Reverse False Claims

For many years, practitioners have been trying to make strong cases based on what is called a Reverse False Claim. What is called a Reverse False Claim is found under 31 U.S.C. § 3729(a)(1)(G) which creates that liability under the False Claims Act for anyone who knowingly makes, uses or caused 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 to the government. If an individual wants to know more about Reverse False Claims, they should consult a skilled False Claims Act lawyer that could help them file a Reverse False Claim.

Defining Obligation

When discussing Reverse False Claims, “obligation” is the word that means the most. It was re-defined by Congress in 2009, which made amendments to the Act. The term obligation now refers to an established duty, whether or not fixed, arising from an express or implied contractual, grantor-grantee, or license-licensee relationship, from a fee-based or similar relationship, from statute or regulation, or from the retention of any overpayment.

A person can be liable for hiding money from the government or hiding an obligation to pay the government, and the term obligation is defined in what seems like really expensive language under the law. In fact, the 2009 Amendment first appeared to be an attempt to overturn some earlier cases that said a person could not file and get money for a Reverse False Claim when the basis of the obligation was fine.

Fixed or Not Fixed Obligation

Interestingly enough, the courts have determined the term fixed or not fixed, as meaning an obligation can be fixed or not fixed with respect to the amount of money that can be awarded under a Reverse False Claim or the amount of money that might be subject of a Reverse False Claim, not to whether or not the obligation itself initially is created.

Such distinctions make a big difference in the law even if they do not seem all that intuitive. Generally, as far as fines are concerned, they do not form the basis of liability under the False Claims Act case; however, it turns out that this provision does appear to apply to Customs duties.

Knowingly Making, Using, or Causing a False Record or Statement Material to an Obligation

A person “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” when:

  1. There is an obligation to pay money or property to the government
  2. The person knowingly creates, uses, or causes a record or statement that he knows is false
  3. The false record or statement is material to (i.e. could influence) the obligation to pay the government

For the distinctions between making, using, and causing a false record or statement, see annotations for section 3729(a)(1)(B).

A reverse False Claims Act case targets people who use false statements to avoid paying money or property to the government. For example, this provision is violated when a person makes a false statement in order to avoid paying fees, such as by forging a certificate of origin to avoid paying tariffs on products manufactured in certain foreign countries.

A person also violates this section when he or she knowingly makes, uses, or causes a false statement material to someone else’s obligation to pay the government. If a printing shop creates false certificates of origin that it knows its customer will use to avoid tariffs, the printing shop has violated the FCA (as well as almost certainly engaged in a conspiracy).

While it certainly is an obligation to pay taxes, a person who makes false statements on their tax returns has not violated this provision. This is because the False Claims Act explicitly does not apply to tax fraud. A person who commits tax fraud of any kind has instead violated IRS regulations. If you have information about tax fraud, please refer to the IRS Whistleblower page.

This type of false claim also occurs when a person conceals or avoids an obligation to return government money. If a doctor accidentally presents a claim to Medicare with an incorrect procedure code, but realizes the mistake and then submits a corrected claim, there is a chance that the government will pay both of them. In this situation, the doctor is required to return the overpayment. If the doctor fails to do this, then he or she has improperly avoided an obligation to pay and therefore committed a reverse False Claims Act violation.

What are the Penalties for Making a False Record or Statement?

A person who knowingly makes or uses a false record or statement, or knowingly causes a false record or statement to be made or used, that is material to an obligation to pay the government, is liable for three times the amount of the obligation to which those false records or statements are material. That person is also liable for civil penalties of between $5,500 and $11,000 for each false statement. These fines have been increased as a result of legislation, which adjusts all civil penalties for inflation. Call an attorney today to learn more about reverse False Claims Act cases and how a dedicated legal professional could help you.

Fines As the Subject of a False Claims Act

It looked initially like the word obligation was as of 2009 defined broadly enough that fines could be the subject of a Reverse False Claims, and there are a couple of old cases involving various environmental laws where people hid what they had done from government knowingly, in order to avoid being fined by the government.

Eventually, courts ruled that fines are too contingent to create an obligation. The government has to assess the fine, then has to take some action to fine someone, and until they have created that action or done that action, according to most case law and analyses, that does not create enough of an obligation to create liability under the False Claims Act.

Environmental Law and False Claims

The question was could this provision of the False Claims Act be used to enforce environmental law effectively and get money for relators who come forward with knowledge of environmental fraud or other kinds of fraud involving the hiding from the government, when people hiding from the government know that they would likely be fined.

Unfortunately, the Department of Justice supports, and the Fifth Circuit ruled, that environmental fines in and of themselves are not really going to fall within this provision of the law. While a fine may seem to create an obligation to those who first read this definition in 2009, for the purposes of False Claims Act Litigation, it may not create an obligation. If an individual wants to learn more about Reverse False Claims, they should consult a knowledgeable attorney that can answer their questions.