The 2009 amendment expands the types of fraud subject to the federal False Claims Act.

• Author: Stubbs, Jerald D.

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The Federal False Claims Act (FCA), 31 U.S.C. [section][section] 3729-3733 (Supp. IV 2010), imposes civil penalties and treble damages for making false claims against the United States and its contractors, grantees, and other recipients of federal funds. (1) Described as "one of the most potent civil tools for rooting out waste and fraud in the [federal] [g]overnment," (2) the FCA's purpose is to enable the government to "recover losses sustained as a result of fraud...." (3)

The 2009 amendment (4) to the False Claims Act significantly expanded the types of fraud subject to the FCA, according to the senate report accompanying the 2009 amendment. (5) Generally, Congress intended the amendment to extend the reach of the FCA to false claims made to contractors and grantees of the federal government when these claims are paid with federal funds. (6) The amendment was needed, stated the senate report, to correct the erroneous interpretations of the FCA in Allison Engine Co. v. United States ex rel. Sanders, 553 U.S. 662 (2008), and United States ex rel. Totten v. Bombardier Corp., 380 F.3d 448 (D.C. Cir. 2004). Understanding these decisions is helpful to understanding the 2009 amendment.

This article examines the statutory text to determine if Congress succeeded in changing the FCA as claimed in the senate report. An examination of the text is important because the Supreme Court considers legislative history irrelevant if the text is clear. (7) This article concludes that Congress succeeded as intended.

This article will first describe the 2009 amendment and then examine two earlier amendments to the FCA that help to understand the 2009 amendment. This is followed by a discussion of the court interpretations of the FCA that prompted Congress to enact the 2009 amendment. This article then assesses whether the 2009 amendment accomplished the result Congress intended, and concludes with a discussion of how far the 2009 amendment expanded the types of fraud subject to the FCA and the types of fraud not subject to the FCA.

The 2009 Amendment

As amended, 31 U.S.C [section] 3729 imposes a civil penalty of $5,000 to $10,000 and triple the damages the government sustains for seven categories of acts. (8) The first two are the subject of this article: "(a)(1)(A) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval; [or] (B) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim." The first clause will be referred to as the "presentment" clause, and the second as the "statement" clause.

The term "claim" is defined in [section] 3729(b)(2).

(A) ... any request or demand, whether under a contract or otherwise, for money or property and whether or not the United States has title to the money or property, that--

(i) is presented to an officer, employee, or agent of the United States; or

(ii) is made to a contractor, grantee, or other recipient, if the money or property is to be spent or used on the [government's behalf or to advance a [g]overnment program or interest, and if the United States [g]overnment--

(I) provides or has provided any portion of the money or property requested or demanded; or

(II) will reimburse such contractor, grantee, or other recipient for any portion of the money or property which is requested or demanded. ...

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Earlier Amendments to the FCA

The meaning of the 2009 amendment requires an understanding of two earlier amendments to the FCA. The first was in 1982, (9) as part of Congress' decision to "revise, codify, and enact without substantive change certain general and permanent laws related to money and finance as title 31." (10) The FCA was included as 31 U.S.C. [section][section] 3729-3731 (1982). (11) The presentment and statement clauses of [section] 3729 provided:

1) knowingly presents or causes to be presented, to an officer or employee of the government or to a member of an armed force a false or fraudulent claim for payment or approval; [or]

2) knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved!.] (12)

The term "claim" was not defined. (13) Congress enacted the second amendment in 1986, which made substantive changes to the FCA, most of which are not relevant here. (14) Two substantive changes, however, are relevant.

First, the 1986 amendment added a new section (c) to define the term "claim."

(c) Claim denned. For purposes of this section, "claim" includes any request or demand, whether under a contract or otherwise, for money or property which is made to a contractor, grantee, or other recipient if the United States Government provides any portion of the money or property which is requested or demanded, or if the [g]overnment will reimburse such contractor, grantee, or other recipient for any portion of the money or property which is requested or demanded. (15)

This definition of a "claim" was intended to ensure that the FCA encompassed not only claims and statements submitted to the United States government, but also claims and statements submitted to a party other than the federal government "if the payment ... would ultimately result in a loss to the United States." (16) As examples, the senate report cited claims and statements made to the recipient of a grant from the United States or to a state under a grant partly funded by the United States. (17) According to the senate report, this subsection defining claim "clarifies that ... the False Claims Act [applies to] frauds perpetrated on [f]ederal grantees, including [s]tates and other recipients of federal funds." (18) The senate report cited with approval the court decisions that concluded the FCA covered Medicare claims submitted to private companies and Medicaid claims submitted to state agencies. (19) In the case of Medicaid, which is partly funded by the federal government, the senate report cited with approval United States ex rel. Davis v. Long's Drugs, 411 F. Supp. 1144, 1146-47 (S.D. Cal. 1976). In this case, the court held that the FCA applied to the Medicaid program administered by the state and paid for with equal state and...