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Federal Enforcement and Recovery Act Affects Fraudand Abuse
Liability
On May 20th, President Obama signed the Federal Enforcement and
Recovery Act of 2009 ("FERA"), expandingpotential liability under
the False Claims Act ("FCA"). In several ways, explained below, the
Act expands thescope of the FCA and the ability of the government
and qui tam relators to sue under it.
Reversal of Restrictions on FCA from the USC Allison Engine
Decision
FERA overturns a United States Supreme Court decision, Allison
Engine Co. v. United States ex rel. Sanders,which had clarified and
narrowed key interpretations of the FCA. Prior to the passage of
FERA, the FCA had a"presentment" requirement. A defendant must have
presented the fraudulent claim directly to the government.
InAllison Engine, the Supreme Court found that if the defendant
submitted the false claim to a contractor and notdirectly to the
government, then the government would have to prove that the
defendant intended to defraud thegovernment as well as the
contractor. FERA removes the "presentment" requirement so that a
defendant is liablefor knowingly presenting to anyone a false or
fraudulent claim for funds that at least partially come from the
federalgovernment.
In addition to removing the presentment requirement, FERA
expands the definition of a "claim." The operativelanguage of the
Act covers claims for money that "is to be spent or used on the
Government's behalf or to advance aGovernment program or interest."
As a result of this new and broader definition of a "claim" under
the Act, a partyreceiving Federal funds indirectly (e.g., Medicaid
payments) may be swept into the reach of the statute.
FERA also removes from the FCA a requirement of "intent" that
the Supreme Court relied upon in Allison Engine.Under FERA, the
false statement only has to be "material" to the government's
decision to pay money. FERAbroadly defines "material" as "having a
natural tendency to influence, or be capable of influencing the
payment,"adopting the definition suggested by the U.S. Department
of Justice (DOJ). Previously, underAllison Engine, theSupreme Court
had found that "to get" required that the defendant have the
purpose of "getting" the government topay a false claim. FERA
deletes the "to get" language and, as a result, the FCA no longer
requires a showing thatdefendants have the purpose of getting the
government to pay a false claim. Instead, the government or a qui
tamrelator bringing suit now only has to meet the "material" test
and show that the defendant made a false statementcapable of
influencing payment on a claim.
Increased Authority for DOJ and Other Governmental Agencies
FERA also allows DOJ new flexibility in dealing with other
governmental entities and qui tam relators. Overall,FERA provides
for the DOJ to share information in a much broader and coordinated
way.
FERA minimizes the restrictions on the Attorney General's
authority to issue Civil Investigative Demands ("CID").The Attorney
General may elect a designee to issue the CID and control the
procedure. Moreover, if the AttorneyGeneral or designee determines
that disclosure of the information from the CID is necessary to the
qui tam action,then the designee or Attorney General may disclose
the information to the relator. Before FERA, only the
AttorneyGeneral had authority to issue CID, and disclosure of
information provided in response to a CID was strictly limitedand
not shared with the qui tam relator. The new access to CID
information could aid a relator in fulfilling thestrict
requirements for a complaint alleging fraud under existing FCA case
law.
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The Attorney General or designee also may disclose the
information to a Department of Justice attorney for"official use."
Under FERA, sharing information for "official use" includes sharing
the information with attorneysfor other parties, with other
governmental agencies (state or federal), as well as with
government consultants,experts, auditors, and investigators. The
government may also disclose the information to state law
enforcementagencies when the state is a co-plaintiff. Just last
week, the DOJ and the U.S. Department of Health and HumanServices
foreshadowed their coordinated efforts with the announcement of the
Health Care Fraud Prevention and
Enforcement Action Team ("HEAT"). The HEAT Team will coordinate
and expand efforts to detect, prevent, andprosecute health care
fraud and abuse.
Also under FERA, the government's intervention in a qui tam
action "relates back" to the date that the relator filedthe qui tam
complaint, for statute of limitations purposes. Consequently, this
provision could allow the governmenta longer time to decide to
intervene in a qui tam action. FERA's relation back amendment
therefore eliminatesdefenses previously available to such action by
the government, including running of the statute of limitations
andinadequate notice.
Other Changes
The Act includes a number of other important changes,
including:
FERA changes liability for conspiracy under the FCA from
"conspiracy to defraud the government" toconspiracy to violate any
of the substantive provisions of the FCA.
FERA expands liability for reverse false claims. Previously, a
reverse false claim occurred when a personmade or used a false
record to conceal or decrease an obligation to pay the government.
FERA amends this
provision to include liability for obligations directly owed to
the government. FERA also increases protection against retaliatory
measures for persons reporting fraud by an institution
subject to the FCA. Such protection now applies not only to
employees, but also to agents and contractors.Since agents and
contractors encompass many different types of relationships, FERA
introduces greater
liability for retaliatory measures.
DRA Implications
Health care entities may also have to update the education
information they provide on the FCA as required by theDeficit
Reduction Act of 2005 (the "DRA"). The DRA requires most health
care providers participating inMedicare or Medicaid to educate
their employees, contractors and agents about federal and state
false claims actsand about the whistleblower protections under the
acts. The changes implemented by FERA may need to beincluded in
your organization's FCA information.
Conclusion
The changes above, the $165 million appropriated to the
Department of Justice under FERA, and the creation of
theinteragency HEAT team serve to demonstrate the government's
far-reaching approach to prosecuting fraud. Weexpect health care to
increasingly be an active area of false claims enforcement. If you
have questions about theimpact of the Federal Enforcement and
Recovery Act of 2009, please contact a member of Bradley Arant
BoultCummings LLPHealth Care team.
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