The Chamber of Commerce has commenced a well-financed and aggressive lobbying campaign to undermine America’s most effective whistleblower law, the False Claims Act. To justify its anti-whistleblower campaign the Chamber published a report entitled, “Fixing the False Claims Act: the Case For Compliance-Focused Reforms.” The purpose of this blog series is to combat the Chamber’s misinformation, and explain why the False Claims Act must be protected.
Fact Number 11:
Unlike the impression given in the Chamber’s report, the FCA is not a negligence or strict liability law. As explained by the Department of Justice in its FCA Primer: “A person does not violate the False Claims Act by submitting a false claim to the government.”
This point was made perfectly clear in the 1986 Senate Report on the FCA: “The Committee is firm in its intention that the act not punish honest mistakes or incorrect claims submitted through mere negligence.”
How can a company escape all liability under the FCA, even if it submits a false claim to the government?
The answer is simple: create internal controls that prevent or reduce the probability that a business can be accused, of promoting “deliberate ignorance” of fraudulent conduct.
Congress crafted the FCA to directly address the need for effective internal compliance programs. During the hearings held on the FCA in 1986, Congress heard many witnesses complain about retaliation within corporate compliance programs. Companies that negligently or innocently submitted false claims would be immune from liability. If, however, a whistleblower reported a concern, and the company tried to cover it up or failed to have proper internal controls, the company could not escape liability.
The 1986 Senate Report on the FCA spelled this out clearly:
“The Committee is firm in its intention that the act not punish honest mistakes or incorrect claims submitted through mere negligence. But the Committee does believe the civil False Claims Act should recognize that those doing business with the Government have an obligation to make a limited inquiry to ensure the claims they submit are accurate.”
“The FCA is already designed to encourage businesses to create strong, independent and effective compliance programs.”
“While the Committee intends that at least some inquiry be made, the inquiry need only be ‘reasonable and prudent under the circumstances,’ which clearly recognizes a limited duty to inquire as opposed to a burdensome obligation. The phrase strikes a balance which was accurately described by the Department of Justice as ‘designed to assure the skeptical both that mere negligence could not be punished by an overzealous agency and that artful defense counsel could not urge that the statute actually require some form of intent as an essential ingredient of proof.’”
The “deliberate ignorance” standard was crafted with an eye toward ensuring that companies have strong internal controls. Indeed, Congress was well aware that corporate inspectors were often the target of retaliation and, in fact, endorsed the finding of a 9th Circuit Court of Appeals ruling that held that internal inspectors should be fully protected under anti-retaliation laws, even if they never contacted the government.16
The FCA is already designed to encourage businesses to create strong, independent, and effective compliance programs. As more cases are filed under the FCA, more companies will come to recognize that it is to their advantage to institute effective compliance programs.
Whistleblowers and their supporters are strongly urged to read this blog series and share it with friends. In addition, an Action Alert has been issued by the National Whistleblower Center so members of the public inform their representatives that the False Claims Act should not be “reformed” as proposed by the Chamber.