During the Civil War, unscrupulous defense contractors drained the U.S. Treasury with impunity. In response, Congress and President Abraham Lincoln enacted the False Claims Act (FCA) to unleash whistleblowers to help the government suppress fraud that was plaguing the Union Army. During World War II, Congress overreacted to a situation in which a False Claims Act suit was filed based entirely on the information in a government indictment. In response, Congress weakened the law and limited relators' ability to sue on the Government's behalf. The amendments to the False Claims Act made at that time had the unfortunate effect of disabling the FCA at the very moment when government programs entered an era of major growth. Not surprisingly, without whistleblowers to unravel the inner workings of fraudulent schemes, federal law enforcement officials were overwhelmed by fraud and outmatched by a well-funded army of dishonest government contractors. The FCA was revived in 1986 after congressional hearings and GAO reports exposed rampant fraud in the defense industry. Senator Charles Grassley and Congressman Howard Berman collaborated to push amendments through Congress that President Ronald Reagan signed into law, reenlisting whistleblowers in a national effort against fraud. Congress's intent was to reinstate a “coordinated effort” between private citizens and the government, so as to “enhance the Government's ability to recover losses sustained through fraud against the Government.” This publication chronicles the False Claims Act's remarkable success over the last twenty-five years, and highlights the pivotal role whistleblowers have played in recovering over $30 billion in stolen funds.
The Success of The False Claims Act.
The government's partnership with private citizens in the fight against fraud was cemented in 1986, when Congress amended the False Claims Act, the United States' primary tool against government fraud. — Tony West, Assistant Attorney General of the United States The False Claims Act is the most successful fraud-fighting tool ever developed. Its success is due to the efficiency of law enforcement, made possible by the public-private partnership that exists between whistleblowers, their attorneys, and the United States Government. Since the 1986 Amendments were passed, with bipartisan support in both houses of Congress, fraud recoveries have risen dramatically.Today, whistleblower actions under the False Claims Act are the primary vehicle for fraud recoveries for both federal and state governments. An analysis of recoveries in the health arena finds that the U.S. Government gets back $15 for every $1 invested in False Claims Act investigations and prosecutions. In Fiscal Year 2010, over $3 billion was recovered under the False Claims Act—twice as much as was recovered in FY 2000. Of this amount, nearly 80% was recovered as a direct result of whistleblower lawsuits—a total of $2.39 billion. Since the 1986 amendments to the False Claims Act, more than $30 billion has been recovered in judgments and settlements.
Blowing the whistle is not easy...
But nothing works better to deter fraud. Because most False Claims Act lawyers work on a contingency basis (i.e., they only get paid if they return money back to the Government), frivolous lawsuits are discouraged. The False Claims Act provides cost-effective law enforcement. Because so many False Claims Act cases are based on whistleblower evidence, the FCA has proven to be an extremely effective and efficient law enforcement tool, returning in settlements and judgments many multiples of what is spent on investigations and prosecutions. The False Claims Act changes how corrupt businesses operate. Prosecutions, settlements and judgments under the False Claims Act often have a ripple effect across industries where frauds have become an entrenched part of the business model. From hospitals to drug companies, and from oil companies to defense contractors, prosecutions under the False Claims Act are a clear sign that the government is no longer winking at liars, thieves and cheats. Whistleblowers are paid by the fraudsters. In recognition of the value of the information collected and given to the Federal Government by whistleblowers, the False Claims Act provides for a whistleblower award of 15 to 30 percent of the amount recovered under the Act. Since damages can be tripled under the False Claims Act, whistleblower awards can be sizeable, but one hundred percent of all whistleblower awards are paid by the company that loses or settles a False Claims Act suit.