False Claims Act History

The False Claims Act (FCA) came about as a response to widespread abuses by government contractors during the Civil War. This 1863 “Lincoln Law” was rarely used until 1986 when amendments were enacted that strengthened the law and increased monetary awards for whistleblowers willing to expose fraud involving federally funded contracts or programs.

The False Claims Act in Healthcare Fraud

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When Was The False Claims Act Enacted?

The False Claims Act has been helping to uphold the integrity of the federal fisc for over 150 years. This federal Whistleblower Statute was passed in 1863 at the urging of President Abraham Lincoln, whose Union Army was being routed by the Confederate Army, despite its inferior size and resources. War profiteers were defrauding the Union by selling crates filled with sawdust instead of muskets, selling sick mules, selling substandard uniforms, and selling rotten food supplies. 

President Lincoln pushed for passage of a law that created incentives for private individuals to combat fraud against the Union and gave the Government an effective remedy against fraud. Thus, the False Claims Act of 1863 (the “Original FCA”) was born.

Qui Tam Laws and the Original “Lincoln Law”

Under the original FCA, citizens were deputized as private attorney generals, and they were compensated for their work by receiving 50% of the money their lawsuits recovered for the Treasury. The original FCA provided for the assessment of double damages and a $2,000 civil penalty for every false claim submitted.

Lincoln adopted the qui tam concept from contemporary American statutes that, in turn, had incorporated the notion from Anglo-Saxon jurisprudence. Qui tam laws were common in the Middle Ages because there was no organized police force or other law enforcement to maintain law and order. Instead, the public was enlisted through monetary incentives to police wrongdoing. 

The term “qui tam” stands for this longer Latin phrase:

qui tam pro domino rege quam pro se ipso in hac parte sequitur 


“He who pursues this action on our Lord the King’s behalf as well as his own.”

Revisions and 1943 Amendments to the False Claims Act

The original FCA was successful at helping combat fraud against the federal government into the 20th century, but its qui tam provisions underwent drastic amendment by Congress in 1943 at the height of World War II. The guaranteed 50% share was eliminated, and the amended law instead gave the court discretion to award as little as nothing and at most 25% of the funds recovered. 

Further, a qui tam case was not permitted “whenever it shall be made to appear that such suit was based upon evidence or information in the possession” of the federal government. As a result, even when the federal government possessed the requisite information but was not acting on it, a qui tam case could not go forward. Thus, qui tam cases became virtually nonexistent after 1943.

Growing Fraud in the 1980s and Reconsidering the FCA

While use of the FCA declined in the years after 1943, fraud against the federal fisc grew exponentially. In 1985, 45 of the 100 largest defense contractors, including 9 of the top 10 largest, were under investigation for multiple fraud offenses. Moreover, several of the largest defense contractors were convicted of criminal offenses. Misconduct was not limited to defense contractors, however. 

The Department of Health and Human Services received nearly triple the number of referrals of program fraud cases in the mid-1980s. Yet, despite the increased government resources directed at the problem, Department of Justice records indicated that most fraud referrals were either not fully investigated, or not prosecuted. As a result, public funds lost to fraud remained largely un-recovered. At the time, the Department of Justice estimated that fraud was draining up to 10% of the entire federal budget.

Why Was The False Claims Act of 1986 Enacted?

The widespread reports that the United States Treasury was being repeatedly bilked and that federal prosecutors alone could not keep pace with the investigation and prosecution of meritorious cases, led to amendments to the False Claims Act in 1986. These amendments rejuvenated qui tam lawsuits, by modifying the law to encourage whistleblower incentives.  For example, the automatic bar against cases about which the federal government possessed information was removed from the statute. 

The successful qui tam plaintiff became guaranteed, subject to several disqualifiers including the public disclosure and first-to-file legal bars, to at least 15%and up to 30% of the total recovery. In addition, a  special section was added to this “Modern FCA” that provided whistleblower protection for employees from retaliation. This Modern FCA also increased the cost of defrauding the Treasury, to treble damages.

