Reasons for the False Claims Act
See also “What is a False Claim?”
The False Claims Act (FCA) was originally enacted in 1863 as a response to widespread abuses by government contractors during the Civil War. The law was rarely used until 1986, when amendments were enacted that strengthened the law and increased monetary awards for whistleblowers.
The reasons for the 1986 Amendments included:
- 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 it detected. The GAO estimated losses from undetected fraud in the tens of billions of dollars. See: GAO Report to Congress, A Fraud in Government Programs: How Extensive is it? How Can it be Controlled?, 1-15 (1981).
- Congress acknowledged that the federal government was sustaining enormous losses due to fraud schemes. In 1980, the United States 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. This estimate showed the enormity of the fraud on the federal government and the lack of any meaningful governmental control over the fraud. S. Rep. No. 345, 99th Cong., 2nd Sess. 3 (1986). No one knows, of course, exactly how much public money is lost to fraud. 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. S. Rep. No. 345, 99th Cong., 2nd Sess. 3 (1986).
- 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:
[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. 132 Cong. Rec. S11,243 (Aug 11, 1986) (remarks of Sen. Grassley).
Congress explicitly encouraged Government and qui tam Relators to work together, thus bringing more legal resources…to bear against those who defraud the government. Cong. Rec. H9382-83 (Oct 7, 1986).
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).
- Congress believed that private citizens, with their counsel, could assist enforcement efforts of the federal government.
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.
132 Cong. Rec. H9382-83 (October 7, 1986).
On January 31, 2012, the Department of Justice celebrated the 25th Anniversary of the False Claims Act Amendments of 1986. Nolan Auerbach & White attorneys attended the ceremony held in The Great Hall, Robert F. Kennedy Justice Building, Washington D.C.
Department of Justice
Office of Public Affairs
FOR IMMEDIATE RELEASE
Tuesday, January 31, 2012
Justice Department Celebrates 25th Anniversary of False Claims Act Amendments of 1986
Considered Single Most Important Tool U.S. Taxpayers Have to Recover Funds Lost Due to Fraud Against the Government
The Justice Department today celebrated the 25th anniversary of the 1986 amendments to the False Claims Act. The False Claims Act has been called the single most important tool that American taxpayers have to recover funds when false claims are made to the federal government, including healthcare fraud, mortgage fraud, and procurement fraud.
“In the last quarter century, the False Claims Act’s success has been unparalleled with more than $30 billion dollars recovered since it was amended in 1986 and $8.8 billion since January 2009,” said Attorney General Eric Holder. “In these challenging economic times when resources are scarce, government budgets are being tightened, and so many Americans are forced to do more with less, the need to act as sound stewards of every taxpayer dollar has never been more clear or more urgent. The Department of Justice has achieved record recoveries in recent years and we will continue to aggressively pursue those who would take advantage of their fellow citizens.”
The False Claims Act was originally passed by Congress during the administration of President Abraham Lincoln in 1863 to help the government recover federal funds stolen through fraud by U.S. government contractors. During the Civil War, the law was used to recover monies from unscrupulous contractors who sold the Union Army decrepit horses and mules in ill health, faulty rifles and ammunition, and rancid rations and provisions.
In 1986, Senator Charles Grassley and Representative Howard Berman led successful efforts in Congress to amend the False Claims Act. The amendment permitted the government to seek treble damages and revised the statute’s qui tam, or whistleblower, provisions to increase the incentives for whistleblowers to come forward with allegations of fraud. Since those changes were enacted, the Justice Department has recovered more than $30 billion under the act.
On this, the 25th anniversary of the 1986 amendments, Assistant Attorney General of the Civil Division of the Department of Justice, Tony West, paid tribute to the bill’s sponsors, thanking them for “their foresight in providing the Department with this powerful tool to fight fraud, waste, and abuse.” He also expressed his gratitude to Senator Patrick J. Leahy, Chairman of the Senate Judiciary Committee, and to Senator Grassley and Representative Berman for their support of the Fraud Enforcement and Recovery Act of 2009, which made additional improvements to the False Claims Act and other fraud statutes.
“One need look no further than the record recoveries this department has obtained in civil fraud cases to demonstrate the tremendous importance and effectiveness of the False Claims Act,” said Assistant Attorney General West. “That framework was put in place in 1986, but our successes would not have been possible without the ongoing efforts and collaboration of career civil servants, private counsel, and, of course, the whistleblowers who come forward to report fraud.”