False Claims Act: Overview, definition, and example
What is the False Claims Act?
The False Claims Act (FCA) is a U.S. federal law that imposes liability on individuals and companies that knowingly submit false or fraudulent claims for payment to the federal government. Originally enacted during the Civil War, the FCA is one of the government’s most powerful tools for combating fraud, especially in industries like healthcare, defense, and government contracting. It also allows whistleblowers (known as “relators”) to file lawsuits on the government’s behalf under its qui tam provisions.
Why is the False Claims Act important?
The FCA is important because it helps protect taxpayer money by deterring fraud and enabling enforcement against improper billing, inflated charges, or false certifications in connection with government programs. Violations can result in significant civil penalties, treble damages (three times the amount of the false claim), and exclusion from future government work. Companies that do business with the federal government must be especially careful to maintain accurate records, submit truthful claims, and comply with contractual and regulatory obligations.
Understanding the False Claims Act through an example
A medical provider submits claims to Medicare for services that were never performed. A former employee becomes a whistleblower and files a lawsuit under the FCA’s qui tam provisions. The Department of Justice joins the case and secures a multimillion-dollar settlement against the provider for submitting false claims. The whistleblower receives a percentage of the recovery as a reward.
Example of how a False Claims Act clause may appear in a contract
Here’s how a False Claims Act clause may appear in a government services or healthcare agreement:
"Each party represents and warrants that it shall comply with the False Claims Act (31 U.S.C. §§ 3729–3733) and shall not submit, or cause to be submitted, any false, fictitious, or fraudulent claims for payment to any federal program or agency."
Conclusion
The False Claims Act is a cornerstone of federal fraud enforcement that applies broadly to any entity doing business with the government. It creates strong incentives for both compliance and whistleblowing, and imposes serious consequences for violations. Including FCA-related provisions in contracts helps clarify expectations and reinforces a commitment to honest and lawful conduct.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.