False Claims Act of 1863: Difference between revisions - Wikipedia

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| SCOTUS cases = {{ubl|''[[United States v. Cohn]]'', {{ussc|270|339|1926}}|''[[United States v. Gilliland]]'', {{ussc|312|86|1941}}|''[[United States ex rel. Marcus v. Hess]]'', {{ussc|317|537|1943}}|''[[United States v. Grainger]]'', {{ussc|346|235|1953}}|''[[Rainwater v. United States]]'', {{ussc|356|590|1958}}|''[[United States v. McNinch]]'', {{ussc|356|595|1958}}|''[[United States v. Neifert-White Co.]]'', {{ussc|390|228|1968}}|''[[United States v. Bornstein]]'', {{ussc|423|303|1976}}|''[[United States v. Halper]]'', {{ussc|490|435|1989}}|''[[Hughes Aircraft Co. v. United States ex rel. Schumer]]'', {{ussc|520|939|1997}}|''[[Vermont Agency of Natural Resources v. United States ex rel. Stevens]]'', {{ussc|529|765|2000}}|''[[Cook County v. United States ex rel. Chandler]]'', {{ussc|538|119|2003}}|''[[Graham County Soil and Water Conservation Dist. v. United States ex rel. Wilson]]'', {{ussc|545|409|2005}}|''[[Rockwell International Corp. v. United States]]'', {{ussc|549|457|2007}}|''[[Allison Engine Co. v. United States ex rel. Sanders]]'', {{ussc|553|662|2008}}|''[[United States ex rel. Eisenstein v. City of New York]]'', {{ussc|556|928|2009}}|''[[Graham County Soil and Water Conservation Dist. v. United States ex rel. Wilson]]'', {{ussc|559|280|2010}}|''[[Schindler Elevator Corp. v. United States ex rel. Kirk]]'', {{ussc|563|401|2011}}|''[[Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter]]'', {{ussc|docket=12-1497|volume=575|year=2015}}|''[[Universal Health Services, Inc. v. United States ex rel. Escobar]]'', {{ussc|docket=15-7|volume=579|year=2016}}|''[[State Farm Fire & Casualty Co. v. United States ex rel. Rigsby]]'', {{ussc|docket=15-513|volume=580|year=2016}}|''[[Cochise Consultancy, Inc. v. United States ex rel. Hunt]]'', {{ussc|docket=18-315|volume=587|year=2019}}|''[[United States ex rel. Schutte v. SuperValu Inc.]]'', {{ussc|docket=21-1326|volume=598|year=2023}}|''[[United States ex rel. Polansky v. Executive Health Resources, Inc.]]'', {{ussc|docket=21-1052|volume=599|year=2023}}|''[[Wisconsin Bell, Inc. v. United States ex rel. Todd Heath]]'', {{ussc|docket=23-1127|volume=|year=2025}}}}

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The '''False Claims Act of 1863''' ('''FCA''')<ref>{{Cite web|url=https://www.govinfo.gov/app/details/USCODE-2011-title31/USCODE-2011-title31-subtitleIII-chap37-subchapIII-sec3729|title=govinfo|website=www.govinfo.gov|access-date=Jul 23, 2020}}</ref> is an American [[federal law]] that imposes liability on persons and companies (typically [[federal contractor]]s) who [[defraud]] governmental programs. It is the federal government's primary [[litigation]] tool in combating fraud against the government.<ref>{{cite court |litigants=United States ex rel. Steury v. Cardinal Health, Inc. |vol=625 |reporter=F.3d |opinion=262 |pinpoint=267 |court=[[5th Cir.]] |date=2010 |url=https://www.leagle.com/decision/infco20101101082 |access-date=2018-11-08 |quote=The FCA is the Government's primary litigation tool for recovering losses resulting from fraud.}}</ref> The law includes a ''[[qui tam]]'' provision that allows people who are not affiliated with the government, called "relators" under the law, to file [[Lawsuit|actions]] on behalf of the government. This is informally called "[[whistleblower|whistleblowing]]", especially when the relator is employed by the organization accused in the suit. Persons filing actions under the Act stand to receive a portion (15–30%, depending on certain factors) of any recovered [[damages]].<ref>{{Cite web|url=https://www.justice.gov/sites/default/files/civil/legacy/2011/04/22/C-FRAUDS_FCA_Primer.pdf |archive-url=https://web.archive.org/web/20141113141951/http://www.justice.gov/sites/default/files/civil/legacy/2011/04/22/C-FRAUDS_FCA_Primer.pdf |archive-date=2014-11-13 |url-status=live|title=The False Claims Act: A Primer|date=February 22, 2011|website=Department of Justice}}</ref>

