False Claims Act Protections & Incentives

There are federal and state laws that provide protections for employees who blow the whistle on fraud against our governments. Some of these laws provide incentives or awards for employees or citizens who help the government prosecute fraud claims against dishonest corporations or individuals. Some of the key laws and a brief description are summarized below.

Overview of Federal Government Awards by FY 2008-2015[1]

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In FY 2015, the federal government provided almost $4.5 billion in loans, over $320 billion in contracts, $562 billion in grants, and over $1.3 trillion in other financial assistance. Similarly, general fund spending in FY 2015 by all states was in excess of $750 billion.[2]

Defrauding our governments of our hard-earned tax dollars can take many forms. Government contractors may provide substandard products or equipment. They may fail to meet government contract specifications or may fail to meet other requirements that they certified would be met; such as paying adequate wages, following civil rights laws, and meeting occupational safety standards. Some examples of frauds involving the military; pharmaceutical production, marketing, or sales; and prevailing wages are provided in the links at the top of this page.

Statute & Citation Coverage Remedies
False Claims Act (FCA), 31 U.S.C. §§ 3729 – 3733 A person may bring an action on behalf of the United States to recover funds pertaining to false or fraudulent claims for payment. Common bases for an FCA qui tam action include: (1) presentation of false or fraudulent claim; (2) use of false or fraudulent statement or record; (3) conspiracy to get a false claim paid; and (4) 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.

 

Private citizens may sue those that commit fraud against government programs.  Violators are liable to the United States Government for a civil penalty of not less than $ 5,000 and not more than $ 10,000 plus 3 times the amount of damages which the Government sustains because of the act of that person. The law provides up to three times the actual damages and also provides awards of 15 to 30 percent of what is recovered for those bringing cases.
FCA employee protection, 31 U.S.C. § 3730(h) Protects any employee, contractor or agent who is retaliated against because of lawful acts done in furtherance of an action under this section or other efforts to stop 1 or more violations of this subchapter.   Protected actions include investigating or reporting fraud. Reinstatement with the same seniority status that employee, contractor, or agent would have had but for the discrimination, 2 times the amount of back pay, interest on the back pay, and compensation for any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorneys’ fees.
State FCAs About 30 states and the District of Columbia (see below) have some form of false claims law. “In addition, New York City, Chicago, Philadelphia, and Allegheny County, Pennsylvania, have their own versions of the False Claim Act with qui tam provisions, enabling them to recover money at the municipal or county level.” See, TAFEF, States with False Claims Acts, located at: https://www.taf.org/states-false-claims-acts Vary. Not all state FCAs cover all frauds.
Protections for federal government contractor, subcontractor, or grantee employees, 41 U.S.C. § 4712 An employee of a contractor, subcontractor, or grantee may not be discharged, demoted, or otherwise discriminated against as a reprisal for disclosing to Congress, GAO, Inspector General, Contract Manager, DOJ, Court, Grand Jury, or manager responsible to investigate such misconduct information that the employee reasonably believes is evidence of gross mismanagement of a Federal contract or grant, a gross waste of Federal funds, an abuse of authority relating to a Federal contract or grant, a substantial and specific danger to public health or safety, or a violation of law, rule, or regulation related to a Federal contract (including the competition for or negotiation of a contract) or grant. Reinstatement to the position that the person held before the reprisal, compensatory damages (including back pay), employment benefits, and other terms and conditions of employment that would apply to the person if the reprisal had not been taken, pay the complainant an amount equal to the aggregate amount of all costs and expenses (including attorneys’ fees and expert witnesses’ fees) that were reasonably incurred by the complainant for, or in connection with, bringing the complaint regarding the reprisal.

 

Protections for DOD and NASA contractor employees, 10 U.S.C. § 2409 An employee of a contractor, subcontractor, grantee, or subgrantee is protected for reporting gross mismanagement of a Department of Defense or NASA contract or grant, a gross waste of Department funds, an abuse of authority relating to a Department contract or grant, or a violation of law, rule, or regulation related to a Department contract (including the competition for or negotiation of a contract) or grant; or a substantial and specific danger to public health or safety. Disclosure must be made to Congress, GAO, Inspector General, Contract Manager, DOJ, Court, Grand Jury, or manager responsible to investigate such misconduct. Reinstatement to the position that the person held before the reprisal, compensatory damages (including back pay), employment benefits, and other terms and conditions of employment that would apply to the person if the reprisal had not been taken, pay the complainant an amount equal to the aggregate amount of all costs and expenses (including attorneys’ fees) that were reasonably incurred by the complainant for, or in connection with, bringing the complaint regarding the reprisal.
District of Columbia False Claims Act, D.C. Code §§ 2-381.01 to 2-381.09 A person may bring an action on behalf of the District of Columbia to recover funds pertaining to false or fraudulent claims for payment resulting from the following acts: (1)  Knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval; (2)  Knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim;

