Reporting False Claims

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Prior to Making an Accusation of Claims Fraud

Before making an accusation against a contractor under claims fraud, understand first what a false claim is. Short-titled the “Lincoln Law,” under the False Claims Act (31 U.S.C. § 3729–3733) a non-government affiliated party may file an action against a federal contractor for claims fraud committed against the government (The Free Dictionary, Farlex, 2013). Supplements and journals generalize cases under the Fair Claims Act, infamously known as “whistleblowing,” but filing the action itself can prove rather difficult. Lawful jurisdiction of the Act is examined in the federal court system. Therefore, a party must follow Federal Rules of Civil Procedure for commencing the action.

Examination of Requirements

Although, the False Claims Act is upheld under federal jurisdiction, the Act was constructed to require specific provisions: (1) the complaint must be filed under seal; (2) service of process upon the federal government, but not the defendant; (3) the complaint must be buttressed by a comprehensive memorandum, not filed in court, detailing the factual underpinnings of the complaint. Matters of law are further complicated because the Fraud Enforcement and Recovery Act of 2009 (“FERA”) possibly expanded “liabilities” of the FCA (The Free Dictionary, Farlex, 2013).

Application of Law

“Liability” is key in determining whether a violation has occurred. Working backwards, there are six liabilities under which a claim is possible (Legal Information Institute, Cornell University Law School, 2013): (1) knowingly presenting or causing the presentation of false or fraudulent claims for payment or approval; (2) knowingly makes use or causes the use of a false record or statement for payment of approval; (3) conspires to commit a violation to seek payment or approval under subparagraphs (A-G); (4) while in possession of money belonging to, used by, or for delivery to the Government, for which less is received; (5) knowingly falsifying documents or receipts of property belonging to the Government; (6) unauthorized receipt of property, or debt belonging to the Government; (7) and knowingly makes use of or transmit obliged payments or debts belonging to the Government.

Civil penalties can range between $5,000 and $10,000 which is also subject to inflation under the Federal Civil Penalties Inflation Adjustment Act of 1990 (28 U.S.C. 2461 note; Public Law 104–410). If found guilty, the Government can be awarded damages three times the amount. Providing all required documents or retrieving all information requested within thirty days can reduce the penalties. Additionally, the defendant must be free and clear of pending cases or criminal acts before the court is permitted to reduce damages. However, the law still notes even under reduced damages, the government is awarded not less than three times the amount.

How to Protect Yourself

Protection from any fraud requires knowledge of the situation and contract. Before an organization or individual conducts business with the Government, the party must be cleared. The process requires fingerprinting, thorough criminal, credit, and reference checks. “Protection” in this sense would infer legal protection. Therefore, the best protection is being provided “legal” protection at all times. These services are often provided by paralegals or law firms for a monthly fee and regularly include contract validation, mediation, and representation.

References

Legal Information Institute, Cornell University Law School. (2013, January 16). 31 USC § 3729 – False claims. Retrieved from Title 31, Sub-title 3, Chapter 37, Sub-chapter 3, Sub-section 3729: http://www.law.cornell.edu/uscode/text/31/3729

The Free Dictionary, Farlex. (2013, January 16). False Claims Act. Retrieved from The Free Dictionary: http://encyclopedia.thefreedictionary.com/False+claims

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Terrence Wadsworth often writes on law, politics, criminal investigation, finance and current events. Claims fraud is a very important legal topic; click to learn more from a firm with extensive experience in the area of fraud and theft.