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FCA Elements

What Are the Elements of the False Claims Act?

Since its establishment in 1863, the False Claims Act (FCA) has been a pivotal tool in the federal government's battle against fraud, marking a significant milestone in our nation's legal history.

President Abraham Lincoln, often referred to as the architect of the FCA or 'Lincoln's Law,' championed this legislation to safeguard government expenditures from fraudulent claims, thereby upholding the integrity of federal procurement and spending.

 The False Claims Act (FCA)
The government must prove four key elements to find someone liable for violating the FCA.

Codified in Title 31 U.S.C. 3729, et seq., the Act has been revised to address contemporary challenges. While most false claims are penalized by civil fines, criminal charges can also result via 18 U.S.C. 287, punishable by up to five years in prison.

The federal government takes the enforcement of the False Claims Act very seriously, imposing severe penalties on healthcare organizations found guilty of fraud. These penalties can be initiated by the U.S. Department of Justice, whistleblowers, or private citizens, known as 'realtors,' who file a qui tam lawsuit.

The scope of False Claims Act liability is not static. It continues to increase as whistleblowers come forward to report alleged violations. Since the DOJ and federal prosecutors will review all complaints closely, healthcare providers face close scrutiny.

18 U.S.C. 287 makes submitting false, fictitious, or fraudulent claims a federal crime. However, this statute doesn't apply to all false or fraudulent claims anyone could make. It only applies to false or fraudulent claims against the United States or any department or agency within the United States government.

The federal False Claims Act applies to a wide range of entities. It is not limited to individuals or businesses with a direct contract with and pay for services from the United States government. It also extends to those with indirect contracts.

Simply put, 18 U.S.C. 287 imposes criminal liability for any person, business, or contractor who knowingly submits, or even causes to submit, a false or fraudulent claim when their intent is to receive payment from the federal government.

While the FCA addresses fraud in many ways, the government must prove four key elements to find someone civilly or criminally liable. Let's explore these four elements in more detail.

Falsity

The defining element of the FCA is the presence of a false claim, which is a claim made to the government for payment or approval that is incorrect or misleading.

The concept of falsity under the FCA is broad, encompassing outright false statements, partially true but incomplete disclosures, and false records or statements used to avoid paying the government.

A claim that meets the falsity criterion does not necessarily have to result in financial loss to the government when it is made. Instead, the focus is on the accuracy and truthfulness of the information presented. False claims can fall into one of two categories:

  • Objective Falsity: This occurs when the claim is objectively false, meaning it can be proven incorrect using factual evidence. For instance, submitting a bill to the government for never rendered services constitutes an objectively false claim.
  • Subjective Falsity: This involves situations where statements are misleading or deceptive but may not strictly contain false information. The claim could be subjectively false if the service provider knowingly misrepresents their qualifications, services, or adherence to government program standards.

Knowledge

The FCA does not penalize errors made in good faith. Instead, the law focuses on individuals or entities that knowingly submit false claims. "Knowledge" under the FCA includes the following:

  • Actual Knowledge: This occurs when the person submitting the false claim is fully aware of the inaccuracies or deceptive information. For instance, knowingly billing for products not delivered would demonstrate actual knowledge.
  • Deliberate Ignorance: This involves consciously avoiding learning the truth about the claim submitted. An example is a service provider who intentionally refuses to verify patient eligibility before billing.
  • Reckless Disregard: This occurs when a person displays a careless attitude toward verifying the accuracy of claims. Submitting bills without verifying compliance with government requirements could fall under reckless disregard.

Materiality

The materiality element requires that the false claim be significant enough to influence government decision-making. In other words, the government must demonstrate that it would not have disbursed funds if accurate information had been provided.

Materiality is defined as "having a natural tendency to influence or being capable of influencing" a government decision. Claims for services that were not provided, misrepresented billing rates, or failure to meet contract requirements can all impact funding decisions and qualify as materially false.

Causality

Finally, a violation of the FCA requires a causal connection between the defendant's false claims and the government's loss or payment. In other words, the false information must have caused the government to pay when it should not have done.

Causality means that the government's financial loss or overpayment occurred directly due to the false information provided.

To prove this element, the government must demonstrate that the false record or statement contributed to the government making a payment or approving a false claim.

What are Common Defenses Against FCA Violations?

Because these four elements must all be present and well-established to prove liability or procure a conviction, a federal criminal defense attorney will typically focus their defense strategy around disproving one or more of these critical elements. If you're accused of violating the FCA, here are some examples of how these defenses might play out:

Disproving Falsity

  • Demonstrating the accuracy of the claim submitted to the government.
  • Proving that inaccuracies were due to mistake or misunderstanding rather than deceit.
  • Arguing that the claim is based on a reasonable interpretation of ambiguous regulations or guidelines.

Disproving Knowledge

  • Establishing the lack of actual knowledge of the claim's falsity.
  • Providing evidence that the defendant conducted due diligence to ensure the claim's truthfulness.
  • Contesting the notion of reckless disregard by showing reliance on expert advice or the existence of compliance programs.

Disproving Materiality

  • Arguing that the alleged falsehood did not influence the government's decision to pay, demonstrating its immaterial nature.
  • Presenting evidence that the government had knowledge of the facts and still chose to pay the claim.
  • Highlighting instances where the government knowingly accepted similar claims in other situations.

Disproving Causality

  • Disputing the direct link between the alleged false statement and any decision by the government to disburse funds.
  • Showing that the payment would have been made despite the alleged falsity.
  • Illustrating that any errors were peripheral and did not contribute to the decision to approve the claim.

Notably, the most common defense to a charge of 18 U.S.C. 287 false claims would include lack of knowledge or intent to defraud.

Federal Healthcare Fraud

Even if it can be proven that the defendant was not entitled to the money or services claimed against the United States, the issue remains whether the defendant has a good faith belief that they are entitled to payment.

Applying the Federal Sentencing Guidelines is particularly important in false claims cases. The advisory guideline sentencing range for a particular defendant will vary widely depending on the "loss amount," i.e., the amount of money claimed against the United States.

Suppose you are under investigation or indicted in a false, fictitious, or fraudulent claims case under Title 18 of the United States Code, Section 287. In that case, our experienced defense attorneys can assist you immediately. Eisner Gorin LLP is based in Los Angeles, California.

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