As of 2019, over 71% of all FCA actions were initiated by whistleblowers.<ref name=":1">{{Cite web|url=https://www.justice.gov/opa/press-release/file/1233201/download|title=FRAUD STATISTICS - OVERVIEW|date=September 30, 2019|website=Department of Justice (Civil Division)}}</ref> Claims under the law have typically involved government health care programs (Medicare, Medicaid and TriCare), military, or other government spending programs,. ~~and~~FCA actions dominate the [[list of largest pharmaceutical settlements]]. Between 1987 and 2019, the government recovered more than $62 billion under the False Claims Act.<ref>{{Cite web|url=https://www.justice.gov/opa/pr/justice-department-recovers-over-3-billion-false-claims-act-cases-fiscal-year-2019|title=Justice Department Recovers over $3 Billion from False Claims Act Cases in Fiscal Year 2019|date=January 9, 2020|website=Department of Justice}}</ref>

==History==

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The Act establishes liability when any person or entity improperly receives from or avoids payment to the Federal government. The Act prohibits:

# Knowingly presenting, or causing to be presented, a false claim for payment or approval;

# Knowingly making, using, or causing to be made or used, a false record or statement material to a false or fraudulent claim;

# [[Conspiracy (civil)|Conspiring]] to commit any violation of the False Claims Act;

# Falsely certifying the type or amount of property to be used by the ~~Government~~government;

# Certifying receipt of property on a document without completely knowing that the information is true;

# Knowingly buying ~~Government~~government property from an unauthorized officer of the ~~Government~~government, and;

# 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~~government.

# The False Claims act does not apply to IRS Tax matters.<ref>{{Cite web|url=https://www.falseclaimsact.com/irs-whistleblower-law/|title=Report Tax Fraud - Call our IRS Whistleblower Attorneys Today|access-date=Jul 23, 2020}}</ref>

The statute provides that anyone who violates the law "is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, as adjusted by the Federal Civil Penalties Inflation Adjustment Act of 1990,<ref name=":4">{{Cite web|title=28 U.S. Code § 2461 - Mode of recovery|url=https://www.law.cornell.edu/uscode/text/28/2461|access-date=2020-06-28|website=LII / Legal Information Institute|language=en}}</ref> plus 3 times the amount of damages which the Government sustains because of the act of that person."<ref>{{Cite web|title=31 U.S. Code § 3729 - False claims|url=https://www.law.cornell.edu/uscode/text/31/3729|access-date=2020-06-28|website=LII / Legal Information Institute|language=en}}</ref> The False Claims Act requires a separate penalty for each violation of the statute.<ref name=":5">{{Cite web|date=2020-06-01|title=False Claims Act Penalties Explained - Whistleblower Law|url=https://www.whistleblowerllc.com/false-claims-act-penalties/|access-date=2020-06-28|website=Whistleblower Law Collaborative}}</ref> Under the Civil Penalties Inflation Adjustment Act,<ref name=":4" /> False Claims Act penalties are periodically adjusted for inflation.<ref name=":5" /> In 2020, the penalties range from $11,665 to $23,331 per violation.<ref>{{Cite web|date=2020-06-23|title=2020 False Claims Act Penalties|url=https://www.whistleblowerllc.com/2020-false-claims-act-penalties/|access-date=2020-06-28|website=Whistleblower Law Collaborative}}</ref>

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There are unique procedural requirements in False Claims Act cases. For example:

# a complaint under the False Claims Act must be filed under seal;<ref name="31 U.S.C. § 3730b2">31 U.S.C. § 3730(b)(2).</ref><ref>{{Cite web|url=http://www.jameshoyer.com/what-does-under-seal-really-mean/|title=What Does "Under Seal" Really Mean?|date=Jun 24, 2013|access-date=Jul 23, 2020|archive-date=September 26, 2020|archive-url=https://web.archive.org/web/20200926050148/http://www.jameshoyer.com/what-does-under-seal-really-mean/|url-status=dead}}</ref>

# the complaint must be served on the government but must not be served on the defendant;<ref name="31 U.S.C. § 3730b2"/>

# the complaint must be buttressed by a comprehensive memorandum, not filed in court, but served on the government detailing the factual underpinnings of the complaint.<ref>The FCA requires each relator to supply the Government with a statement of material evidence ("SME") containing all information and documents they possess that support the FCA allegations. 31 U.S.C. § 3730(b)(2).</ref>

