The Government Revamps Its Weapon Against False Claims: The New Amendments To The False Claims Act

Federal government funding now comes with increased potential

liability and treble damages exposure for a broader scope of

entities as a result of new amendments to the federal False Claims

Act ("FCA"),1 signed into law last week by

President Obama. All government contractors and subcontractors,

healthcare providers, public and private grantees and sub-grantees,

and other entities doing business with the federal Government or

with an entity that receives federal funds, should be mindful of

these changes. The Government has recovered more than $21 billion

from FCA actions since the last substantial amendments to the FCA

in 1986, and over two-thirds of those recoveries were from the

healthcare industry alone. These new amendments expand the scope of

parties potentially liable for treble damages, narrow available

defenses, and otherwise strengthen one of the Government's most

successful civil weapons in its fight against suspected fraud on

the United States.

Amendments to Liability Provisions

The FCA imposes liability on any person or entity that makes a

false "claim" or false statement to obtain federal funds.

The qui tam provisions of the FCA permit a whistleblower

to file an FCA action on behalf of the United States in exchange

for protection from retaliatory action and a bounty if the action

results in a monetary recovery. In actions by either the Government

or a whistleblower, proven damages are automatically trebled unless

the defendant made a voluntary disclosure to the Government

concerning the alleged wrongdoing. The new amendments now make it

easier for the Government and whistleblowers to successfully

prosecute FCA claims, and thus to recover significant damages.

First, the new amendments, entitled the Fraud Enforcement and

Recovery Act of 2009 ("FERA"), enable prosecuting parties

to circumvent the U.S. Supreme Court's unanimous decision in

Allison Engine v. United States ex rel.

Sanders.2 In that case, the Supreme Court limited

the reach of FCA liability by holding that a defendant must have

the specific intent "to get" a false claim "paid or

approved by the government." FERA, however, eliminates the

provision interpreted by the Supreme Court to require specific

intent and replaces it with the less demanding requirement that a

false statement be "material" to a false claim. The term

"material" is broadly defined to mean "having a

material tendency to influence, or be capable of influencing, the

payment or receipt of money or...