Reasons for the 1986 FCA Amendments

  1. In 1981, the United States General Accounting Office (“GAO”) estimated that the federal government lost between $150-$200 million in the relatively few fraud schemes that were detected. The GAO estimated losses from undetected fraud in the tens of billions of dollars.1
  2. Congress acknowledged that the federal government was sustaining enormous losses due to fraud schemes. In 1980, the Department of Justice reported that between one and ten percent of the entire federal budget was lost to fraud, but that only a small fraction of the total estimated fraud losses were recovered.

    There was therefore a clear at that point of the  enormity of the fraud on the federal government, coupled with a lack of meaningful recoveries.2 No one knows exactly how much public money is lost to fraud, but estimates from those who have studied the issue, including the General Accounting Office, Department of Justice, and  Inspectors General, range from hundreds of millions of dollars to more than $50 billion per year.3
  3. Congress believed that the federal government did not have adequate resources to detect the fraud. Congress was concerned with the ability of the federal government to adequately protect the United States Treasury against growing and sophisticated fraud. The Senate Report leading up to the Modern FCA provided the following:

[T]he Federal government has a big job on its hands each year… [the] job is simply too big if government officials are working alone.4

Congress explicitly encouraged Government and qui tam Relators to work together, thus bringing more legal resources…to bear against those who defraud the government.5

Through hearings and research on Government fraud, the Committee has sought and is continuing to seek out the reasons why fraud in Government programs is so pervasive, yet seldom detected, and rarely prosecuted. It appears that there are serious roadblocks to obtaining information as well as weaknesses in both investigative and litigative tools.

In an effort to correct some of those weaknesses, the Committee has reviewed the Government’s remedies against false claims and developed the legislative improvements embodied in S. 1562. S. Rep. No. 345, 99th Cong., 2nd Sess. 3 (1986).

  1. Congress believed that private citizens, with their counsel, could assist enforcement efforts of the federal government.The House Report continued:

The law we vote on today is intended to encourage a working partnership between the Government and the qui tam plaintiff. The public will be well-served by having more legal resources brought to bear against those who defraud the government… If the Government can pass a law that will increase the resources available to confront fraud against the Government without paying for it with taxpayers’ money, we are all better off. This is precisely what [the False Claims Act] is intended to do: deputize ready and able people who have knowledge of fraud against the government to play an active and constructive role through their counsel to bring to justice those contractors who overcharge the government.6

The 1998 Holder Memorandum & DOJ Targeted Industries

In the late 1990s, concerns were raised in the healthcare industry that the United States Department of Justice was being overly aggressive in its application of prosecutorial discretion arising out cases initiated under the  False Claims Act. In response, on June 3, 1998, then-Deputy Attorney General Eric Holder circulated a memorandum to his Justice Department colleagues, providing “guidance” on the proper use of the False Claims Act in civil healthcare matters. 

Holder recognized that the False Claims Act was one of the most powerful tools the Department of Justice had to protect the integrity of Medicare and other taxpayer-funded healthcare programs. Of particular note, Holder stressed that the False Claims Act should be reserved for egregious conduct of defrauding government healthcare programs.

Today, more than two decades later, the Holder memorandum remains a guiding document for the Department and, by extension, the qui tam community. In practice, this means that the Justice Department and Healthcare Fraud Attorneys focus efforts on egregious healthcare fraud schemes which result in significant government damages and/or patient harm. 

Such schemes tend to be business-plan frauds conjured up from the highest levels of  some of the country’s largest healthcare providers. Since 1986, there has been a long line of enforcement actions against diagnostic lab companies, pharmaceutical and medical device manufacturers, hospital systems and other national providers, all of which in total comprise the source of the largest recoveries in recent years.

For over a decade, Medicare fraud, together with other federally-funded healthcare programs,  has comprised over 80% of False Claims Act recoveries.

2009 FCA Amemendments

Further legislative amendments occurred in 2009, and Jeb White, then-Executive Director of Taxpayers Against Fraud, heavily contributed to their success. As a result, on May 20, 2009, President Obama signed the Fraud Enforcement and Recovery Act of 2009, which included amendments to the Modern FCA – the first update since 1986. 

