This is a blog series on the False Claims Act (FCA), 31 USC §§ 3729, et seq., which targets any person that knowingly submits false claims for payment or false statements material to false claims to the US government.  FCA violators can be liable for three times the government’s damages, plus penalties for every false claim or statement.  In this blog series, we will walk through what all federal contractors and recipients of federal funding should know about the FCA, including the elements that the government must prove to establish FCA liability, the life cycle of a typical FCA case, and the roles of qui tam relators and the DOJ in FCA cases.

The False Claims Act (FCA) imposes liability on any individual or entity that knowingly submits a false claim for payment to the government, among other fraudulent actions.  Any person or entity that receives federal dollars could potentially be the target of a government investigation or FCA lawsuit.  When Congress passed the FCA in 1863, it was intended to punish federal government contractors that defrauded the government on procurement contracts during the Civil War.  Today the Department of Justice (DOJ) uses the FCA to prosecute recipients of many other kinds of federal funding, from research grants to Medicare and Medicaid reimbursements.

Recent settlements demonstrate the wide reach of DOJ’s enforcement efforts under the FCA:

• In May 2024, a medical research institution paid $7.6 million to settle allegations that it failed to disclose on grant applications to the National Institutes of Health that one of its key researchers was receiving grants from other sources.
• In October 2023, a car dealership chain paid $9 million to resolve allegations that it falsely certified that it was a small business to receive loan forgiveness under the Paycheck Protection Program.
• In September 2023, a healthcare payor spent $172 million to settle allegations that it knowingly submitted inaccurate diagnosis codes for Medicare Advantage Plan enrollees, sometimes based on cursory, in-home assessments by its vendors.
• In July 2023, a global consulting firm paid $377 million to settle allegations that it improperly allocated costs from its commercial contracts to its government contracts.
• In January 2023, a vitamin manufacturer settled allegations that it misclassified vitamins and nutritional supplements under the Harmonized Tariff Schedule to avoid customs duties for $22.8 million.

Thus, it is no longer only government contractors who must be mindful of potential FCA exposure, though procurement fraud remains a top enforcement priority for DOJ.  Before applying for or accepting any kind of federal funds, it is important to understand the legal risks that come with them.  The best way to avoid expensive FCA investigations, litigation, and liability is to educate yourself and your team about the law and your team members’ roles in compliance. 

In our next blog, we will explore the Falsity element of False Claims Act liability.

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