Materiality. The FCAA would add a provision establishing the standard for proving materiality under the FCA, specifying that the government’s decision to pay a claim despite knowing of fraud or falsity “shall not be considered dispositive if other reasons exist for the decision[.]” This change is a direct response to the Supreme Court’s decision in United Health Services v. United States ex rel. Escobar, as well as other post-Escobar decisions that considered the government’s continued payment despite knowledge of falsity in finding that the violations were not material. As Senator Grassley explained recently in remarks on the Senate floor, however, oftentimes the government has no choice but to continue paying the claims if,  for instance, the contractor who submitted false claims was also the only one capable of operating a satellite on an important mission during a time of war. Accordingly, under the FCAA, if the government has other reasons for continuing to pay claims tainted by fraud, like protecting troops in combat, its choice to do so won’t defeat materiality.
  2. Restrict the DOJ’s Authority to Dismiss Cases. The FCAA would establish a new test for government-initiated dismissals of qui tam cases. The new Act would require that the government “identify a valid government purpose and a rational relation between dismissal and accomplishment of that purpose,” after which the whistleblower may defeat dismissal by “demonstrating that the dismissal is fraudulent, arbitrary and capricious, or illegal.”
  3. Expanding Anti-Retaliation Provision. The FCAA would expand the FCA’s anti-retaliation provision to explicitly include “current or former” employees, meaning that post-employment retaliation would be expressly encompassed by the FCA for the first time.

How Do We Fight Fraud Against the Government?

Seek justice on behalf of taxpayers with the help of our experienced whistleblower attorneys. Our Dallas, Texas, whistleblower team has battled corporate giants for nearly 20 years, aggressively fighting to hold corporations, individuals, and other entities accountable for fraud committed against the government. If you believe you have a whistleblower case, we can help.

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