What is the False Claims Act?
The
False Claims Act, 31 U.S.C. 3729, is a federal law proposed by President Abraham Lincoln and enacted by Congress during the Civil War to deal with dishonest war profiteers. It is sometimes referred to as “Lincoln’s Law.” Congress strengthened the False Claims Act in 1986 and since that time, honest Americans have assisted the federal government in recovering over $21 billion of taxpayer money lost to corporate fraud. The False Claims Act allows private citizens to assist the government in uncovering and prosecuting fraud. The law encourages citizens who directly know of specific instances of fraud against the government to file a civil lawsuit on behalf of the government. As a reward for their help, the individual or “whistleblower” receives a percentage of the recovery as a reward for assisting the government in recovering taxpayer money.
Many states have adopted their own version of the False Claims Act including Arkansas, California, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Louisiana, Massachusetts, Michigan, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Rhode Island, Tennessee, Texas, Virginia, Wisconsin, and the District of Columbia.
The False Claims Act covers any business that has a contract with the government. Both causing the government to pay money or allowing the company to avoid making a payment to the government are covered by the False Claims Act. The False Claims Act is not limited to one industry, it covers any company that provides goods or services to the government, including:
- Construction
- Defense contracting
- Healthcare/pharmaceutical
- Oil and Gas (i.e. underpaying royalties)
- Advertising
- Technology
- Agricultural
- Financial Services
The False Claims Act also applies:
- When a company falsely certifies to the government that it has complied with the government’s requirements. For example, when the government requires a contractor to comply with environmental requirements and the contractor doesn’t comply but certifies it has is a violation of the False Claims Act.
- When a company makes a loan through a federal agency knowing that the loan application contains false statements.
If a court determines that a company has defrauded the government in violation of the False Claims Act, not only will the company be required to pay back the amount, but in addition, it will be required to pay a penalty of $5,000 to $11,000 for each claim. If the government is successful in recovering money as result of the whistleblower’s disclosure, the individual will be compensated with a percentage of the recovery (15% to 30%).
Useful Links
http://www.taf.org/
http://www.law.cornell.edu
http://uscode.house.gov
http://www.law.com/
http://uscode.house.gov/uscode-cgi/fastweb.exe?
getdoc+uscview+t26t28+2483+0++26%3Acite%20w%2F3%207623
False Corporate Tax Claims
The government loses billions of dollars each year to corporate tax fraud and underpayment. In an effort to keep more profits, greedy corporations may fail to report income, falsify expenses, over report losses, improperly use tax shelters, and even fail to file returns. Individuals can also assist the government in recovering taxpayer money by reporting tax fraud under the Tax Relief and Health Care Act of 2006, 26 U.S.C. § 7623. As a reward for his/her assistance, an individual will be paid between 15% and 30% of the recovery (recovery must be at least $2 million).
A tax claim is processed internally by the IRS Whistleblower Division. Due to staffing limitations generally only large claims (above $5 million) will investigated and pursued by the IRS. For this reason the best false tax claims cases typically will involve large corporations, particularly where foreign and offshore accounts and transactions are used. The IRS law is new (effective December 2006) and relatively few claims have been filed so far (compared to the much older False Claims Act under which many cases have been filed and resolved successfully). The IRS whistleblower program offers a real opportunity for people to report significant corporate tax fraud and receive a sizable reward for helping recoup dollars for the U.S. Treasury.