The U.S. Senate Judiciary Committee recently voted to advance a bill strengthening the False Claims Act, the first significant amendment to the law in more than a decade. 

At an Oct. 28 hearing, the committee voted the False Claims Amendments Act of 2021 (S.2428) out of committee, advancing it to the Senate floor for consideration. 

The bill boasts bipartisan support. Its cosponsors include Sens. Chuck Grassley (R-Iowa) and Patrick Leahy (D-Vermont). 

The False Claims Act was originally signed into law in 1863 to help combat fraud by suppliers to the U.S. government during the Civil War. Today, it remains one of the federal government’s most effective weapons in fighting fraud on the government. It incentivizes whistleblowers, or relators, as they’re known, to report a fraud on the government by rewarding them with a percentage of the amount the government successfully recovers because of the whistleblower’s FCA case. The law has not been amended since 2009. 

Liability under the FCA only results from “material” violations. “Materiality” is defined as “having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property.” The pending Amendments are a legislative fix made necessary because of judicial interpretations of dicta (non-binding discussion) in the 2016 Supreme Court decision in United Health Services v. United States ex rel. Escobar that are inconsistent with what Congress intended in the law’s materiality standard. 

The bill’s sponsors say that judicial interpretations of a single example in the Escobar decision (that the government’s conduct after a claim is submitted is “strong evidence” that a requirement of the FCA is not material to the government) have made it more difficult for the government and whistleblowers to expose fraud on the government.  Companies accused of defrauding the government have conducted fishing expeditions to determine if anyone in the government was aware of the alleged fraud, and then argue that if the government was aware of it, the alleged fraud was not material because the government did not act to stop it. 

The bill’s sponsors argue that reasoning “fails to take into account that government bureaucrats are highly segmented and often unable to make key decisions for their monolithic organizations . . . nor are they highly motivated to stop fraud. Yet, the Escobar decision has made it all too easy for fraudsters to argue that obvious fraud was not material simply because the government continued payment.”

The bill also provides clarification about when the government may dismiss whistleblower-initiated FCA cases, requiring a hearing before a judge in which the relator has the opportunity to show the reasons for dismissal are arbitrary and capricious. 

It also clarifies that the existing anti-retaliation provisions apply to post-employment retaliation. 

The bill has the backing of groups including Taxpayers Against Fraud, the National Whistleblower Center, the Project on Government Oversight and the Government Accountability Project. 

Taxpayers Against Fraud applauded the committee vote. 

“Today, the vast majority of the Senate Judiciary Committee decided to protect taxpayer dollars from fraud,” said Taxpayers Against Fraud President Jeb White. “With our country trying to recover from a pandemic, this is not the time for our elected officials to pander to the demands of the Fraud Lobby.”

Whistleblowers play an important role in rooting out fraud against the government. With over 30 years of experience litigating fraud and employment cases, Keller Grover is uniquely positioned to represent whistleblower clients. The firm has recovered billions for its clients. 

In August, a Keller Grover client reached a record $90 million False Claims Act settlement with Sutter Health, a healthcare provider, to resolve her alleged claims that the health system submitted inaccurate and unsupported medical diagnosis codes, which inflated its Medicare Advantage reimbursements. 

We are here to help those who want to report wrongdoing. For advice about how to handle suspected fraud, contact Keller Grover for a free and confidential consultation.