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Akron Univ. School of Law

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Monday, May 4, 2009

Reforms to Fraud and Abuse Laws

BNA provides a helpful overview of legislation in Congress to reform the False Claims Act to strengthen the statute after several court decisions limited its impact.  The story provides,

Both houses of Congress April 28 acted on amendments intended to strengthen the False Claims Act, 31 U.S.C. §3729 et seq. The full Senate by a 92-4 vote passed the Fraud Enforcement and Recovery Act, S. 386, which includes amendments to the FCA as part of broader legislation to combat financial fraud by amending the federal fraud laws and providing additional funds for enforcement, and the House Judiciary Committee voted out the False Claims Act Correction Act, H.R. 1788, by a 20-6 vote.

The House April 28 also approved the Fight Fraud Act of 2009, H.R. 1748, which contains language similar to the sections of S. 386 that expand the federal fraud laws to improve enforcement of mortgage fraud, securities fraud, financial institution fraud, and other frauds related to federal assistance and relief programs. . . . 
 
The Senate Judiciary Committee report accompanying S. 386, S. Rep. No. 111-010 (Mar. 23, 2009), explained that the FCA amendments are necessary because the “effectiveness of the FCA has recently been undermined by court decisions limiting the scope of the law and allowing subcontractors and non-governmental entities to escape responsibility for proven frauds.” . . .
Thus, the report stated, liability would attach “whenever a person knowingly makes a false claim to obtain money or property, any part of which is provided by the Government without regard to whether the wrongdoer deals directly with the Federal Government; with an agent acting on the Government's behalf; or with a third party contractor, grantee, or other recipient of such money or property.” The report emphasized that the FCA would reach all false claims submitted to state administered Medicaid programs.
 
The Senate amendments also “correct” the U.S. Supreme Court's decision in Allison Engine , which, according to the committee report, held that the government must prove that an FCA defendant intended that the government itself pay the claim in order for liability to attach, thus creating “a new element in a FCA claim and a new defense for any subcontractor” as well as creating “ a significant question about the scope and applicability of the FCA to certain false claims, effectively limiting FCA coverage for some Government programs and funds” that were traditionally covered by the FCA. . . . . (there is much more so read for the full article for the other changes).
        House FCA Amendments -   According to a Congressional Research Service summary of H.R. 1788, the False Claims Act Correction Act of 2009, the bill would amend the FCA by:
• repealing the requirement that a false or fraudulent claim for payment must be presented directly to a federal employee or member of the Armed Forces, thus tying liability for claims directly to federal money and property, regardless of to whom the claim is presented;
• revising requirements for alternate remedies affecting qui tam actions and related qui tam plaintiff awards;
• allowing dismissal of a private action based upon prior public disclosures only upon timely motion to dismiss by the Attorney General;
• revising the prohibition of retaliatory action against whistleblowers to include materially hindering the person in obtaining new employment or other business opportunities;
• requiring the government to pay from the proceeds of an action for financial losses suffered by administrative beneficiaries, thus permitting actions for fraud instituted against nontaxpayer funds under federal trust and administration;
• extending the statute of limitations for bringing a civil action;
• requiring the government, if it elects to intervene in an action, to file its own complaint, or amend the relator's complaint, with the government's complaint relating back to the filing date of the original qui tam complaint to the extent that the government's claim arises out of the same set of facts;
• declaring that a relator's complaint is not required to identify specific claims that result from an alleged course of misconduct if: (1) the facts alleged, if ultimately proven true, would provide a reasonable indication that one or more false claims are likely to have occurred; and (2) the complaint provides adequate notice of the specific nature of the alleged misconduct to permit the government effectively to investigate and defendants fairly to defend such allegations;
• declaring void any contracts, agreements, or private terms or conditions of employment that limit or circumvent the rights of a person to bring a qui tam action;
• declaring that no court–ordered seal on a qui tam action prevents the government or the relator from serving the complaint or related documents upon state or local law enforcement authorities;
• modifying procedures for civil investigative demands; and
• citing circumstances in which the government may move to dismiss a qui tam action by a federal employee (who has, in effect, not exhausted administrative procedures for addressing the allegations in the false claim complaint). . . .
 
No decision has been made as to when H.R. 1788 will be brought to the House floor for a vote, or whether that bill will be reconciled with S. 386, the Fraud Enforcement and Recovery Act, a House Judiciary spokesman told BNA April 30. The House and Senate bills are very similar in their FCA amendments, although they contain differences in language, the spokesman said.
It is possible both H.R. 1788, The False Claims Act Correction Act, and H.R. 1748, the Fight Fraud Act of 2009, which contains provisions similar to S. 386's broad fraud provisions but not the FCA amendments, could be reconciled with S. 386, the spokesman said.
 
The Obama administration issued a statement strongly supporting enactment of S. 386, including the FCA amendments. The legislation would amend the FCA in several important respects so that it remains a potent and useful weapon against the misuse of taxpayer funds, the statement said.
Sen. Chuck Grassley (R-Iowa), a co-sponsor of S. 386, applauded the passage of the act, saying it will help to protect Americans from fraud and recover taxpayers' money lost to fraud. Grassley said in a statement that the Fraud Enforcement and Recovery Act strengthens the False Claims Act, one of the best civil tools available to root out fraud in government. From 2000-2008, the Justice Department recovered more than $15 billion in fraud for the government using the False Claims Act.

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