NWC Rebuts Chamber’s Proposed FCA Reforms

Intern Paul Lyons authored this post.

On Friday, December 6th, 2013, National Whistleblower Center Executive Director, Stephen Kohn, was a guest panelist at the Congressional Civil Justice Caucus Academy’s Briefing on False Claims Act Reform. The briefing was styled as a debate between Mr. Kohn and David Ogden. Mr. Ogden, a former Deputy U.S. Attorney General and the chair of WilmerHale’s Government and Regulatory Litigation Group, is one of the authors the U.S. Chamber’s Institute for Legal Reform’s proposed amendments to the FCA.

The Chamber claims that its proposed amendments will make the FCA more effective. The provisions are to incentivize companies to implement better compliance programs and prevent fraud before it happens. However, it is clear that the proposed reforms would do the opposite and actually hinder the FCA as well as the detection and prevention of fraud at large.

Mr. Ogden claims that the FCA is “simply ineffective at preventing fraud.” However, the FCA is the single most effective anti-fraud statute in the world. The FCA was reformed in 1986 to allow whistleblowers to perform qui tam actions, meaning that the whistleblower could pursue cases on behalf of the government and be rewarded for helping the government recover penalties from corporations that defraud the government. Since the inclusion of the Qui Tam provision the detection and prevention of fraud has risen exponentially. In 1986, prior to the reform, the U.S. government recovered 89 million dollars from detecting and prosecuting fraud. In 2012, that number rose to 4.95 billion dollars, 68% of that money was recovered via Qui Tam actions. All of this information and more is available in the National Whistleblower’s Center’s FCA Report.

The reforms proposed by the Chamber would reduce both protections and incentives. One suggested reform would require employees to report fraud internally at least 180 days prior to filing a qui tam action in order for their action to even be considered. The first issue with this is that the chamber concedes in their own report that “90 percent of employees who filed a qui tam case had initially filed their concerns internally” so it doesn’t seem logical that this behavior would need reinforcement. Second, the FCA includes provisions for whistleblowers to file reports to the government anonymously, precisely because congress understood that there was a great value in having an insider who was able to report information about fraud while it was happening. That simply isn’t possible when an employee reports internally and lets their company know that they oppose the misconduct.

Mr. Ogden argued that the FCA treats those corporations that have defrauded the government too harshly. He believes that it should be the priority of the U.S. government to improve protections for corporate interests, and had little to say about the treatment of those whistleblowers reporting fraud. He did argue though that these employees do not deserve the monetary awards granted by the FCA.

Mr. Kohn’s argument relied on clear statistics and common sense to demonstrate how fraud is reported, detected and prosecuted, how whistleblowers provide a public good by helping to end fraud, and how not to help whistleblowers and the U.S. government to achieve this end. In contrast, Ogden proposed that companies should receive immunity from being excluded from government contracts, otherwise known as debarment, after being caught committing fraud, and should be incentivized to participate in better compliance programs. Both of these ideas are divorced from the reality of how the FCA is used in court and extra-judicial proceedings. As Mr. Kohn pointed out, debarment is very rarely used. Furthermore, prosecutions under the FCA already result in a company being required to participate in stronger compliance programs in almost every case, so Mr. Ogden’s recommendation that the FCA be reformed to incentivize compliance programs is redundant at best.

Certainly, it is troubling to see the Chamber seek reforms that are clearly against the interests of both the Federal Government and the American people. The good news however, groups like Mr. Kohn and the National Whistleblower Center are standing strong in defense of the False Claims Act.

The videos of this event can be found here


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