Enacted in 1986, the False Claims Reform Act is an extension of the original False Claims Act of 1863, designed to combat government fraud through the use of qui tam provisions.

The 1986 Act enhanced the government’s ability to recover losses sustained as a result of fraud against the government. The False Claims Reform Act sought not only to provide the government’s law enforcers with more effective tools, but also to encourage any individual with knowledge of fraud against the government to bring any relevant information forward. In the face of sophisticated and widespread fraud, Congress believed that only a coordinated effort of both the government and the citizenry would decrease the systemic and pervasive fraud that resulted in the loss of hundreds of millions if not billions of dollars in public funds. The False Claim Reform Act sought to accomplish this goal through increased financial incentives and protections for private individuals, known as whistleblowers, who brought suit on behalf of the government.

The False Claims Reform Act prohibits presenting any false claim for reimbursement to the United States government, either intentionally or where there is “deliberate ignorance or reckless disregard” of the claim’s falsity. Congress designed the provision to preclude so called hear-no-evil see-no-evil defenses. A system that creates ignorance by limiting information available to a claimant provides no protection from prosecution. Under the statute, “individuals and contractors seeking public funds have some duty to make a limited inquiry so as to be reasonably certain they are entitled to the money they seek.” Thus, a deliberate ignorance or reckless disregard for the truth is basis for liability under the Act.

The Act prohibits “submitting or causing to submit” a false claim. This means that a contractor may be liable for his own fraud or for a subcontractor’s fraud. The amendments also prohibit conspiring to obtain a false claim, or creating false records with the goal of filing a false claim, so that even a plan to submit a false claim can lead to liability. Thus, the government can intervene even when it suffers no financial loss. The subsection creates a separate $5,000 to $10,000 civil fine for each record falsified, above the damages normally applicable in false claims cases. Under the statute, a court has no discretion to reduce the amount of the penalty per claim no matter how great the ratio is of the amount of fraud to the statutory penalty. The whistleblower receives anywhere from fifteen to thirty percent of this money, depending on the amount of involvement of the government.

Want to blow the whistle on fraud at your workplace? Contact Consumer Fraud Online to discuss your options with a lawyer.