The Ultimate Guide to the Federal False Claims Act - Federal Lawyer
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The Ultimate Guide to the Federal False Claims Act

The Ultimate Guide to the Federal False Claims Act

The False Claims Act is a broad federal statute that allows for both civil and criminal enforcement in appropriate cases. As the U.S. Department of Justice (DOJ) explains, the statute was “originally enacted in 1863 in response to defense contractor fraud during the American Civil War.”

Today, the DOJ continues to use the False Claims Act to fight fraud, waste, and abuse (FWA) in the federal defense contracting sector. But, it uses the statute to combat (and prosecute) many other types of government fraud as well. As a result, many types of federal white-collar cases can involve False Claims Act allegations—from those involving government contracts to those involving Medicare, Medicaid, and other government healthcare programs.

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Dr. Nick Oberheiden
Dr. Nick Oberheiden

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Lynette S. Byrd
Lynette S. Byrd

Former DOJ Trial Attorney

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Brian J. Kuester
Brian J. Kuester

Former U.S. Attorney

Amanda Marshall
Amanda Marshall

Former U.S. Attorney

Local Counsel

Joe Brown
Joe Brown

Former U.S. Attorney

Local Counsel

John W. Sellers
John W. Sellers

Former Senior DOJ Trial Attorney

Linda Julin McNamara
Linda Julin McNamara

Federal Appeals Attorney

Aaron L. Wiley
Aaron L. Wiley

Former DOJ attorney

Local Counsel

Roger Bach
Roger Bach

Former Special Agent (DOJ)

Chris Quick
Chris J. Quick

Former Special Agent (FBI & IRS-CI)

Michael S. Koslow
Michael S. Koslow

Former Supervisory Special Agent (DOD-OIG)

Ray Yuen
Ray Yuen

Former Supervisory Special Agent (FBI)

The Federal False Claims Act: An Overview

The federal False Claims Act appears in several sections of the U.S. Code. However, for purposes of understanding the statute’s prohibitions and its implications for those targeted in government fraud investigations, we can focus on two key sections: 31 U.S.C. Section 3729 (the civil enforcement section) and 18 U.S.C. Section 287 (the criminal enforcement section).

Civil False Claims Act Violations

The False Claims Act’s civil enforcement provisions appear in 31 U.S.C. Section 3729. It establishes several acts that warrant civil enforcement, imposing civil penalties for any individual or company that:

  • “(A) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval;
  • “(B) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim;
  • “(C) conspires to commit a violation of subparagraph (A), (B), (D), (E), (F), or (G);
  • “(D) has possession, custody, or control of property or money used, or to be used, by the Government and knowingly delivers, or causes to be delivered, less than all of that money or property;
  • “(E) is authorized to make or deliver a document certifying receipt of property used, or to be used, by the Government and, intending to defraud the Government, makes or delivers the receipt without completely knowing that the information on the receipt is true;
  • “(F) knowingly buys, or receives as a pledge of an obligation or debt, public property from an officer or employee of the Government, or a member of the Armed Forces, who lawfully may not sell or pledge property; or
  • “(G) knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government . . . .”

As you can see, “false claims” under the civil enforcement provisions of the federal False Claims Act can take many different forms. As a practical matter, however, most civil enforcement actions under the False Claims Act tend to focus on the prohibitions in subsections 3729(A), (B), and (C). These provisions focus on the submission of fraudulent claims for payment, submission of false records in support of fraudulent claims for payment, and conspiracy to submit false and fraudulent claims.

These three provisions of 18 U.S.C. Section 3729 allow the DOJ and other federal agencies to pursue civil enforcement actions in most cases involving government contract and government program fraud. For example, under these provisions, federal authorities can impose civil penalties for acts including (but by no means limited to):

  • Submitting inflated invoices under government contracts
  • Substituting inferior materials under government contracts
  • Billing for services not performed under a government contract or government benefit program (i.e., Medicare or Medicaid)
  • Double-billing for services, equipment, supplies, medications, or other items
  • Coding violations under government healthcare benefit programs (i.e., upcoding and unbundling)
  • Billing the government for funds used to pay prohibited kickbacks, referral fees, or other forms of remuneration
  • Falsifying payroll records and other documents to support fraudulent claims for payment or reimbursement from the government

There are many more examples of False Claims Act violations that can lead to civil enforcement under 31 U.S.C. Section 3729. As discussed below, these violations (among others) can lead to criminal prosecution in many cases as well.

