Reverse False Claims

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Reverse False Claims Attorneys

For numerous years, legal practitioners have focused on building strong cases utilizing a concept known as Reverse False Claim. The provision governing Reverse False Claims is found in 31 U.S.C. § 3729(a)(1)(G) within the False Claims Act. It establishes liability under the Act for individuals who knowingly create, use, or cause the creation or use of a false record or statement that is material to an obligation to pay or transmit money or property to the government, or knowingly conceal or improperly avoid or decrease an obligation to pay or transmit money to the government. To gain a deeper understanding of Reverse False Claims, individuals are advised to seek the counsel of an experienced False Claims Act lawyer who can assist them in filing a Reverse False Claim.

Defining Obligation

When discussing Reverse False Claims, the term “obligation” carries significant weight. In 2009, Congress amended the Act, providing a revised definition for the term. Obligation now refers to an established duty, regardless of whether it is fixed, arising from various relationships such as contractual, grantor-grantee, or license-licensee relationships, fee-based or similar relationships, statutory or regulatory requirements, or the retention of any overpayment.

An individual can be held liable for concealing money owed to the government or evading an obligation to pay the government. The legal language used to define the term obligation can be complex. Initially, the 2009 amendment seemed to attempt to overturn previous cases that suggested a person could not file a Reverse False Claim and obtain compensation when the obligation was in the form of a fine.

Fixed or Not Fixed Obligation

Interestingly, the courts have interpreted the term “fixed or not fixed” to refer to the amount of money that can be awarded or be subject to a Reverse False Claim, rather than whether the obligation itself is initially established.

Such distinctions have significant implications in the law, even if they may not appear intuitive. Generally, fines do not serve as the basis for liability in False Claims Act cases; however, this provision does seem to apply to Customs duties.

Knowingly Making, Using, or Causing a False Record or Statement Material to an Obligation

A person is considered to have “knowingly made, used, or caused to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government” when the following conditions are met:

  • There is an obligation to pay money or property to the government.
  • The person knowingly creates, uses, or causes the use of a record or statement that they know is false.
  • The false record or statement is material to the obligation to pay the government.

To understand the distinctions between making, using, and causing a false record or statement, refer to the annotations for section 3729(a)(1)(B).

Reverse False Claims Act cases target individuals who utilize false statements to avoid paying money or property owed to the government. For instance, this provision is violated when a person makes a false statement to evade payment of fees, such as forging a certificate of origin to bypass tariffs on products manufactured in certain foreign countries.

Similarly, a violation occurs when someone knowingly makes, uses, or causes the use of a false statement that is material to another party’s obligation to pay the government. For example, if a printing shop produces false certificates of origin for a customer, knowing that the customer will use them to evade tariffs, the printing shop has violated the False Claims Act and likely engaged in conspiracy.

It is important to note that although taxes represent an obligation to pay, making false statements on tax returns does not fall under this provision. The False Claims Act explicitly excludes tax fraud, which instead falls under IRS regulations. Individuals with information about tax fraud should refer to the IRS Whistleblower page.

Another form of false claim occurs when a person conceals or evades an obligation to repay government funds. For instance, if a doctor mistakenly submits a claim to Medicare with an incorrect procedure code but realizes the error and subsequently submits a corrected claim, there is a possibility that the government will pay both claims. In such a situation, the doctor is obligated to return the overpayment. Failure to fulfill this obligation constitutes improper avoidance and a violation of the Reverse False Claims Act.

Penalties for Making a False Record or Statement

A person who knowingly makes, uses, or causes the creation or use of a false record or statement material to an obligation to pay the government is liable for three times the amount of the obligation relevant to those false records or statements. Additionally, they are subject to civil penalties ranging between $5,500 and $11,000 per false statement. These fines have been increased to account for inflation through legislative measures. To gain further insight into Reverse False Claims Act cases and receive guidance, it is recommended to consult an attorney who specializes in this area of law.

Fines in Relation to the False Claims Act

Initially, it appeared that the broad definition of the term “obligation” in 2009 encompassed fines as the subject of a Reverse False Claim. Several older cases involved environmental laws where individuals knowingly concealed their actions from the government to avoid fines.

However, courts ultimately ruled that fines are too contingent to create an obligation. The government must assess the fine and take specific actions to impose it. Until such actions are taken or initiated, fines, according to most case law and analyses, do not establish enough of an obligation to impose liability under the False Claims Act.

Environmental Law and False Claims

The question arose as to whether this provision of the False Claims Act could effectively enforce environmental laws and reward relators who come forward with knowledge of environmental fraud or other forms of fraud involving concealment from the government when the perpetrators anticipate potential fines.

Unfortunately, the Department of Justice supports the view that environmental fines alone do not fall within the purview of this provision of the law. While fines may initially appear to create an obligation to pay, they may not create an obligation for the purpose of False Claims Act litigation. To obtain more information about Reverse False Claims, individuals should consult a knowledgeable attorney who can address their queries.