In addition, the FCA contains an anti-retaliation provision, which allows a relator to recover, in addition to his award for reporting fraud, double damages plus attorney fees for any acts of retaliation for reporting fraud against the ~~Government~~government.<ref>31 U.S.C. § 3730(h). To prevail on a § 3730(h) retaliation claim, the relator must establish these three elements: (1) the employee was engaging in conduct protected by the FCA, (2) the employer knew the employee was engaging in protected conduct, and (3) the employer discriminated against the employee because of his or her protected conduct. Id.</ref> This provision specifically provides relators with a personal claim of double damages for harm suffered and reinstatement.<ref>31 U.S.C. § 3730(h).</ref>

Under the False Claims Act, the [[United States Department of Justice|Department of Justice]] is authorized to pay rewards to those who report fraud against the federal government and are not convicted of a crime related to the fraud, in an amount of between 15 and 25 (but up to 30% in some cases) of what it recovers based upon the whistleblower's report.<ref name=Hesch/>{{rp|219}} The relator's share is determined based on the FCA itself, legislative history, Department of Justice guidelines released in 1997, and court decisions.<ref>John C. Moylan. January 2012 [http://www.wyche.com/article/recoveries-and-protections-for-whistleblowers-under-the-false-claims-act Recoveries and Protections for Whistleblowers Under the False Claims Act]</ref>

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==Practical application of the law==

The False Claims Act has a detailed process for making a claim ~~under the Act~~. Mere complaints to the government agency are insufficient to bring claims under the Act. A complaint (lawsuit)

must be filed in a [[U.S. District Court]] (Federal court) ''in camera'' (under seal). The [[United States Department of Justice|Department of Justice]] (DOJ) must thence investigate within 60 days, but it often enjoys several months' worth of extensions by the Court. In this time, the department decides whether it will pursue the case.

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In a 2016 case, ''[[Universal Health Services, Inc. v. United States ex rel. Escobar]]'',<ref>{{Cite web |url=https://www.supremecourt.gov/opinions/15pdf/15-7_a074.pdf |title=Supreme Court Of The United States. Universal Health Services, Inc. v. United States ex rel. Escobar. Certiorari To The United States Court Of Appeals for the First Circuit No. 15–7. Argued April 19, 2016. Decided June 16, 2016 |access-date=October 12, 2017 |archive-date=May 2, 2021 |archive-url=https://web.archive.org/web/20210502142246/https://www.supremecourt.gov/opinions/15pdf/15-7_a074.pdf |url-status=dead }}</ref> the [[Supreme Court of the United States|United States Supreme Court]] sought to clarify the standard for materiality under the FCA. The court unanimously upheld the implied certification theory of FCA liability and strengthened the FCA's materiality requirement.

In a 2023 combined case, ''[[wikisource:U.S._ex_rel._Schutte_v._SuperValu|United States ex rel. Schutte v. SuperValu Inc.]]'' and ''United States ex rel. Proctor v. Safeway'', a unanimous U.S. Supreme Court opinion rejected an attempt to dilute the FCA's "knowledge standard."<ref>{{Cite news |last=Elberg |first=Jacob |date=June 1, 2023 |title=Supreme Court maintains focus on defendant's subjective beliefs in False Claims Act cases |url=https://www.scotusblog.com/2023/06/supreme-court-maintains-focus-on-defendants-subjective-beliefs-in-false-claims-act-cases/ |work=SCOTUS Blog}}</ref> Under the knowledge standard, a defendant is liable under the FCA if a false claim is "knowingly" submitted to the government for payment. The statute defines "knowingly" as acting with actual knowledge, deliberate ignorance, or reckless disregard.<ref>{{Cite news |last=Palvia |first=Tanisha |date=July 6, 2023 |title=SCOTUS clarifies intent requirement for False Claims Act cases |url=https://www.reuters.com/legal/litigation/scotus-clarifies-intent-requirement-false-claims-act-cases-2023-07-06/ |work=Reuters}}</ref> The unanimous opinion found that a defendant is liable if it submits a false claim to the government based on its own knowledge and subjective beliefs — not what an objectively reasonable person may have thought.