(3) Has possession, custody, or control of property or money used, or to be used, by the District and knowingly delivers, or causes to be delivered, less than all of that money or property; (4)  Is authorized to make or deliver a document certifying receipt of property used, or to be used, by the District and, intending to defraud the District, makes or delivers the receipt without completely knowing that the information on the receipt is true;

(5)  Knowingly buys, or receives as a pledge of an obligation or debt, public property from an officer or employee of the District who lawfully may not sell or pledge property; (6)  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 District, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the District; (7)  Conspires to commit a violation of paragraph (1), (2), (3), (4), (5), or (6) of this subsection; (8)  Is a beneficiary of an inadvertent submission of a false or fraudulent claim to the District, subsequently discovers the falsity of the claim, and fails to disclose the false or fraudulent claim to the District; or (9)  Is the beneficiary of an inadvertent payment or overpayment by the District of monies not due and knowingly fails to repay the inadvertent payment or overpayment to the District.

 

Any person who commits fraud against the District shall be liable to for 3 times the amount of damages which the District sustains because of the act of that person. A person who commits such acts shall also be liable to the District for the costs of a civil action brought to recover penalties or damages, and shall be liable to the District for a civil penalty of not less than $5,500, and not more than $11,000, for each false or fraudulent claim.

If the District proceeds with an action brought by the qui tam plaintiff, s/he may be eligible to receive at least 15%, but not more than 25%, of the proceeds of the action or settlement of the claim, depending upon the extent to which the qui tam plaintiff substantially contributed to the prosecution of the action.

If the District does not proceed with an action brought by a qui tam plaintiff, s/he may receive an amount which the court decides is reasonable for collecting the civil penalty and damages; provided, that the amount shall be not less than 25%, and not more than 30%, of the proceeds of the action or settlement of the claim.

 

DC FCA employee protection, DC Code § 2-381.04 Protects employees, contractors, agents, or associated others from retaliation for their lawful acts done in furtherance of an action under the District’s FCA or other efforts to stop one or more violations of that law. Remedies include: (1) reinstatement with the same seniority status that the employee, contractor, or agent would have had but for the discrimination; (2) two times the amount of back pay; (3) interest on the back pay; and (4) compensation for any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorneys’ fees.
Protections for employees of District of Columbia government contractors or instrumentalities, DC Code § 2-223.03 There are two types of protections provided by this law.

(1) A supervisor of a District instrumentality or a District government contractor shall not threaten to take or take a prohibited personnel action or otherwise retaliate against an employee because of the employee’s protected disclosure or because of an employee’s refusal to comply with an illegal order.

(2) A District government official or employee having the responsibility to evaluate, award, authorize payments, terminate, or otherwise administer a contract for goods or services between the District government and a contractor shall not threaten to take or take a prohibited procurement action against a contractor, or a contractor competing for a contract, based wholly or in part on a protected disclosure made by an employee, officer, or owner of the contractor to a public body.

A protected disclosure is defined as any disclosure of information, not specifically prohibited by statute, by an employee to a supervisor or to a public body that the employee reasonably believes evidences: (A)  Gross mismanagement in connection with the administration of a public program or the execution of a public contract; (B)  Gross misuse or waste of public resources or funds; (C)  Abuse of authority in connection with the administration of a public program or the execution of a public contract; (D)  A violation of a federal, state, or local law, rule, or regulation, or of a term of a contract between the District government and a District government contractor which is not of a merely technical or minimal nature; or (E)  A substantial and specific danger to the public health and safety.

Remedies include the following: injunction, reinstatement to the same position held before the prohibited personnel action or to an equivalent position, and reinstatement of the employee’s seniority rights, restoration of lost benefits, back pay and interest on back pay, compensatory damages, reasonable costs, and attorney fees.

In addition, a supervisor employed by a District instrumentality who is found to have retaliated shall be subject to appropriate disciplinary action, up to and including dismissal and shall be subject to a civil fine not to exceed $1000.

 


[1] Source: USAspending.gov: https://www.usaspending.gov/transparency/Pages/OverviewOfAwards.aspx (last viewed 9/21/2015). Key terms used have the following meanings and are taken from the USAspending.gov glossary page. “Other Financial Assistance”– Includes direct payments to individuals (such as Medicare and food stamps), insurance payments (such as, unemployment benefits, flood insurance), and other types of assistance payments (such as, reimbursements for prescriptions for veterans). “Grant” – An award of financial assistance from a federal agency to a recipient to carry out a public project or service authorized by a law of the United States.  “Loans” — Federal awards that the borrowers​ will eventually pay back to the government. Guaranteed loans require the federal government to pay the bank and take over the loan if the borrower defaults. “Contract” – An agreement between the federal government and a prime recipient to execute goods and services for a fee.

[2] National Association of State Budget Officers, The Fiscal Survey of States, Spring 2015 at vii. Available on line at: https://www.nasbo.org/publications-data/fiscal-survey-states/fiscal-survey-states-spring-2015