Congress Introduces Bipartisan Legislation to Enhance The False Claims Act

In a rare showing of support between the parties, Senator Chuck Grassley (R-Iowa) and Senator Dick Durbin (D-Ill.) have jointly introduced amendments aimed at clarifying and reinforcing important provisions within the federal False Claims Act (FCA). This crucial law serves as the government’s primary weapon in combating fraud against the taxpayers ensuring patient safety, and protecting the interests of U.S. service members. The proposed amendments, which received favorable bipartisan support during the last legislative session, seek to strengthen the FCA further and enhance its ability to combat fraud in a rapidly evolving landscape.

CLARIFYING THE MATERIALITY STANDARD

One of the amendments focuses on clarifying the “materiality” standard in the current FCA. The existing definition of “material” refers to violations that have a natural tendency to influence or impact the payment or receipt of money or property by the United States. The intention of this definition is to hold liable those who submit fraudulent claims for payment that the government could have rightfully rejected.

However, some uncertainty arose due to a Supreme Court decision, Universal Health Services, Inc. v. United States ex rel. Escobar (136 S. Ct. 1989, 2016), which introduced various factors to consider when determining the “materiality” of fraud. This decision has led to instances where the government’s knowledge of fraud has been considered a decisive factor, leading to potential defenses to evade liability.

The proposed FCA amendment aims to reduce ambiguity and maintain the focus on the fraudulent actions of the wrongdoers. It ensures that the government can continue making essential decisions, even in emergency situations like the current COVID-19 pandemic, without fear that such payments will shield fraudulent entities from facing consequences. The amendment reaffirms the government’s ability to continue to pay  while it is investigating and taking enforcement actions. Some defendants asserted that if the government continues to pay after becoming aware of the fraud it signifies the offence is not material – however, an abrupt stopping of pay could lead to compromising the investigation and the concept of materiality and payment are separate despite defendant’s assertions otherwise.  Most courts already take the view consistent with the amendment, but Congress wanted to codify it.

STRENGTHENING PROTECTION FOR FORMER EMPLOYEES AGAINST RETALIATION

The second issue addressed by the proposed amendments pertains to anti-retaliation protection for whistleblowers under the FCA, particularly in cases involving former employees. The existing law safeguards employees from retaliation when they expose FCA violations. However, there has been debate among courts about whether this protection extends to instances of post-termination retaliation, commonly known as “blackballing.”

Post-termination retaliation can occur when a former employer makes negative remarks about a former employee to potential future employers, effectively hindering their chances of finding new employment. To resolve this ambiguity, the proposed amendment explicitly states that the anti-retaliation protections provided by 31 U.S.C. § 3730(h) apply to both current and former employees, leaving no room for doubt.

By adopting these crucial amendments, Congress can bolster the False Claims Act and remove uncertainties that deter potential whistleblowers from stepping forward. In an era of ever-evolving fraud schemes, it is essential to ensure that the government’s primary tool for combating fraud remains robust and effective.

“I commend Senators Grassley and Durbin for their bipartisan efforts to strengthen the False Claims Act (FCA). These amendments address crucial issues, clarifying the materiality standard and enhancing protection for whistleblowers. By empowering the FCA to act decisively against fraud and safeguarding those who expose wrongdoing, we can better protect taxpayer funds and promote integrity in our systems. Brown, LLC fully supports this legislation and urges Congress to adopt these amendments promptly. Together, we can continue to fight fraud effectively and ensure accountability in taxpayer-funded programs.” -said Jason T. Brown, Head of Whistleblower Law Firm Brown, LLC.