Reasons for the False Claims Act

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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The False Claims Act (FCA) was originally enacted in 1863 as a response to widespread abuses by government contractors during the Civil War.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.

The reasons for the 1986 Amendments included:

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 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).

2. 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).

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.

[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 embodies in S. 1562. S. Rep. No. 345, 99th Cong., 2nd Sess 3 (1986).

4. 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).