Happy Birthday to the False Claims Act!

by Kurt Schulzke

The False Claims Act known as “Lincoln’s Law” was signed 149 years ago today by then President Abraham “Honest Abe” Lincoln.  Since its signing, the law has saved U.S. taxpayers many billions of dollars, $30 billion in civil recoveries* since 1986 alone.

Whistleblowers and their legal counsel are key players in the anti-fraud effort.  Thanks to the qui tam nature of the False Claims Act (“FCA”), private whistleblowers have the power to file claims confidentially and under seal on behalf of the taxpayers without having to wait around for government agency action.

At a January 2012 celebration of the 1986 False Claims Act Amendments, Assistant Attorney General Tony West said:

One need look no further than the record recoveries this department has obtained in civil fraud cases to demonstrate the tremendous importance and effectiveness of the False Claims Act. That framework was put in place in 1986, but our successes would not have been possible without the ongoing efforts and collaboration of career civil servants, private counsel, and, of course, the whistleblowers who come forward to report fraud (emphasis added).

The qui tam character of the FCA distinguishes it from the SEC and IRS whistleblower programs under which whistleblowers have little or no power to move investigations forward.  How many investor dollars might have been saved if Harry Markopolos had been able to file an SEC fraud claim (without waiting for the SEC) against Bernie Madoff?  In a word: billions. Harry was right about Madoff.  The SEC didn’t get it until it was far too late to protect Madoff’s misled investors.

In this vein, it is also worth emphasizing that most whistleblowers should disregard Michael Douglas’s recent FBI PSA encouraging whistleblowers to take their information straight to the FBI or other law enforcement.  Much better to begin the whistleblowing process by reaching out to knowledgeable legal counsel.

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*This total omits additional billions recovered through imposition of criminal fines and penalties.

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