The History of the False Claims Act and the Critical Role of Whistleblowers in Helping the Government Combat Fraud
Congress enacted the False Claims Act (“FCA”) more than a hundred and fifty years ago to combat fraud against the government by empowering private citizens to assist in this fight. In the early years of the Act, during the Civil War, fraudulent practices exposed under the law included companies selling rancid food, ailing mules, and defective weapons to the Union Army. However, the Act was never limited to the military sphere, but rather was intended as a broad and flexible tool for eradicating fraud throughout all aspects of government. In more recent times, the Act has been used to root out fraud involving a great variety of government agencies including the Department of Education, the Food and Drug Administration and the Centers for Medicare and Medicaid Services. In particular, the Act has been instrumental in addressing frauds in the healthcare field, which is responsible for many billions of dollars in federal spending annually.
The history of the FCA reveals two longstanding aims: strongly encouraging private parties (relators) to play a significant role in fraud enforcement as a necessary supplement to the government’s finite resources, and widely reaching all types of fraud that cause financial loss to the government. See Rainwater v. U.S., 356 U.S. 590, 592 (1958) (“It seems quite clear that the objective of Congress was broadly to protect the funds and property of the Government”); United States v. Neifert-White Co., 390 U.S. 228, 233 (1968) (the FCA “reaches beyond claims which might be legally enforced to all fraudulent attempts to cause the Government to pay out sums of money”); United States ex rel. Wilkins v. United Health Group, Inc., 659 F.3d 295, 306 (3d Cir. 2011) (pointing to “Congress’ expressly stated purpose that the FCA should reach all fraudulent attempts to cause the Government to pay out sums of money”).
Over the Years Congress Has Strengthened the False Claims Act to Encourage Whistleblowers to Report Fraud
From 1943 until 1986, the FCA contained an insurmountable jurisdictional bar, which effectively foreclosed fraud detection and enforcement under the Act. During this time, the FCA barred jurisdiction over any claim “whenever it shall be made to appear that such suit was based upon evidence or information in the possession of the United States, or any agency, officer, or employee thereof, at the time such suit was brought.” 31 U.S.C. § 232(C) (1976). Courts broadly construed this language as categorically prohibiting any qui tam relator from bringing a case in which the government was already aware of the allegations of fraud. Courts enforced this absolute bar even when it was the relator himself who first reported the fraud to the government, as relators were legally required to do under the Act. As a consequence of this perverse catch-22 for potential relators, during this time, fraud against the government went largely unidentified and unprosecuted. Predictably, government fraud skyrocketed.
The 1986 Amendments to the False Claims Act
In 1986, recognizing that the FCA was “in desperate need of reform” and that “the Government need[ed] help and, in fact, need[ed] lots of help to adequately protect the Treasury against growing and increasingly sophisticated fraud[,]” Senator Charles “Chuck” Grassley (R-IA) spearheaded “much needed amendments to the False Claims Act.”
Significantly, the 1986 Amendments eliminated the absolute government knowledge defense. Congress replaced it with a mechanism known as the “public disclosure bar,” which was specifically tailored only to preclude qui tam lawsuits based on information already known to the government through certain enumerated government proceedings and reports or the news media. S. Rep. 99-345, 1986 U.S.C.C.A.N. 5266, 5295. “The goal of this [new] provision was to ensure that any individual qui tam relator who came forward with legitimate information that started the Government looking into an area it would otherwise not have looked, could proceed with an FCA case.” S. Rep. 110-507 at 5.
Congress passed several amendments to the FCA after 1986 to further strengthen its provisions and correct certain judicial decisions that had limited the scope of the Act.
The False Claims Act has been Enormously Successful in Fighting Fraud
With the assistance of private individuals and entities serving as whistleblowers, the FCA has been enormously successful in returning money to the federal fisc. In less than thirty years, in the healthcare arena alone, the government has recovered more than $31.1 billion of taxpayers’ funds via the FCA.
 See United States ex rel. Stinson, Lyons, Gerfin & Bustamante, P.A. v. Prudential Ins. Co., 944 F.2d 1149, 1153-54 (3d Cir. 1991) (discussing such “restrictive interpretations” as United States ex rel. Wisconsin v. Dean, 729 F.2d 1100, 1106 (7th Cir. 1984) (holding that the “district court had no jurisdiction over a qui tam action brought by Wisconsin based on information of Medicaid fraud the state had uncovered because the state had reported the Medicaid fraud to the federal government as required under the Act”)).
 U.S. Senate, Subcommittee on Administrative Practice and Procedure of the Committee on the Judiciary, S. 1562, Hearing, pg. 2, Sept. 17, 1985 (S. Hrg. 99-452). Washington: Government Printing Office, 1986; The Grassley Amendments, Pub.L. No. 99-562, 100 Stat. 3153 (Oct. 27, 1986).
 See Merena v. Smithkline Beecham, 52 F. Supp. 2d 420, 441 (E.D. Pa. 1998), rev’d on other grounds, 205 F.3d 97 (3d Cir. 2000) (finding that one of the purposes of the 1986 amendments to the FCA was “to prevent the harsh preclusive effect of mere governmental knowledge or investigation.”).
 See, e.g., The Fraud Enforcement and Recovery Act (“FERA”), Pub. L. No. 111-21, § 4, 123 Stat. 1617; Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub.L. 111-203, 124 Stat. 1376 (July 21, 2010); The Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119 (Mar. 23, 2010).
 U.S. Dep’t of Justice, Fraud Statistics – Overview October 1, 1987 – September 30, 2015 (Nov. 23, 2015), https://www.justice.gov/opa/file/796866/download (last visited March 1, 2017).
If you have discovered evidence of fraud committed against the government, you may be entitled to a substantial reward and the legal protections afforded to whistleblowers under state and federal laws. The attorneys at Berger & Montague are nationally recognized for their work in Whistleblower/Qui Tam actions. For more information or to schedule your confidential consultation, contact us online or call us at 1-800-424-6690.