Criminal False Claims Act Violations

Under 18 U.S.C. Section 287, the DOJ can pursue criminal charges against individuals and businesses accused of knowingly submitting false and fraudulent claims to the federal government. This provision of the law states, in relevant part:

“Whoever makes or presents to any person or officer in the civil, military, or naval service of the United States, or to any department or agency thereof, any claim upon or against the United States, or any department or agency thereof, knowing such claim to be false, fictitious, or fraudulent, shall be [punished as provided for herein].”

Unlike many other federal criminal statutes, the False Claims Act does not require evidence of specific intent to defraud. Instead, Section 287 employs the reduced standing of “knowing” conduct. This creates a much lower burden of proof for the government, and it allows for prosecution in a wide range of cases. This breadth is amplified by the fact that knowledge can be imputed from a target or defendant’s deliberate ignorance or reckless disregard for the truth.

Penalties for False Claims Act Violations Under 31 U.S.C. Section 3729 and 18 U.S.C. Section 287

An individual’s or company’s risk in a federal False Claims Act investigation depends on whether the investigation is civil or criminal in nature. While both types of investigations can lead to substantial fines, these fines are calculated differently in civil and criminal cases. Additionally, when the DOJ files criminal charges under 18 U.S.C. Section 287, federal prison time is also on the table.

Civil Penalties for False Claims Act Violations (31 U.S.C. Section 3729)

Under 31 U.S.C. Section 3729, civil violations of the False Claims Act carry fines of up to $13,508 per violation (as of 2023). Since each individual false claim constitutes a separate violation, healthcare providers, government contractors, and other entities that submit numerous claims for payment can easily face six or even seven-figure liability. The False Claims Act also allows the DOJ to pursue recovery of treble (triple) damages in civil False Claims Act cases, as well as recovery of the government’s costs of prosecution.

Criminal Penalties for False Claims Act Violations (18 U.S.C. Section 287)

Under 18 U.S.C. Section 287, criminal violations of the False Claims Act carry fines and prison time. This includes a fine of $250,000 for individuals ($500,000 for companies) in felony cases, or a fine of $100,000 individuals ($200,000 for companies) for a misdemeanor conviction. The maximum prison sentence for a criminal False Claims Act violation is five years. Here, too, these penalties apply on a per-claim basis.

Defending Against Civil and Criminal Allegations Under the False Claims Act

Due to the substantial risks involved in facing civil or criminal allegations under the False Claims Act, individuals and entities targeted under the statute need to execute a comprehensive and strategic defense. This starts with assessing the applicability of the specific defenses that are available. Generally, defenses to alleged False Claims Act violations include (but are not limited to):

  • No False Claim – In some cases, it will be possible to defend against allegations of False Claims Act violations by affirmatively demonstrating that the target or defendant has not submitted a false claim. This requires comprehensive documentation of compliance; and, before voluntarily providing any evidence to the government in connection with an investigation or prosecution, it is imperative to ensure that this is in the target’s or defendant’s best interests.
  • No Knowledge – Most civil violations, and all criminal violations, require evidence of knowledge. If the government cannot prove that a target or defendant knowingly submitted a false or fraudulent claim, this alone can be enough to avoid prosecution (though the target or defendant may still be liable for recoupments or repayment).

In criminal cases, targets and defendants can also raise constitutional issues to prevent the DOJ from meeting its burden of proof. For example, if the investigating agency conducted an invalid warrantless search, illegally seized evidence, or interrogated a suspect in violation of the suspect’s Fifth Amendment rights, these are all issues that could render the government’s evidence inadmissible in court.

In certain circumstances, it may not be possible to prevent the government from proving a False Claims Act violation. When this is the case, targets and defendants must work closely with their defense counsel to determine the best path forward. Oftentimes, it will be possible to settle False Claims Act cases without formal charges; but, in some cases, prosecutors may insist on a plea deal that results in a criminal conviction.

Discuss Your (or Your Company’s) False Claims Act Case with a Lawyer at Oberheiden P.C.

Defending against civil or criminal allegations under the False Claims Act requires a strategic and proactive approach. At Oberheiden P.C., we have extensive experience representing clients in False Claims Act cases, and we have resolved the majority of our clients’ cases without charges being filed. To speak with a senior lawyer at Oberheiden P.C. in confidence, please call 888-680-1745 or request a complimentary consultation online today.

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