RELEASE: Senators Grassley and Durbin Introduce Legislation to Strengthen the Government’s Primary Fraud-Fighting Law

WASHINGTON, DC — Today, Senator Chuck Grassley (R-Iowa) and Senator Dick Durbin (D-Ill.) introduced amendments to clarify important provisions of the federal False Claims Act, the government’s primary fraud-fighting law which protects taxpayer dollars, patient safety, and U.S. service members. Last legislative session, these amendments were favorably voted out of the Senate Judiciary Committee with strong bipartisan support.

The Department of Justice states since the False Claims Act was revitalized in 1986, over $70 billion has been recovered, with nearly 80% of the recoveries coming from whistleblower-initiated actions. The indirect benefit of the False Claims Act could be worth an additional trillion dollars in deterrence. With our government investing trillions of dollars into our pandemic economy, Congress should ensure that the False Claims Act can effectively reach those who seek to steal with impunity.

“Taxpayers Against Fraud applauds Senators Grassley and Durbin’s continued strong support of the False Claims Act,” said Taxpayers Against Fraud President & CEO Jeb White. “The Senators are consistent champions of Lincoln’s Law, which saves taxpayers billions of dollars every year. Regularly updating and modernizing the law ensures our federal anti-fraud statutes can meet the challenges created by today’s fraudsters who seek to steal and misuse taxpayer funds. We appreciate Senators Grassley and Durbin’s tenacious leadership and look forward to full congressional passage of this bipartisan legislation.”

By any measurement, the False Claims Act has been a remarkable success. However, the proposed Amendments would clarify two key provisions. Below is a summary of this much-needed legislation.

1. Clarify the materiality standard

    The current FCA “materiality” standard is easy to understand—liability only results from “material” violations. The FCA explicitly defines “material” to mean “a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property” by the United States. Congress added this statutory definition in 2009 to clarify that liability attaches when the government could have rejected the fraudsters’ claims for payment.  

    Nonetheless, this clear-cut standard was undermined by dicta language in a Supreme Court decision, Universal Health Services, Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016). In this case, the Supreme Court provided numerous factors that a court could consider for when determining whether fraud was “material” to the United States decision to pay a claim.  On one such factor, the Court wrote: “[I]f the Government pays a particular claim in full despite its actual knowledge that certain requirements were violated, that is very strong evidence that those requirements are not material.” 

    Although government knowledge was described as being “strong evidence” of immateriality, courts and defendants have made the government knowledge factor dispositive, stating that there must be proof that the government actually refused to pay the claim. This logic leaves no room for the government to pay a claim in an emergency situation and later bring an FCA case. Further, it undermines the clear language in the Supreme Court’s decision requiring the government to know that claims were false, by insisting that the government to stop payment anytime fraud is alleged, whether or not those allegations prove to be accurate, depriving patients of care and in violation of their contracts with private sector partners.

    For instance, during the current COVID-19 pandemic, the government might have made the decision to continue paying Medicare payments to a dishonest hospital that is the only available healthcare facility for a rural population. Under the wayward reading of the Supreme Court’s Escobar decision, such corrupt entities could use the government’s emergency payment decision to shield itself from FCA enforcement and drain government funds with impunity. The Government should not be deterred in recovering funds wrongfully taken from it simply because it is required to cut off payment to demonstrate materiality.

    The proposed FCA amendment reduces this uncertainty and allows the government to make the real-world decision to pay a false claim without concerns that the payment will subsequently shield the wrongdoer from FCA liability. Specifically, the proposed FCA amendment places the focus back on the fraudsters’ actions and allows the government to proceed with enforcement where it could have denied the fraudulent claims for payment. Of note, defendants are free, as they were before Escobar, to show that a requirement was minor or insubstantial. They also remain free to show that they did not “knowingly” violate the requirement.

    2. clarify the False Claims act provides anti-retaliation protection to former employees

    The second issue involves False Claims Act anti-retaliation protection for whistleblowers who have been blackballed by their former employer. Under current law, the FCA protects an “employee” from retaliation for efforts to stop violations of the FCA.  Although most courts recognize that the provision applies to “former employees” in the sense that most individuals who bring retaliation cases have been terminated and are “former employees,” courts have disagreed over whether the statute applies to post-termination retaliation.  See United States ex rel. Felton v. William Beaumont Hospital, 993 F.3d 428 (6th Cir. 2021).  For example, it is not uncommon for a former employer to make negative comments about a former employee to future potential employers, thereby preventing the former employee from obtaining new employment, a practice sometimes referred to as “blackballing.”  Although blackballing is the most common form of post-termination retaliation, such retaliation takes other forms as well.  The proposed amendment removes any uncertainty about whether the FCA reaches any post-termination retaliation by explicitly stating that the protections found in 31 U.S.C. § 3730(h) apply to any “current or former employee.”

    If Congress adopts these amendments, it will strengthen the FCA and remove the judicial uncertainty that is deterring would-be whistleblowers from coming forward. Now is the time to make sure the government’s primary fraud-fighting weapon is effectively reaching modern-day fraud schemes.

    For more information on this topic, please contact Jeb White at [email protected].