History Of The Act

"The False Claims Act has proved wildly successful at combating fraud and returning money
to the United States Treasury."

The False Claims Act is a specialized statute that was first signed into law by President Abraham Lincoln during the Civil War. It creates a unique private-public partnership that permits each citizen to act as a “private attorney general” and file suit on behalf of the United States against anyone committing fraud against the federal government.

When it was first passed by Congress in 1863, the federal government was seeking a way to deter and punish unscrupulous profiteers who were providing substandard supplies to the Union Army. With the federal government’s energies and resources committed fully to the war effort, the False Claims Act empowered the citizenry to assist the government in ferreting out those who, in the words of President Lincoln, “feast and fatten on the misfortunes of the nation while patriotic blood is crimsoning the plains of the South.” As passed in 1863, the Act permitted a successful whistleblower to collect 50% of the money recovered by the government.

The Act remained virtually unchanged until 1943. At that time, a number of False Claims Act suits were filed by individuals who literally copied their civil fraud allegations from federal criminal indictments. The people filing the suits had no independent knowledge of the wrongdoing. After the U.S. Supreme Court ruled that such “parasitic” or “copycat” suits were not barred by the False Claims Act, Congress amended the Act in two significant ways. First, Congress enacted a “government knowledge bar” which prevented whistleblowers from filing suit if the suit was based on information that was already known to the government. Second, Congress reduced the whistleblower’s share of the recovered proceeds from 50% to between 10% and 25%.

"The False Claims Act was amended during the Reagan Administration, reinvigoration the public-private partnership envisioned when the Act was first signed
into law by President Lincoln."

The “government knowledge bar” proved to be an insurmountable hurdle for most qui tam plaintiffs to overcome. As a result, the 1943 amendments virtually destroyed the ability of a private citizen to successfully bring a False Claims Act case. As a result, the Act fell into disuse.

In the 1980's, at a time when the Reagan administration was pushing for greater privatization of government functions and advocating a significant military buildup, public attention focused on a series of highly-publicized frauds involving defense industry contractors. Interested in demonstrating a commitment to combating defense fraud, Congress passed and President Ronald Reagan signed a bill amending the False Claims Act in 1986, reinvigorating the public-private partnership envisioned by the Act.

The 1986 amendments greatly revitalized the Act, making it the government’s primary tool in the war against fraud on the federal government. Congress changed the law in the following significant ways:

  • Removed the “government knowledge bar,” which had effectively prevented citizens from bringing False Claims Act cases whenever the government had information about a fraud.

  • Guaranteed a successful plaintiff between 15% and 30% of the amount recovered by the government, as well as reasonable expenses and attorneys’ fees.

  • Added a special section providing legal protections and remedies for whistleblowers who are harassed, threatened, discharged or otherwise discriminated against in their employment because of their whistleblowing.

  • Increased penalties for defrauding the U.S. Treasury to three times the amount of actual damages plus up to $10,000 per false claim submitted to the government.

  • Increased the plaintiff’s participation in the suits that the government joins.

  • Eliminated the need to prove specific intent by allowing a false claim when a defendant acts in “deliberate ignorance” or “reckless disregard” of the truth.

  • Reduced the applicable standard of proof by restoring the normal “preponderance of the evidence” standard applicable in all other civil cases.

Since the False Claims Act was amended, it has proven wildly successful at combating fraud and returning money to the U.S. Treasury. To see just how successful the Act has been, check out our FCA Facts & Figures. To learn about the nuts and bolts of how the Act is applied in practice, visit How it Works.

[Client Service] [False Claims Act] [Filing a Case] [Resources] [About Us] [Contact Us] [Site Map] [Home]

©2002 Kreindler & Associates, All Rights Reserved