The False Claims Act - Recent Developments

Wednesday, June 25, 2008

Media and political attention regarding potential abuses in a variety of government programs have recently called attention to the False Claims Act (FCA). Two new developments will affect the scope and reach of the FCA - potentially subjecting thousands more subcontractors, grantees, universities, hospitals, and other recipients of federal funds to qui tam actions, lowering the barriers for relators to pursue FCA actions, and possibly increasing the exposure for recoveries by the government and the relators.

The Supreme Court's unanimous decision in Allison Engine Co. v. United States ex rel. Sanders stated that the FCA will impose liability on a person when a defendant makes a false statement and/or conspires to make a false statement with the specific intent that the false statement will be material to the government's decision to pay the claim. Rather than clarify the FCA and its potential reach, this opinion - which imposes a new evidentiary requirement - will make the FCA a likely litigation battleground for the near future. At the same time, the US Congress is actively considering legislation that will expand and enhance the ability of relators to initiate and prosecute false claims actions. The Senate Judiciary Committee already has reported a bill and the House Judiciary Committee also held hearings on its version of the amendments.

The webinar presented by Marcia Madsen, head of Mayer Brown's Government Contracts practice, Tony Alexis, former AUSA and Trial Attorney in the Civil Fraud Section of the Department of Justice and partner in the White Collar Defense & Compliance practice, and David Gossett, partner in the Supreme Court & Appellate practice, addressed the issues decided by the Court in Allison Engine, as well as how that decision and the pending legislation will affect anyone who is a potential recipient of government money or property. They focused on the following key points:

  • The Court's reaction to the "presentment" argument made by the relators in Allison Engine and how the Congress may view that issue.
  • How Allison Engine may ease the burden of suits against defendants.
  • How pending legislation may expand FCA liability for companies and individuals that submit claims for payment to government grantees or subcontractors under government contracts.
  • The impact on relationships between business and its employees - who is a potential relator?
  • The legal and policy arguments surrounding government employees as relators in qui tam actions.
  • The effect of changing the damages provision of the statute so that actual losses to the government need not be proven.
  • Exposure to litigation as a result of a change in the statute of limitations.

Marcia Madsen
Anthony Alexis
David Gossett

Related Materials

Presentation Slides (PDF)
Full Presentation (WebEx)
S. 2041 as reported from the Senate Judiciary Committee in April (PDF)
H.R.4854 introduced by Rep. Berman, which was the subject of hearings last week before the House Judiciary Committee (PDF)