In a 2024 case, ''[[Murray v. UBS Securities, LLC]], et al.'' 601 U. S. ____ (2024), a unanimous U.S. Supreme Court endorsed a lower burden of proof for whistleblowers, holding that whistleblowers do not need to prove that an employer acted with "retaliatory intent" in order to be protected under the Sarbanes-Oxley Act. The Supreme Court found that a whistleblower needs only to prove that their actions in making a whistleblower complaint were a "contributing factor" in the employer's unfavorable action.<ref>{{Cite news |last=Hughes |first=Melissa |date=February 15, 2024 |title=U.S. Supreme Court Endorses Low Burden of Proof for Whistleblowers |url=https://www.natlawreview.com/article/us-supreme-court-endorses-low-burden-proof-whistleblowers |work=National Law Review}}</ref> The unanimous opinion found that liability hinges on a defendant’s “knowledge and subjective beliefs” — not what an objective, reasonable person would have thought — at the time they submitted their claims to the government.<ref>{{Cite news |last=Palvia |first=Tanisha |date=June 6, 2023 |title=SCOTUS clarifies intent requirement for False Claims Act cases |url=https://reuters.com/legal/litigation/scotus-clarifies-intent-requirement-false-claims-act-cases-2023-07-06/ |work=Reuters}}</ref>

==State False Claims Acts==

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The largest healthcare fraud settlement in history was made by GlaxoSmithKline in 2012 when it paid a total of $3 billion to resolve four qui tam lawsuits brought under the False Claims Act and related criminal charges.<ref name=":3">{{Cite web|url=https://www.justice.gov/opa/pr/glaxosmithkline-plead-guilty-and-pay-3-billion-resolve-fraud-allegations-and-failure-report|title=GlaxoSmithKline to Plead Guilty and Pay $3 Billion to Resolve Fraud Allegations and Failure to Report Safety Data|date=2012-07-02|website=www.justice.gov|language=en|access-date=2020-01-23}}</ref> The claims include allegations Glaxo engaged in off-label marketing and paid kickbacks to doctors to prescribe certain drugs, including Paxil, Wellbutrin and Advair.<ref name=":3" />

In 2013, [[Wyeth|Wyeth Pharmaceuticals Inc]]., a pharmaceutical company acquired by [[Pfizer|Pfizer, Inc]]. in 2009, paid $490.9 million to resolve its criminal and civil liability arising from the unlawful marketing of its drug [[Sirolimus|Rapamune]] for uses that were not FDA-approved and potentially harmful.<ref>{{Cite web|url=https://www.justice.gov/opa/pr/wyeth-pharmaceuticals-agrees-pay-4909-million-marketing-prescription-drug-rapamune-unapproved|title=Wyeth Pharmaceuticals Agrees to Pay $490.9 Million for Marketing the Prescription Drug Rapamune for Unapproved Uses|date=2013-07-30|website=www.justice.gov|language=en|access-date=2019-08-05}}</ref> The case, ''U.S. ex rel. Sandler and Paris v. Wyeth Pharmaceuticals and Pfizer, Inc.'' was brought by multiple [[whistleblower]]s and culminated in one of the largest False Claims Act recoveries for a single drug.<ref name=":0"/>

In 2014, CareFusion paid $40.1 million to settle allegations of violating the False Claims Act by promoting off label use of its products in the case United States ex rel. Kirk v. CareFusion et al., No. 10-2492. The government alleged that [[CareFusion]] promoted the sale of its drug ChloraPrep for uses that were not approved by the [[FDA]].<ref>{{Cite web|url=https://www.justice.gov/opa/pr/carefusion-pay-government-401-million-resolve-allegations-include-more-11-million-kickbacks|title=CareFusion to Pay the Government $40.1 Million to Resolve Allegations That Include More Than $11 Million in Kickbacks to One Doctor|website=www.justice.gov|date=9 January 2014|language=en|access-date=2017-09-06}}</ref> ChloraPrep is the commercial name under which CareFusion produced the drug [[chlorhexidine]], used to clean the skin before surgery. In 2017, this case was called into question and was under review by the [[United States Department of Justice|DOJ]] because the lead attorney for the DOJ serving as Assistant Attorney General in the case, Jeffery Wertkin, was arrested by the FBI on January 31, 2017, for allegedly attempting to sell a copy of a complaint in a secret whistleblower suit that was under seal.<ref>{{Cite web|url=http://www.nationallawjournal.com/id=1202778867156/Whistleblower-Lawyers-Fret-Over-Leaks-After-Akin-Gump-Partners-Arrest|title=Whistleblower Lawyers Fret Over Leaks After Akin Gump Partner's Arrest|website=National Law Journal|access-date=2017-09-06}}</ref><ref>{{Cite web|url=http://fortune.com/2017/02/08/fbi-lawyer-whistleblower/|title=Lawyer Charged for Trying to Sell Secret Tech Whistleblower Case|last=Roberts|first=Jeff John|website=Fortune|access-date=2017-09-06}}</ref>

