New Whistleblower legislation submitted to Senate
The Senate made history this week by introducing essential bi-partisan whistleblower legislation that will help protect taxpayers against fraudulent government contractors. Senator Charles Grassley (R-IA), and Senator Dick Durbin (D-IL). were sponsors of this False Claims Act Correction Act of 2007legislation. Additional key figures involved in co-sponsoring the False Claims Correction Act of 2007 legislation include Senator Patrick Leahy (D-VT) and Senator Arlen Specter (R-PA). The bill attempts to close loopholes in the False Claims Act, a law which permits private citizens to file suit against contractors who defraud the federal government.
In response to this new legislation, Whistleblower Center President Stephen M. Kohn is quoted as as saying "The majority of all civil fraud recoveries in the US are based on whistleblower disclosures. Because of the effectiveness of the False Claims Act, powerful corporate interests have aggressively attacked the law in court, creating loopholes which have undermined the law and cost the taxpayers billions of dollars. The False Claims Act Correction Act is badly needed legislation to stop the hemorrhaging of the public treasury by unscrupulous beltway bandits.”
Important Highlights from the Bill include:
Makes corrections to 31 U.S.C § 3729 removing the requirement that false claims be presented to a government employee.
Amends the FCA to clarify the dismissal of parasitic claims filed based upon publicly disclosed information.
Clarifies that false or fraudulent claims against non-U.S. Government funds under the trust and control of the U.S. Government are subject to recovery under the FCA.
Clarifies a split between Circuit Courts of Appeal as to when a government employee may act as a qui tam relator under the FCA.
Makes technical and clarifying amendments to the statute of limitations in FCA cases.
Senator Grassley gave a passionate speech when he addressed the Senate introducing the False Claims Correction Act 2007 legislation. In his speech, Senator Grassley states " the FCA again faces a situation where it may not be as effective as intended. Recent decisions by federal courts have limited the FCA in a way that was not envisioned when I authored the 1986 amendments. ". He goes on to highlight the following three influential FCA cases and their impact on future cases: ex rel. Totten v. Bombardier Corp, Rockwell International Corp. et al. v. United States, and FCA is ex rel. DRC, Inc. v. Custer Battles, LLC.
In ex rel. Totten v. Bombardier Corp, Senator Grassley states that "false claims presented to government grantees, in this case employees at Amtrak, were not actually presented to the federal government. As a result, the government was precluded from recovering money lost to fraud and abuse perpetrated against Amtrak."
In Rockwell International Corp. et al. v. United States, Senator Grassley states that "the court interpreted an area of the False Claims Act, known as the “public disclosure bar,” which prohibits a FCA case from moving forward if the case was based upon publicly disclosed information, such as a government report, unless the whistleblower filing the case was the “original source” of the information. Here, the Supreme Court held that a qui tam whistleblower was barred from receiving a share in any money recovered unless they were the “original source” of all claims ultimately settled. This may not sound like a troublesome decision. However, the impact is that often times a case is brought by a whistleblower on a certain set of facts and then expanded by the Department of Justice who ultimately settles on other grounds. As a result, this case creates a disincentive for a whistleblower to bring forth information about fraud as they may not get to share in any part of the recovery."
In FCA is ex rel. DRC, Inc. v. Custer Battles, LLC, Senator Grassley states that "a jury found that a defense contractor had defrauded the government of $10 million. However, the judge overturned the jury verdict finding that the money lost was not U.S. Taxpayer money, but was instead Iraqi money under the control of the U.S. Government. As a result of this case, the U.S. Government may not recover for any fraud committed against the U.S. Government if the funds are not American funds, even if the U.S. Government has been entrusted with the management of those funds."
