False Claims Act
The genesis of the False Claims Act can be found during our nation’s darkest hour. At a time when the United States was in danger of being irrevocably torn apart, unscrupulous individuals saw an opportunity to profit from their country’s misfortune. The war effort required a tremendous budget. With so much money changing hands, government contractors had ample opportunities to defraud the government and hide losses in a mountain of paperwork.
Congress learned of several abuses that occurred early in the war and garnered embarrassing headlines. Purchase officers were accused of overpaying for lame and disabled horses, a practice that resonates to the present day with the term “horse trading.” In at least one instance, bullets provided to the Union forces contained sawdust instead of gunpowder. Men who had contacts in the government were often given substantial “commissions” for their ability to secure government contracts.
The matter reached a boiling point in 1863, when Congress passed the False Claims Act in response to public outcry against government contract abuse. Claims of fraud could be brought by private citizens as well as the Attorney General. This was not a new development, however. Qui tam actions (from the Latin phrase meaning “he who brings an action for the king as well as for himself) had their origins in the English common law. The qui tam plaintiff was known as the relator.
Private citizens were given valuable incentives to bring claims. The courts were directed to award double the amount of actual damages in a False Claims Act case, and a successful relator would be granted half of the recovery. Thus a relator would usually benefit more from turning in his co-conspirators than he would from defrauding the government undetected.