MENS REA (MENTAL STATE) AND REQUIRED PROOF
The False Claims Act (the “FCA”) subjects an individual or company to liability for “knowingly” submitting or causing the submission of a false claim. There are two common elements that a qui tam whistleblower must establish under any FCA subsection to prove a violation under the FCA: a claim must be (1) made “knowingly” and (2) “false” or “fraudulent.”
- A defendant will be liable upon demonstration that he or she “knowingly” submitted a false claim. There is no requirement to prove that the defendant actually intended to submit false claims under the FCA. Rather, liability may be established by simply proving deliberate ignorance or reckless disregard for the truth of the claims. Mere negligence and “innocent mistakes” are not sufficient to establish liability under the FCA.
- Actual knowledge is often difficult to demonstrate. Although it is always desirable to show that the defendant subjectively knew the claim was false, rarely are confessions admitting responsibility found. Except for an occasional e-mail providing a paper trail, showing actual knowledge requires more brain surgery than proof.
- Some arrangements, however, by their nature demonstrate awareness. For example, some contracts may call for the delivery of a specific type or brand name of a product. These contracts will also lay out appropriate procedures to follow if the contractor wishes to provide an alternate product. If the contractor does not provide the requested brand name product and does not follow the procedures to provide an alternate product, courts will easily find that the contractor had actual knowledge that he was submitting products that did not comply with the terms of the contract.
- Recklessness is usually defined in civil law as a standard that falls between negligent and deliberate conduct. In FCA terms, the degree to which the cost of submitting a false claim (over-payment expense), is greater than the cost of preventing the false claim (expense of due diligence), determines the knowledge classification. For example, submitting bills to Medicare that have little or no factual basis is also considered reckless behavior. In the medical arena, courts may impose liability based on grossly inferior record keeping. For instance, courts have imposed liability based on reckless conduct when a doctor billed close to, or in some instances over, twenty-four hours in a single day and failed to review bills submitted on his behalf.
False or Fraudulent
- In contrast to the term “knowingly,” the terms “false” and “fraudulent” are not defined in the FCA. When falsity is an issue, the question usually centers on the interpretation of a government regulation, contract, or law. Some courts have held that a claim cannot be “false” if it is submitted pursuant to a reasonable interpretation of vague statutory language. Those courts hold that to be actionable, a statement must be false under all reasonable interpretations. A well-informed defendant might defeat a finding of falsity by proving that the conduct was reasonable under at least one interpretation of the law.
THEORIES OF LIABILITY
There are seven theories of liability under the False Claims Act under which a qui tam whistleblower could proceed.
- Presenting a false claim (Section 3729(a)(1)). This section allows a court to impose liability on a defendant for presenting a “direct false claim,” or presenting a “false certification” to the government. However, the treatment of FCA claims varies significantly among the circuit courts.
- Using a False Record (Section 3729(a)(2)). False records or statements are generally incorporated into submitted claims. The methods of incorporation may vary from mere references to attachments.
Because of the roles of multiple parties and the somewhat differing statutory interpretations by the courts, there are two theories that must be considered when analyzing this section. Assuming one party, a subcontractor, is responsible for preparing a false record or statement, and another party, a contractor, is responsible for submitting the false claim, there may be differences in responsibility for the final submission. All courts require the ultimate false claim be submitted to the government before imposing liability. However, the courts are divided on the liability of the subcontracting party that was involved in the preparation and submission of the false record or statement. While the majority rule requires no knowledge or participation by the subcontractor in the actual presentment of the false claim, the minority view requires that the subcontractor have some degree of knowledge or participation in the contractor’s presentment of the false claim to the government.
