The False Claims Act (FCA) is usually used to punish people and corporations that submit false claims for money to which they are not entitled. However, the FCA can also be used against those who fail to pay money they owe the government—a so-called “reverse” false claim.
For much of the FCA’s history, in order to prove a reverse false claim, whistleblowers had to prove that a false statement or record was created. This burden made it very difficult to prove reverse false claims. For example, what if a contractor knew it received an overpayment and simply pocketed the money without saying anything? Without making a false statement or record, the contractor would avoid liability under the FCA. Congress fixed this problem in 2009, when it adopted the Fraud Enforcement and Recovery Act (FERA).
Reverse False Claims
FERA amended the FCA to make it much easier to establish a reverse false claim. Now, in order to prove a reverse false claim, a whistleblower must demonstrate:
- A person or company knowingly made, used, or caused 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
- A person or company knowingly concealed, or knowingly and improperly avoided or decreased, an obligation to pay or transmit money or property to the government.
This means if a person or corporation knows that it owes money to the government and fails to pay, it can be held liable even without making a false record or statement. For example, the government might enter into a contract with a company to construct a building for $100 million—but requiring the company to return any unspent funds. If the company knowingly spends only $90 million to construct the building and fails to return the extra $10 million to the government, it could be liable for a reverse false claim under the FCA.
Detecting Fraudulent Retention of Overpayments & Reverse False Claims
Whistleblowers are essential in identifying, reporting, and stopping the fraudulent retention of overpayments. This fraud often involves complex financial instruments and contracts that require special expertise to identify and interpret. While many whistleblowers are employees (or former employees) of government contractors, with inside information about fraud being committed, even non-employee “outsiders” often are able to use their technical knowledge to identify and report fraud.
A whistleblower who files a successful complaint under the False Claims Act is entitled to between 15% and 30% of the amount the government recovers.
With over 30 years of experience, the attorneys on Baron & Budd’s whistleblower representation team have represented dozens of clients in government fraud cases returning over $5.4 billion to federal and state agencies, with whistleblower recovery shares as high as 49%. They are ready to help if you have evidence of reverse false claims or the fraudulent retention of overpayments.
Please call (866) 401-5971 or complete our contact form if you would like more information. For more information, see What You Need to Know About Becoming a Whistleblower. Please understand that contacting us does not mean that you have established an attorney-client relationship with Baron & Budd, P.C.