False Claims Prohibited by the False Claims Act
The False Claims Act permits whistleblowers, also known as qui tam relators to recover damages on behalf of the federal government in return for a contingency fee, also known as a relator share. The statute prohibits “(A) knowingly present[ing], or caus[ing] to be presented, a false or fraudulent claim for payment or approval; [and] (B) knowingly mak[ing], us[ing], or caus[ing] to be made or used, a false record or statement material to a false or fraudulent claim.” 31 U.S.C. § 3279(a)(1)(A)–(B). The elements of an FCA claim are as follows: “(1) the defendant submitted a claim to the government, (2) the claim was false, and (3) the defendant knew the claim was false.” Pencheng Si v. Laogai Research Found., 71 F. Supp. 3d 73, 91 (D.D.C. 2014) (internal quotation marks omitted).
There are two types of falsity prohibited by the False Claims Act, express legal falsity and implied legal falsity.
Express Legal Falsity (Factually False Claim)
A claim of express falsity arises where a contractor fails to comply with the requirements for the goods or services that it agreed to provide the federal government. A factually false claim is one that “is untrue on its face,” for example if it “include[s] ‘an incorrect description of goods or services provided or a request for reimbursement for goods or services never provided.’” United States v. Kellogg Brown & Root Servs., Inc., 800 F. Supp. 2d 143, 154 (D.D.C. 2011) (citing United States v. Sci. Applications Int’l Corp. (SAIC II), 626 F.3d 1257, 1266 (D.C. Cir.2010)). Examples include billing for services that were never provided or charging the government for an armored vehicle but providing a vehicle that is not armored.
Legal Falsity (False Certification)
A false certification may be either express or implied:
- Express false certification occurs when a claimant explicitly represents that he or she has complied with a statute, regulation, or contractual term, but in fact has not complied.
- Implied false certification occurs when “the defendant submits a claim for payment that makes specific representations about the goods or services provided, but knowingly fails to disclose the defendant’s noncompliance with a statutory, regulatory, or contractual requirement,” and that “omission renders those representations misleading.” Escobar, 136 S. Ct. at 1995.
A claim of implied certification arises where the claim for payment to the Government implicitly constitutes a certification of compliance with certain applicable regulations. A government contractor’s non-compliance with a government regulation can violate the False Claims Actt where there is a relevant connection to the contract at issue. In 2016, the Supreme Court held in Escobar that an FCA complaint premised on implied certification must satisfy “two conditions”: “first, the claim . . . makes specific representations about the goods or services provided; and second, the defendant’s failure to disclose non compliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths.”
Escobar also provides important guidance on materiality:
- Materiality turns on the “effect on the likely or actual behavior of the recipient of the alleged misrepresentation.” Universal Health, 136 S. Ct. 1989 at 2002.
- To plead materiality with the requisite particularity, a relator may draw inferences from various sources, including the Government’s history of declining to pay claims for failure to comply with the applicable regulation. See Universal Health, 136 S. Ct. at 2003 (noting that materiality may be premised on “evidence that the defendant knows that the Government consistently refuses to pay claims in the mine run of cases based on noncompliance with the particular statutory, regulatory, or contractual requirement[s]”).
- Materiality is absent at the pleading stage when the relator’s chronology suggests that the Government knew of the alleged fraud, yet paid the contractor anyway. See Universal Health, 136 S. Ct. at 2003-04 (“[I]f the Government pays a particular claim in full despite its actual knowledge that certain requirements were violated, that is very strong evidence that those requirements are not material. Or, if the Government regularly pays a particular type of claim in full despite actual knowledge that certain requirements were violated, and has signaled no change in position, that is strong evidence that the requirements are not material.”).
Fraud-In-The-Inducement or Promissory Fraud
The False Claims Act also prohibits fraud-in-the-inducement, i.e., where the contract or extension of government benefit was originally obtained through false statements or fraudulent conduct.
The Supreme Court recognize a fraud-in-the-inducmenent theory when it held in U.S. ex. rel. Marcus v. Hess, 317 U.S. 537 (1943) that contracts obtained under a collusive bidding scheme violated the FCA by defrauding the government and compelling it to pay more “than it would have been required to pay had there been free competition in the open market.”
To establish fraudulent inducement under the FCA, a relator must show that a false statement, omission, or misrepresentation “`caused’ or `induced’ the government to enter into a contract, such that but for the misrepresentations, the government would not have awarded the contract and would not have paid the claim.” United States ex rel. Thomas v. Siemens AG, 991 F. Supp. 2d 540, 569 (E.D. Pa. 2014).
A Grant Assurance is a Claim
A grant assurance in an application for federal funds or a grant progress report is a “claim” under the False Claims Act since representations made in the progress report trigger the payment of grant funds. See United States ex rel. Bauchwitz v. Holloman, 671 F.Supp.2d 674, 689 (E.D.Pa.2009).
Experienced False Claims Act Whistleblower Lawyers
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