FCA’s proposal is unfair and would hamper economic growth
As US industry prepares to rebuild better in the face of a lingering pandemic, Senses Chuck Grassley, R-Iowa, and Patrick Leahy, D-Vt., Introduced the False Claims Amendments Act of 2021, proposing revisions to the False Claims Take action that could scuttle these efforts before they begin by radically changing a unanimous US Supreme Court precedent.
The CAF is the government’s main weapon in the fight against fraud against the federal government. The FCA is arming law enforcement officials with a criminal remedy with triple damages and civil penalties against those who knowingly or fraudulently make false statements to the government.
It also empowers private citizens, known as relators, to sue qui tam – lawsuits brought on behalf of the government – and get a substantial bounty if they win.
Congress first passed the FCA during the Civil War to prosecute unscrupulous contractors who sold defective rifles and gunpowder to the Union Army that was actually sawdust.
Because unfounded allegations of fraud can seriously undermine the goodwill of a business or individual, the common law, to deter unfounded lawsuits, places an increased burden on plaintiffs who must prove these allegations with evidence. clear and convincing. Prior to 1986, some courts applied this enhanced standard in CAF litigation.
In 1986, Congress made several changes to the FCA, one of which changed the burden of proof for the FCA. Congress changed the law to provide that plaintiffs need only prove FCA’s claims by a simple preponderance of evidence.
The FCA modifications have generated significant sums of money for the government, with more than $ 64 billion recovered since 1986. The United States Court of Appeals for the Fourth Circuit noted in its 1999 states decision. -United against Wagner, like “moths to a flame.” .
To share in the triple criminal damages and civil penalty recoveries that the FCA may generate, rapporteurs frequently allege FCA liability in cases involving minor or technical violations of rules and regulations – such as imposing liability on an individual. physician who accurately reports a service but uses a signature rubber stamp, rather than a printed or electronic signature for billing.
To strike the right balance, the Supreme Court, in its 2016 decision in Universal Health Services v. US ex rel. Escobar, clarified the types of potential misrepresentation that are material or significant under the FCA to the government’s decision to pay a claim.
Judge Clarence Thomas – writing for a unanimous tribunal that included Justices Sonia Sotomayor, Elena Kagan, Ruth Bader Ginsburg and Stephen Breyer – explained that the materiality element of the CAF is demanding and rigorous due to the potentially criminal application of the law.
The court stressed that the FCA “is not” an all-purpose anti-fraud law “or a vehicle to punish breaches of contract or regulatory violations of garden varieties.” To ensure that the FCA remained within the appropriate limits, the court asked the plaintiff to pr
There was not – and never has been – a corresponding burden, let alone a greater burden, placed on defendants to rebut a claimant’s assertions in this context. The proposed Grassley-Leahy Amendment seeks to overturn the Supreme Court’s unanimous decision in Escobar and complete the reversal – begun in 1986 – of the traditional burden of proof for fraud allegations.
The proposed amendment provides that claimants must prove materiality by a preponderance of evidence and, if established, would shift for the first time to defendants the burden of rebutting materiality with clear and convincing evidence.
In addition, the proposed amendment would penalize defendants for obtaining from the government the evidence they need to meet the increased burden that would now be placed on them to deny their guilt: if the defendants ask too much information from the government, they must pay the government for its costs and attorneys’ fees to produce it.
And in a final act of injustice, the proposed amendment would be retroactive and would apply to any FCA case pending as of the date of enactment – including those that have been in dispute for years and which the defendants have argued against. basing on the expectation that the current law will apply.
The Grassley-Leahy Amendment would reverse the Supreme Court’s reasoning in Escobar, reverse the traditional standard of burden of proof for fraud claims, and stack the game against the defendant in any FCA action.
Not only would the defendants have to prove their innocence to a higher standard, but they would potentially have to pay the government to engage in an investigation to establish that innocence. In many cases, this would impose insurmountable hurdles on defendants seeking to defend themselves against an allegation of fraud and the severe penalties that accompany it.
Given the places where federal funds have flowed since the start of the pandemic, the likely targets of this enhanced FCA would be businesses on the front lines to rebuild our economy and work to protect us from the COVID-19 scourge – that is, – say hospitals and care facilities. who care for the sick; laboratories that discover and test new treatments; pharmaceutical and durable medical equipment suppliers who manufacture and distribute supplies; universities that conduct clinical research; government contractors who formulate and produce vaccines; and small businesses seeking help from the government to reestablish their operations.
The Supreme Court got it right in Escobar in demanding a balanced approach that punishes violators while ensuring fair standards are in place to protect universities, hospitals and other important industries from frivolous and crippling lawsuits.
That basic fairness didn’t stop FCA plaintiffs from winning – the US Department of Justice clawed back more than $ 11.7 billion from FCA settlements and judgments between 2017 and 2020.
The Grassley-Leahy Amendment poses serious and unnecessary risks to vital businesses and institutions. If American industry is to get back on track, unfair and economically debilitating legislation like this must not be enacted.
The opinions expressed are those of the authors and do not necessarily reflect the views of the company, its clients or Portfolio Media Inc., or any of its respective affiliates. This article is for general information purposes and is not intended to be and should not be construed as legal advice.