The False Claims Act could be up for its first major facelift since 1986.
Senator Chuck Grassley (R-Iowa), joined by Senators Durbin, Leahy, Specter and Whitehouse, has introduced the False Claims Clarification Act of 2009, Bill No. S. 458, which is designed to strengthen and clarify the Civil War-era law in a number of ways. Among the important elements of the Bill are the following:
1. The Bill seeks to override parts of the Supreme Court’s decision in Allison Engine Co., Inc. v. United States ex rel. Sanders, decided last year. Although the exact significance of Allison Engine has been hotly debated (see our 6/18/2008 post for our view of it), defendants in False Claims Act cases have argued that, in some circumstances, the case insulates from liability a subcontractor who submits a false claim to a general contractor, rather than directly to the government itself. The Bill provides a specific definition of the term “claim,” and makes a number of other changes, intended to make clear that a subcontractor who submits a false claim to a general contractor is liable under the False Claims Act if the general contractor has received or will receive government money.
2. The Bill provides, for the first time, specific guidance on when an employee of the government may bring a qui tam case under the False Claims Act. Under the bill, a government employee who learns of fraud on the government is permitted to bring a qui tam case if he or she first reports the fraud to the Inspector General of the affected agency or to the Attorney General, and then at least 18 months pass without the Attorney General filing a lawsuit based upon the information provided by the employee.
3. The Bill clarifies the currently very confusing law on when prior news reports or other types of public disclosures bar subsequently filed qui tam lawsuits, and generally narrows the circumstances under which such lawsuits would be barred.
4. The Bill clarifies the whistleblower protections afforded by the False Claims Act. Most importantly, the Bill makes clear that an employee who complains internally within his or her company in an effort to stop violations of the False Claims Act – and who subsequently is harassed, discharged, demoted or otherwise retaliated against – may sue the company for that conduct, even if the employee has not brought a separate qui tam action or otherwise disclosed the violations to the government.
5. The Bill creates a single, 10-year statute of limitations for all False Claims Act cases, a provision that, in most instances, is an increases the length of time that can be covered by a qui tam or other False Claims Act lawsuit.
6. The Bill also requires the Attorney General to submit an annual repot to Congress detailing yearly False Claims Act settlements. The report would help Congress better monitor whether the Department of Justice follows the spirit of the law, and it would also serve to ensure that the provisions of the False Claims Act allowing cases to be sealed are not harmful to whistleblowers.
Considering the size of recent economic recovery legislation, the False Claim Act will be an invaluable tool to deter contractors from defrauding the government and punishing those who do, and strengthening the law now, as proposed in Senator Grassley’s Bill, is clearly the right thing to do.