In 2017, bio-pharmaceutical giant [[Celgene|Celgene Corporation]] paid $240 million to settle allegations it sold and marketed its drugs [[Thalidomide|Thalomid]] and [[Lenalidomide|Revlimid]] off-label in ''U.S. ex rel. Brown v. Celgene'', CV 10-03165 (RK) (C.D. Cal.).<ref>{{Cite web|url=https://www.justice.gov/usao-cdca/pr/celgene-agrees-pay-280-million-resolve-fraud-allegations-related-promotion-cancer-drugs|title=Celgene Agrees to Pay $280 Million to Resolve Fraud Allegations Related to Promotion of Cancer Drugs For Uses Not Approved by FDA|date=2017-07-25|website=www.justice.gov|language=en|access-date=2019-08-05}}</ref> The case, brought by former Celgene sales representative, Beverly Brown,<ref name=":0"/> alleged violations under the False Claims Act including promoting Thalomid and Revlimid off-label for uses that were not [[FDA approval|FDA-approved]] and, in many cases, unsafe and not [[Medical necessity|medically necessary]], offered illegal [[Kickback (bribery)|kickbacks]] to influence healthcare providers to select its products, and concealed potential [[adverse event]]s related to use of its drugs.<ref name=":0">{{Cite press release|url=https://www.prnewswire.com/news-releases/bio-pharma-giant----celgene----settles-case-alleging-marketing-violations-for-280-million-300494044.html|title=Bio Pharma Giant -- Celgene -- Settles Case Alleging Marketing Violations For $280 Million|date=July 25, 2017|publisher=Guttman, Buschner & Brooks PLLC|via=PR Newswire|access-date=2019-08-05}}</ref>

In 2021, A South Carolina pain management company was ordered to pay $140 million under the False Claims Act after a judge in U.S. district court found it in default after fraud schemes.<ref>{{Cite web |date=2021-11-22 |title=South Carolina Chiropractor Pleads Guilty and Agrees to $9 Million False Claims Act Consent Judgment |url=https://www.justice.gov/opa/pr/south-carolina-chiropractor-pleads-guilty-and-agrees-9-million-false-claims-act-consent |access-date=2022-07-27 |website=www.justice.gov |language=en}}</ref><ref>{{Cite web |title=Brown, LLC Assists in Obtaining $140M False Claims Act Judgment |url=https://ifightforyourrights.com/latest-news/brown-llc-assists-in-obtaining-140m-false-claims-act-judgment/ |access-date=2022-07-27 |website=Brown, LLC |language=en-US}}</ref><ref>{{Cite web |last=Herrington |first=Caitlin |title=Upstate SC pain clinic owes $140M after judge finds it in default after 'fraud schemes' |url=https://www.greenvilleonline.com/story/news/2021/09/09/sc-pain-clinic-ordered-pay-140-million-oaktree-firstchoice-pma-labsource-daniel-mccollum/5683477001/ |access-date=2022-07-27 |website=The Greenville News |language=en-US}}</ref>▼

▲In 2021, A South Carolina pain management company was ordered to pay $140 million under the False Claims Act after a judge in U.S. district court found it in default after fraud schemes.<ref>{{Cite web |date=2021-11-22 |title=South Carolina Chiropractor Pleads Guilty and Agrees to $9 Million False Claims Act Consent Judgment |url=https://www.justice.gov/opa/pr/south-carolina-chiropractor-pleads-guilty-and-agrees-9-million-false-claims-act-consent |access-date=2022-07-27 |website=www.justice.gov |language=en}}</ref><ref>{{Cite web |title=Brown, LLC Assists in Obtaining $140M False Claims Act Judgment |url=https://ifightforyourrights.com/latest-news/brown-llc-assists-in-obtaining-140m-false-claims-act-judgment/ |access-date=2022-07-27 |website=Brown, LLC |language=en-US}}</ref><ref>{{Cite web |last=Herrington |first=Caitlin |title=Upstate SC pain clinic owes $140M after judge finds it in default after 'fraud schemes' |url=https://www.greenvilleonline.com/story/news/2021/09/09/sc-pain-clinic-ordered-pay-140-million-oaktree-firstchoice-pma-labsource-daniel-mccollum/5683477001/ |access-date=2022-07-27 |website=The Greenville News |language=en-US}}</ref>

In 2023, a private equity firm agreed to pay $9 million to settle alleged False Claims Act violations that they unlawfully distributed Subsys, a potent, rapid-onset fentanyl sublingual spray, in violation of the Controlled Substances Act.<ref>{{Cite web |date=2023-07-23 |title=Fentanyl Qui Tam Settlement for $9 Million |url=https://young-lawgroup.com/fentanyl-qui-tam-lawsuit/ |access-date=2023-07-12 |website=www.young-lawgroup.com |language=en}}</ref>

==See also==