- Conspiracy (Section 3729(a)(3)). Whether an entity participated in a conspiracy is a question of fact. The record evidence must be sufficient to permit a reasonable jury to conclude the defendants shared a conspiratorial objective. To determine whether there was an unlawful agreement, courts are guided by general civil conspiracy principles. A qui tam whistleblower must present evidence to show a meeting of the minds of two or more persons on the object or course of action. To establish a meeting of the minds, it is not sufficient that the conspirators intended to engage in the conduct that resulted in the injury. The parties must be aware of the harm or wrongful nature of conduct at the inception of the agreement. In a 2008 opinion in Allison Engine Co. v. United States ex rel. Sanders, the Supreme Court held that a relator must demonstrate that the defendants shared a specific intent to defraud the United States. Although circumstantial evidence may often be used to show the required level of intent, this element must be established by full, clear, satisfactory, and convincing testimony. In 2009, however, Congress amended the FCA and removed the “to get paid” phrase from the conspiracy language. Courts have therefore held that demonstration of specific intent is no longer necessary. In addition, Congress broadened the reach of the conspiracy provision by changing the language to make conspiracy liability actionable for any violation of Section 3729. The evidence must also show that at least one act was performed in furtherance of the conspiracy. To survive a motion for summary judgment, the qui tam whistleblower must raise a fact issue on each element of the claim. There is no requirement to prove damages; the defendant can be liable for civil penalties and costs.
- Delivery of Less Property (Section 3729(a)(4)). This theory is alleged infrequently. The elements of a cause of action under this provision are: (1) possession, custody, or control of property or money used, or to be used, by the government; (2) delivery of less property than the amount for which the person receives a certificate or receipt; (3) with intent to defraud or willfully to conceal the property. To satisfy these elements, qui tam whistleblower must set forth the factual basis for the allegations. Although the FCA states there is no requirement to show specific intent to defraud for any claim, at least one court has added this requirement as an element for recovery under this section.
- False Receipts (Section 3729(a)(5)). This theory is also not often alleged. There are three elements for a claim arising under this theory: (1) the defendant must be authorized to make or deliver a document certifying receipt of property used, or to be used, by the government; (2) the defendant must act intending to defraud the government; and (3) the defendant must deliver the receipt without complete knowledge that the information on the receipt is true.
- False Purchase (Section 3729(a)(6)). This is another rarely-used provision of the False Claims Act. For liability to arise under this theory, the defendant must buy property from the government, knowing that the seller is not authorized to sell the property. Liability will also arise if the defendant receives property as a pledge of an obligation or debt from someone in the government not authorized to pledge the property. Generally, when a violation of 3729(a)(6) has been alleged, it has not succeeded.
- Reverse False Claims (Section 3729(a)(7)). This theory is known as a “reverse false claim” because a defendant attempts to reduce an obligation owed to the government, instead of padding a claim. For example, if a for-profit company submits statements to the U.S. Postal Service claiming eligibility for a non-profit rate, the company has submitted a reverse false claim. For a cause of action under the reverse false claims section, the plaintiff must allege that the defendant: (1) made a false statement or created and used a false record; (2) with knowledge of its falsity; (3) for the purpose of decreasing, concealing, or avoiding an obligation to pay the government. In 2009, Congress amended this section of the FCA and expanded the actionable conduct. A violation occurs when one: “knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government.” Thus, the amended language expressly imposes liability on a person who wrongfully avoids a duty to return funds or property to the Government by remaining silent. Prior to the amendment the term obligation was undefined, and as result, some courts defined obligation narrowly to apply only to pre-existing fixed obligations. Congress, however, amended, the FCA by defining obligation to mean “an established duty, whether or not fixed” There is no requirement to prove that the government actually suffered a loss under this theory.
For more information and case citations, please see Androphy “Federal False Claims Act and Qui Tam Litigation,” published by Law Journal Press (2010).
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You should be aware that qui tam claims are subject to a Statute of Limitations. The area of limitations periods is complex. There are also first to file rules, public disclosure bars, original source issues, and varying limitations in pursuing retaliation claims. If you wish to pursue your claims, you should promptly seek the opinion of an attorney regarding the merits of your qui tam claim and the applicable statute of limitations.