Originally enacted during the Civil War in response to rampant fraud by contractors who sold the Union Army inferior goods or services, the False Claims Act prohibits the submission to the federal government of any false or fraudulent claim for payment. Submitting a false claim can result in both civil and criminal penalties.
To be convicted under the criminal false claims statute, a defendant must make or present a false, fictitious, or fraudulent claim for payment to a department of the United States. And he must have done so with “specific intent” to violate the criminal statute.
A claim is simply a demand for money or property from the U.S. government. For example, a claim would include medical bills submitted for payment under Medicare, an invoice for the delivery of goods or services bought by the government, invoices for goods or services provided under a competitively awarded contract, or an application for a government grant or loan.
A false claim is simply a demand for money or property that is based on a material falsehood or a fraud. To use the examples above, a false claim would result: when the medical bill submitted to Medicare seeks payment for procedures the doctor did not actually perform; when the goods or services do not conform to the representations made by the seller; when the competitively awarded contract was procured through bid-rigging or fraud; or when the loan or grant application contains false statements.
A claim is made or presented to a department of the United States when it is actually and physically placed before the government for payment. The defendant need not actually deliver the claim to the government; it can pass through an intermediary. For example, a subcontractor who submits an invoice to a prime contractor can still violate the act if the prime contractor ultimately passes those costs on to the government for payment.
Finally, the defendant must have “specific intent” to violate the criminal statute. Specific intent requires that the defendant intend to violate the law or that he acted with consciousness that his actions were improper. To meet that requirement, a defendant need not be aware of the specific statute criminalizing his behavior. But he must have submitted the false claim with the purpose of defrauding the government or receiving payment to which he knew he was not entitled. If the defendant genuinely believes that the claim is accurate and correct, he cannot be convicted of submitting a false claim.
To be held liable for a civil violation of the False Claims Act, the government must – as in a criminal case – show that the defendant made or presented a false, fictitious, or fraudulent claim for payment to a department of the United States. A civil violation does not require specific intent to defraud the government, however. Rather, the government must only show that the individual knew the information was false. The government can satisfy this knowledge requirement by showing that the defendant deliberately avoided learning about, or that he acted with reckless disregard of, the truth or falsity of the information.
Although civil liability for submitting a false claim won’t result in imprisonment, the consequences can still be severe. A defendant can be required to pay up to three times the amount of damages suffered by the government as well as additional civil penalties and fines. Those add up quickly. In 2017 alone, the Department of Justice collected $3.7 billion in damages and fines under the False Claims Act. A False Claims Act violation can also be grounds for suspension and/or debarment – an administrative sanction that prohibits an individual or company from contracting with the government.
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