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.

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.