Congress Significantly Expands Federal False Claims Act Liability

On May 20, 2009, President Obama signed into law the first significant expansion of the federal False Claims Act (FCA) in over 20 years. The amendments expand the scope of liability, strengthen the anti-retaliation protections provided to whistleblowers, and reduce certain procedural hurdles that the government and whistleblowers have faced in their litigation of these matters. Participants in government health care programs and others in the health care industry should review current compliance policies and procedures in light of these amendments to ensure that their internal controls are consistent with and take into account the new law. The amendments include the following:

Amendments to Scope of Liability

Expanded Scope of “Claim.” A claim under the FCA now includes not only a request or demand presented to the United States, but also one presented to any other recipient, as long as the money or property at issue will be used on the government’s behalf or to advance a government interest, and the government has either provided or will be reimbursed for part of the money. By amending the definition of what constitutes a claim, Congress has potentially expanded the scope of the FCA to include transactions that the statute did not previously reach.

Simplified and Expanded Prohibitions. The principal liability provisions have generally been simplified and expanded. The FCA now prohibits:

• Knowingly presenting a false claim for payment or approval. This section no longer requires that the claim be presented to the government. 
• Knowingly making or using a false record or statement that is material to a false claim. This section no longer requires that such a record be used “to get” such a claim “paid or approved.” “Material” is also now defined by the FCA. 
• Conspiring to commit a violation of section 3729(a)(1). This section no longer requires that the conspiracy be to defraud the government “by getting a false claim allowed or paid.” 
• Knowingly making or using a false record or statement that is material to an obligation to pay the government. This section no longer requires that the record or statement be used to conceal or decrease an obligation—it is enough that it was made or used and is material to an obligation to pay. “Obligation” is also now defined by the FCA.

Amendments to Anti-Retaliation Provision

Protection extended to contractors and agents. The FCA’s anti-retaliation provision now applies to contractors and agents in addition to employees.

Protection triggered by effort to stop a violation of the FCA. The protection afforded by this provision is now triggered by a lawful effort to stop one or more violations of the FCA; the effort no longer needs to be in furtherance of an action under the FCA.

Amendments to Litigation Procedure

Relation Back of Government Complaint. If the United States elects to intervene, it may file its own complaint, or amend the relator’s complaint to add detail or additional claims. The FCA now specifically provides that for statute of limitations purposes, the government’s complaint will relate back to the filing date of the relator’s complaint.

Ability to Delegate Investigative Work and to Share Information. The Attorney General now may delegate his authority to issue civil investigative demands to investigate potential FCA violations, and may share information developed during his investigation with a relator.

Service of Sealed Complaints and Other Information on State or Local Governments. The FCA now allows service of a sealed complaint, other pleadings, and the written disclosure of substantially all material evidence and information gathered during an FCA investigation on any state or local government that is named as a co-plaintiff with the United States.

Effective Date of Amendments

The amendments take effect on the date of enactment and generally apply to conduct on or after that date. One notable exception is that the amendments to litigation procedure described above apply to cases pending on the date of enactment, regardless of when the conduct at issue in those cases occurred.

The full text of the amendments to the False Claims Act can be found at Section 4 of the Fraud Enforcement and Recovery Act of 2009.

If you would like further information, please contact the attorneys listed above or the Ropes & Gray attorney who usually advises you.