The article concerns a proposed Senate bill that seeks to reform the False Claims Act (FCA), which is a federal law that imposes liability on federal contractors who defraud governmental programs. It is the primary litigation tool used by whistleblowers to combat fraud against the government. According to a Department of Justice report, the federal government has used the FCA to recover more than $62 billion since 1987.
The bipartisan False Claims Amendments Act of 2021 was introduced in the US Senate on July 26, 2021. It requires defendants to present "clear and convincing" evidence to rebut a showing by a whistleblower or the government that an alleged false claim is material to the government's decision to reimburse a contractor for their payment claim. The legislation is aimed at strengthening the government's enforcement actions under the FCA, but some think it may have the opposite effect due to conflicting and potentially unconstitutional language that may elevate a defendant's position.
Proving the materiality of an alleged false claim is a key issue that emerged from the U.S. Supreme Court's landmark Escobar decision in 2016. Lawmakers led by Sen. Chuck Grassley, R-Iowa, argued that "fraudster" defendants have taken advantage of confusion in lower courts interpreting the high court's ruling. Defendants have latched onto language from the ruling to wrongly escape FCA cases based solely on the government continuing to pay claims made by a contractor despite knowing about their alleged falsity, Grassley said.
Mr. Chizewer told Law360 that “by focusing on whether a government decision to pay is material, rather than on reaffirming the broader principle of the FCA that a contractor can’t falsely claim money it knows it’s not entitled to, the bill overemphasizes one aspect of the Escobar ruling. While this [bill] may fix a big part of the problem, and it may be a good practical political solution, I think it still feeds into the unfortunate emphasis on the government’s payment conduct.”
In Escobar, the relevant line states that the government’s continued payment despite knowledge of an alleged false claim is “very strong evidence” that a claim is not material. "That line, despite coming in a case that was unanimously decided in favor of the relator, has received so much favorable play by defendants and should be considered a miscomprehension of the proper role of the court," Chizewer said.
The legislation is worth watching due to the significant amendments to the FCA and potential implications that may reverse gains made by defendants in FCA cases. If enacted, the legislation would make these changes effective retroactively to pending cases within the date of the legislation’s enactment.