Why is the False Claims Act so important?

The False Claims Act is a light of hope for the taxpayers of the United States of America who are fed up with their taxes stolen from under their noses by government contractors. It is a very important tool in the hands of American taxpayers with the power to make billions of dollars of money that goes inside the pockets of the government contractors every year return to where it belongs. Under the False Claims Act, those persons who intentionally submit or induce another person or entity to submit false claims for payment of government funds will be liable to pay 3 times of the government’s damages and also civil penalties ranging between $5,500 and $11,000 per false claim.

Tax fraud is however not included in the False Claims Act. Section 3729(e) of the said act states that the Act “does not apply to claims, records, or statements made under the Internal Revenue Code.” As such any fraud related to taxes will not come under the False Claims Act. For this, there are IRS related laws that will look into the matter and submit penalties for wrongdoers.

The False Claims Act has provisions for ‘qui tam’. The qui tam is a unique feature in the laws of our country. Qui tam allows normal citizens of the country to sue on behalf of the government if he or she has evidence of fraud in government programs and contracts in order that the stolen funds can be recovered. The citizen who goes through the effort of filing a qui tam case may also be awarded compensation for his risk and work done. The citizen whistleblower may be awarded a portion of the funds he helps in recovering usually something between 15% and 25%. After a qui tam suit has been filed, it usually remains under seal during which time the Department of Justice investigates and decides whether or not to join the action.

The majority of the America people believe that the False Claims Act is absolutely wonderful and is in the right direction of ensuring fair dealings by government contractors. They believe that the compensation package the government promises to award a citizen whistleblower is a step in the right direction as it will induce more and more people to come forward in case they have evidence of fraud happening in government agencies and services. But it will be wrong to think that the False Claims Act is only about money. It is about a lot more than that. The Act has been constituted to discourage fraud and change the face of the culture of corporate America. The only thing that one may be critical of about this Act is that it does not cover tax fraud.

Apart from the Federal False Claims Act, states too have their own State False Claims Acts. This is to discourage frauds from happening in state governments prevailing in the country. Some of the states which have their False Claims Acts are Illinois, Louisiana, Massachusetts, New Mexico, Tennessee, Texas, and Virginia.