The legislation closed several liability loopholes, making it easier for qui tam relators to bring and maintain False Claims Act lawsuits on behalf of the federal government. The legislation also provided for more workable and simplified investigative tools to investigate qui tam lawsuits.

False Claims Act recoveries, since the enactment of the Modern FCA, now total more than $60 billion, and the majority involve federally-funded healthcare fraud, led by Medicare Fraud. These healthcare enforcement efforts not only recover money for the federal healthcare programs but also deter fraud schemes that endanger patients and help drive up healthcare costs.

2012: Marking 25 Years Since the FCA of 1986

On January 31, 2012, the Department of Justice celebrated the 25th Anniversary of the False Claims Act Amendments of 1986 with a ceremony held in The Great Hall, Robert F. Kennedy Justice Building, Washington D.C. (and attended by Nolan Auerbach & White attorneys).

The Press Release statement from the Depart Department of Justice Office of Public Affairs begins:

The law we vote on today is intended to encourage a working partnership between the Government and the qui tam plaintiff. The public will be well-served by having more legal resources brought to bear against those who defraud the government… If the Government can pass a law that will increase the resources available to confront fraud against the Government without paying for it with taxpayers’ money, we are all better off. This is precisely what [the False Claims Act] is intended to do: deputize ready and able people who have knowledge of fraud against the government to play an active and constructive role through their counsel to bring to justice those contractors who overcharge the government.

Frequently Asked Questions: Legislative History of the False Claims Act

Who Created the False Claims Act?

The False Claims Act (FCA) was created by the administration of President Abraham Lincoln, and is commonly referred to as the “Lincoln Law.”

When Was the False Claims Act Passed?

The FCA was first enacted in 1863. Significant amendments by Congress were made in 1943 eliminating the guaranteed 50% share. The FCA was overhauled once again with amendments in 1986, rejuvenating qui tam actions in several ways.

Why Was The False Claims Act Created?

The FCA was created to incentivize private individuals to help combat fraud against the federal government.

More FCA Resources


1. [GAO Report to Congress, A Fraud in Government Programs: How Extensive is it? How Can it be Controlled?, 1-15 (1981)]

2. [S. Rep. No. 345, 99th Cong., 2nd Sess. 3 (1986)]

3. [ibid.]

4. [132 Cong. Rec. S11,243 (Aug 11, 1986) (remarks of Sen. Grassley)]

5. [Cong. Rec. H9382-83 (Oct 7, 1986)]

6. [132 Cong. Rec. H9382-83 (October 7, 1986)]

Kathleen Hawkins

Dignity Health
$37 million

Kathleen Hawkins, RN MSN, had been employed by Defendant, Catholic Healthcare West (CHW) for approximately 6 years when she decided she had had enough of trying to change the hospital system from within.

CHW, a California not-for-profit corporation that operated hospitals in California, Arizona, and Nevada, was at the time the eighth largest hospital system in the nation and the largest not-for-profit hospital provider in California.


Joe Strom

Johnson & Johnson
$184 Million

Joe Strom contacted us in 2005. We were very grateful that he did. We immediately formed an all-star legal team and a process to stop a very harmful pharmaceutical marketing strategy. It was this process we set into motion that ultimately returned hundreds of millions of dollars to the U.S. Treasury, and a portion of that, very well-deserved, into Joe’s bank account.

Joe told us a very troubling story about the off-label promotion of a pharmaceutical drug for patients who already suffered from chronic heart failure.


Bruce A. Moilan Sr.

$27 Million

Bruce Moilan was a seasoned hospital systems expert by the time he contacted our Firm. At the time he decided to file his qui tam lawsuit, he was employed by South Texas Health System as a System Director for Materials Management. In this position, he oversaw $24 million in annual purchases of supplies and equipment and helped determine budget, reduction and cost analysis throughout the contract bidding and negotiations process. His job was to insure proper implementation for purchasing, receiving and management of inventory, for McAllen Hospitals, L.P.


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