On May 20, 2009, President Obama signed into law the 2009 amendments to the Civil False Claims Act contained in the Fraud Enforcement and Recovery Act (FERA). The amendments expand the scope of liability under the False Claims Act and give the government enhanced investigative powers.
Liability for Improper Retention of Government Overpayments
FERA specifies that an entity violates the False Claims Act if it “knowingly and improperly avoids or decreases an obligation” to pay money to the United States—including an obligation based on an “established duty . . . arising from . . . the retention of any overpayment.”
Though the law doesn’t define any new obligations to return overpayments, a knowing and improper failure to return an overpayment (if there is an “established duty” to do so) is now the basis for a False Claims Act action. Entities will need to have mechanisms in place to track and return overpayments when there is an obligation to do so,and to document in real time that their retention of overpayments while quantifying and processing them for refund does not reflect any intent to improperly retain the funds. This issue will likely become particularly acute with respect to potential violations of the Stark Law self-referral prohibitions. In addition, all government contractors who receive payments for goods or services may be exposed to False Claims Act liability if they are overpaid under their contracts, have a duty to return the overpayments and fail to do so.
Expanded Liability for Claims or Statements Affecting Government Funds
Most notably, FERA overturns the 2008 Supreme Court decision in Allison Engine Co. v. United States ex rel. Sanders, 128 S.Ct. 2123 (2008), by removing certain language in sections 3729(a)(2) and (a)(3) of the False Claims Act. Prior to the 2009 amendments to the False Claims Act, liability existed under § 3729(a)(2) when a person “knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government.”
FERA removes the words “to get” and “by the Government” from the language of § 3729(a)(2), essentially eliminating the requirement that a claim be presented to a representative of the federal government. Instead, False Claims Act liability now extends to include any false or fraudulent claim for government money or property, whether or not the claim is presented to a government official or employee, whether or not the government has physical custody of the money, and whether or not the defendant specifically intended to defraud the government.
As amended, False Claims Act liability will attach to funds dispensed by the government through intermediaries, which may have broad application to funds distributed to, and disbursed by, states and state agencies through the American Recovery and Reinvestment Act of 2009 (the economic stimulus package). Whether the funds received from an alleged false claim are obtained directly from the United States government is not controlling. Rather, if the funds are spent or used on the government’s behalf, or to advance a government program or interest, a recipient will now be exposed to False Claims Act liability. This would likely include payments received from Medicare administrative contractors, and may open the door to False Claims Act liability for claims submitted to Medicaid Advantage plans and Medicaid HMOs. In addition, False Claims Act liability may attach to claims made on government contractors and subcontractors who hold government derived funds, regardless of how far removed from the initial disbursement of government funds.
The revisions to section 3729(a)(2) apply retroactively to all claims under the False Claims Act that were pending on or after June 7, 2008.
Expanded Retaliation Provisions
The 2009 amendment to the False Claims Act expands the bar on retaliation against “employees” and now includes retaliatory actions taken against any “contractor, or agent.”
Expanded Statute of Limitations Period for Cases in Which the Government Intervenes
Under the 2009 amendments to the False Claims Act, when the government files a complaint, or files a complaint in intervention amending, clarifying or adding claims to a relator’s complaint, the government’s complaint is treated as being filed on the date of the relator’s original complaint for statute of limitations purposes. As a result, the time the government spends investigating a case or negotiating with a defendant does not count towards the statute of limitations.
Broadened Investigative Authority
The amendments expand the Attorney General’s authority to issue Civil Investigative Demands (CIDs) and broaden the government’s authority to share documents obtained through subpoena with qui tam relators and other parties.