The next series of posts are authored by Stacy Morris, a partner in LDM’s litigation department.  Mr. Morris has agreed to draw upon his experiences with the False Claims Act to provide information about the growing issues for businesses and individuals.

By Stacy Morris:

A recent opinion from the D.C. Circuit illustrates not only the reach of the False Claims Act (31 U.S.C. § 3729-3733 “FCA”), but a reason why we may see even more of those types of claims in the future.  To understand the implications of a whistleblower claim under the FCA, it is helpful to have a basic understanding of the recent evolution of the FCA. Part I of this post will provide a quick background of this expansive legislation, while Part II, next Tuesday, will reveal why the FCA is such a powerful tool and why it is likely to continue being so in light of the D.C. Circuit’s recent opinion.

In 2011, Verizon agreed to pay $93.5 million stemming from a 2007 FCA lawsuit, U.S. ex rel. Shea v. Verizon Communications, Inc., relating to Verizon’s billing practices involving surcharges.  Private citizens have standing to pursue a suit alleging violations of the FCA, and are statutorily entitled to a percentage of any recovery.  On February 23, 2012, the D.C. Circuit even entered an order raising the percentage of the recovery for the person responsible for bringing to light the claims against Verizon.  Mike Scarcella of The Blog of LegalTimes reports in more detail about the case.

The FCA, enacted during the Civil War to curb perceived fraud against the government, is perhaps the most powerful weapon used to prosecute false claims submitted in government programs.  To give an example of just how powerful, the government claims to have recovered $8.7 billion in settlements and judgments over the last three years alone.  As far-reaching as it is, the FCA “was not intended to impose liability for every false statement made to the government.”  Hutchins v. Wilentz, Goldman & Spitzer, 253 F.3d 176 (3rd Cir. 2001).  Rather,  “only those actions by the claimant which have the purpose and effect of causing the United States to pay out money it is not obligated to pay, or those actions which intentionally deprive the United States of money it is lawfully due, are properly considered ‘claims’ within the meaning of the FCA.”  Costner v. URS Consultants, Inc., 153 F.3d 667, 677 (8th Cir. 1998).

While the FCA seeks to impose liability for a wide variety of acts, three provisions, found at 31 U.S.C. §3729(a)(1)(A)-(C), are frequently cited in FCA lawsuits:

  1. Section 3729(a)(1)(A) imposes liability upon any person who: “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval.”
  2. Section 3729(a)(1)(B) imposes civil liability on any person who “knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim.”
  3. Section 3729(a)(1)(C) imposes civil liability on persons who conspire to defraud the Government by getting a false or fraudulent claim allowed or paid.

In the next installment of these posts, I will discuss each of these provisions in more depth.