Utah Whistleblower Hotline

False Claims Act

The False Claims Act was enacted in 1863 to fight widespread fraud by companies selling food, weapons, and other supplies and provisions to the Union Army during the Civil War. For this reason, the False Claims Act is also sometimes referred to as “Lincoln’s Law”. The law upon which the False Claims Act is based is rooted in a thirteenth-century English tradition of the qui tam, derived from a Latin phrase meaning “he who sues on our Lord the King’s behalf as well as his own.”

The False Claims Act allows private citizens to sue companies that commit fraud against the U.S. Government and it is the foundation of the U.S. whistleblower system. The Act is also the basis for extended protections under state and federal law for whistleblowers.

The basis for a whistleblower claim under the False Claims Act is that provable fraud or misconduct caused financial harm to the government. Circumstances under which such a claim can be made include deceiving the government into paying for a product or service it did not receive, overpaying for a product or service, or paying for a product or service that was of a lesser standard than that which the government agreed to purchase. The Act provides for up to treble damages and also provides awards of 15 to 30 percent of recoveries for those bringing cases.

The False Claims Act is the single most important tool U.S. taxpayers have to recover the billions of dollars stolen through fraud by U.S. government contractors every year.

Changing Corporate America

The False Claims Act is intended to discourage fraud and to uncover and punish deceit. The Act has, indeed, affected the practices of corporate America. Where once some corporations were willing to engage in unscrupulous practices to boost their profits, corporations now spend substantial sums developing meaningful compliance programs.

What the False Claims Act Covers

The federal False Claims Act covers fraud which involves any federally funded contract or program, except for tax fraud.  A separate IRS whistleblower program covers federal tax fraud.

Traditionally, many qui tam actions involved war contracts and the Department of Defense contracts. In recent years, however, the majority of qui tam actions have involved Medicare and Medicaid fraud.

It is impossible to list all of the fraudulent acts that have been prosecuted under the False Claims Act, as the scope of the frauds is wide-ranging. The following list gives just a few of the frauds that have been uncovered:


  • Winning a contract through kickbacks or bribes
  • Submitting false certification that a contract falls within certain guidelines (i.e. that the applicant is a minority or a veteran)
  • Shifting expenses from one fixed-price contract to another
  • Billing for non-FDA approved drugs or devices
  • Illegal marketing of prescription drugs and devices through kickbacks
  • Billing for brand name drugs when generic drugs were supplied
  • Billing for work or tests not performed
  • “Lick and stick” prescription rebate fraud and “marketing the spread” prescription fraud, both of which involve lying to the government about the true wholesale price of prescription drugs
  • Performing inappropriate or unnecessary medical procedures to increase Medicare
  • Submitting multiple billing codes instead of one billing code for a drug panel test to increase remuneration (“unbundling”)
  • Billing more for a panel of tests when a single test was asked for (“bundling”)
  • Inflating bills by using diagnosis billing codes that suggest a more expensive illness or treatment (“upcoding”)
  • Charging more than once for the same goods or service (“double billing”)
  • Charging for employees that were not actually on the job, or billing for made-up hours to maximize reimbursements (“phantom employees”)
  • Upcoding employee work – billing for a physician’s time when the work was performed by a nurse or other employee
  • Forging physician signatures when such signatures are required for reimbursement from Medicare or Medicaid
  • Prescribing a medicine or recommending a type of treatment or diagnosis regimen to win kickbacks from hospitals, labs, or pharmaceutical companies
  • Billing for unlicensed or unapproved drugs
  • Billing for marketing, lobbying or other non-contract related corporate activities
  • Being over-paid by the government for sale of a good or service, and then not reporting that overpayment
  • Submitting false service records or samples to show better-than-actual performance
  • Billing to increase revenue instead of billing to reflect actual work performed
  • Billing for goods and services that were never delivered or rendered
  • Presenting broken or untested equipment as operational and tested
  • Billing for premium equipment but providing inferior equipment
  • Failing to report known product defects to be able to continue to sell or bill the government for the product
  • Defective testing – certifying that something has passed a test, when in fact it has not falsified natural resource production records — pumping, mining or harvesting more natural resources from public lands that are reported to the government
  • Misrepresenting the value of imported goods or their country of origin for tariff purposes
  • Billing for research that was never conducted and/or falsifying research data that was paid for by the U.S. government


Limits of the False Claims Act

The False Claims Act is a powerful tool to combat fraud, but it is a tool that is limited by both the law and the economic realities of litigation.

A whistleblower is usually eligible for a reward under the False Claims Act if the case succeeds, a whistleblower and his or her lawyer must believe they have a very strong case to proceed. Unless the size of the fraud is considerable, it is generally not worth the risk to his or her career for the whistleblower to file suit, nor is it worth it for a law firm to risk the loss of the enormous time and expense that pursuing a False Claims Act case can represent.

In some cases, particularly with smaller companies, the accused company in a False Claims Act suit may declare bankruptcy. Larger companies with deep pockets may engage in delay tactics to exhaust the claimant’s financial resources.

Not only can a law firm be out time and money if a case fails, but if the government does join the case and the whistleblower proceeds and loses, he or she can be forced to pay the defendant’s attorney’s fees if the court finds that the claim was frivolous, or believes it was brought primarily to harass the defendant.