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August 13, 2014 False Claims Act Legal News

False Claims Act Oversight Hearing Part 2: Proponents Shed Light on Benefits of Incentivizing Whistleblowers

In yesterday’s post, we discussed the recent oversight hearing conducted by the U.S. House of Representatives through its Committee on Judiciary. The hearing, which took place at the end of July, was called in order to address the effectiveness of the False Claims Act, areas ripe for improvement, and issues in need of attention. The introduction to the meeting was given by U.S. Representative Trent Franks (R-AZ), who expressed concern over recent studies indicating as much as $100 billion of taxpayer money is lost each year due to fraud, waste, and abuse – a sum far exceeding the $3 billion recovered by the FCA in 2013. The oversight committee elicited testimony from several experts as to how to close that gap, as well as testimony from the Chamber of Commerce relating to its position that large corporations are unfairly targeted under the FCA.

In today’s post, we review testimony from several proponents of the Act, as well as their positions with regard to the Chamber’s assertion that large corporations should be given a break in penalties for choosing to self-report.

Testimony by Senator Grassley

Senator Charles Grassley (R-IA) was the first to speak on the issue, and began his testimony with the acknowledgement that, to big businesses, whistleblowers are like a “skunk at a picnic.” However, Mr. Grassley further pointed out that without the courage of whistleblowers willing to come forward, the FCA could not continue in its success and corporate and contractor fraud would continue to perpetuate indefinitely.

Senator Grassley spent a majority of his testimonial time addressing the Chamber’s ideas that large corporations should be given 180 days to self-report fraud, thereby incurring a lesser penalty, before a private whistleblower can commence an individual lawsuit. Grassley pointed out that this set-up would result in the whistleblower being unfairly targeted by the company, possibly enduring unlawful retaliation or termination. Further, by implementing these proposed changes, the FCA’s effectiveness would likely decrease due to potential plaintiffs being scared off by the prospect of having to internally report before going to governmental authorities.

Testimony of Patricia Harned, Ph.D.

The oversight committee then elicited testimony from an ethics expert on whether the FCA in its current design best incentivizes integrity or, in the alternative, the Chamber’s proposed internal reporting idea would be a better method for identifying, exposing, and eliminating fraud. Ms. Harned pointed out that even in companies with extensive and intricate compliance and internal reporting structures, misconduct often occurs regularly. She further explained that companies focusing not only on compliance, but on a corporate culture of ethical conduct, are more likely to benefit from a procedure wherein instances of fraud are reported internally first before the implementation of a whistleblower lawsuit. Presumably, however, companies focusing strongly on consistently ethical behavior would not be those most likely in need of these regulations in the first place – presenting a corporate catch-22.

Testimony by Hon. John Clark

Lastly, testimony by former U.S. Attorney and current board member of the Taxpayers Against Fraud Education Fund, Hon. John Clark, reiterated the position that internal compliance programs are certainly a step in the right direction; however, compliance requires integrity – which too many large corporations are lacking. He pointed out that the FCA is specifically designed to address widespread and extensive fraud, making the gross damages provisions appropriate in many situations.

Judge Clark further poignantly testified, “Just as no company should be ‘too big to fail,’ no individual should be too important to not incur personal consequences for fraud against the government. Personal consequences are a strong deterrent to fraud….we have seen a number of entities who have resolved False Claims Act cases, which means that they entered into a corporate integrity agreement that required a strong compliance program, [and] went right back to the same bowl and lapping at it again.”

Contact Berger Montague Today

If you are aware of fraudulent conduct against the federal government, whether involving federal healthcare programs like Medicare or a lucrative government contract, we encourage you to come forward right away. The False Claims Act is designed to reward integrity and deter corporate misconduct, but it cannot advance its effectiveness without a courageous whistleblower like yourself. For more information, contact Berger Montague today.