False Claim Basics

Whistleblower Defense Sidebar

What is the False Claims Act?

The False Claims Act is the United States Government’s primary means for attacking alleged fraud by entities and individuals involved in government contracts and programs.  Companies confronting these claims face the highest stakes possible, including significant monetary penalties, treble damages, exclusion and debarment from government programs and even potential criminal sanctions. 

Originally enacted during the Civil War, the False Claims Act was revitalized in 1986 by Congress, precipitating a wave of litigation that continues unabated.  The law has been used to prosecute defense contractors, subcontractors, health care providers, pharmaceutical companies, financial institutions, education grant recipients and other entities that are compensated or reimbursed by the United States Government.

Under the qui tam provisions of the False Claims Act, whistleblowers (known as relators) bringing suit on behalf of the government are motivated by potentially significant financial rewards — including up to 30% of any recovery.  A qui tam claim can trigger civil, administrative and criminal litigation, often simultaneously.  Qui tam claims are filed and initially proceed “under seal” and without the knowledge of the defendant.  After a period of investigation of the claims asserted by the relator, the government may decide to prosecute the case, or the whistleblower may continue the case on his own.  With the possibility of treble damages, penalties of up to $11,000 per false claim, and potential suspension, exclusion or debarment, the consequences to a business can be can be catastrophic.