The Law Firm of Piacentile, Stefanowski & Malherbe LLP

Senator Chuck Grassley and the Modern False Claims Act

Senator Chuck Grassley, an American politician who has served as a Senator for Iowa since 1981, is, as he has been since the 1980s, been playing a key role in updating the False Claims Act in 2021. This is not the first time Senator Grassley has dealt with this Act. In 1986, he helped modernize what was called the “Lincoln Law” by working to strengthen whistleblower incentives to report wrongdoing. Since Senator Grassley, Congress, and Reagan amended the "Lincoln Law," more commonly and formally known as the False Claims Act ("FCA"), the federal government recovered nearly $70 billion dollars from fraudsters.

Today, once again, Senator Grassley is leading a bipartisan effort to update the Act, hoping to close certain loopholes that bad actors have been taking advantage of in the past. The need for an amendment was partly prompted by a rise in fraudulent schemes perpetrated against the government during the pandemic and to ensure that those who commit fraud against the government are held accountable.

The most important loopholes corrected by this proposed amendment stem from the court decision in United Health Services v. United States ex rel. Escobar, which made it possible for defendants in fraud cases to argue that their fraud was not material if the government had continued to pay for the services in question. 'Materiality' is an important aspect in every whistleblower case because it determines if the subject of the fraud is important enough to warrant attention and legal action. This has led to many cases being dismissed even though it was proven that there was fraud going on because the courts determined that the subject of the fraud was not important enough. The US Supreme Court in Escobar determined that “[I]f the Government pays a particular claim in full despite its actual knowledge that certain requirements were violated, that is very strong evidence that those requirements are not material.” Senator Grassley has argued that the US Supreme court and many lower courts have misinterpreted Congress’ intent in passing and amending the FCA. This proposed amendment allows the government to claim that a requirement is material even if having made payments for claims the government knew violated those requirements.

In addition to this provision, the amendment also includes a requirement that the government must explain its reason for the dismissal of a case. Before this proposed amendment, when the federal government decided to pursue a whistleblower case under the FCA, the government had the power to drop the case if determined that it is frivolous. If the amendment passes, the government will now have to explain its reason(s) for dismissal and the person who initiated the legal process will have the chance to argue that the dismissal was arbitrary, capricious, or even illegal. The amendments also include additional protection against retaliation for whistleblowers, ensuring that the previous anti-retaliation provisions apply to post-employment retaliation. Means that defendants will be deterred from retaliating against the whistleblower who denounced them, even if that whistleblower is not a current but a former employee.

Opponents of this amendment have claimed that the new provisions would motivate individuals to pursue worthless claims and will limit the federal government's decision-making abilities, specifically the Department of Justice. They also worry that an easier whistleblower process for the government will eventually drive up the cost of healthcare and may shift the financial burden of the legal process to defendants who cannot afford it, some of them doctors who had good intentions who simply made honest mistakes when billing the government. Additionally, some opponents simply believe that the Supreme Court was right in their decision in Escobar and that the government’s decision to continue paying for something the government knew violated one of their requirements is de facto proof that the requirement is not material.

Senator Grassley has defended the amendments by emphasizing the importance of the FCA. “The False Claims Act is the federal government’s most powerful tool to protect taxpayer dollars and root out waste, fraud, and abuse,” said Senator Grassley, “Unfortunately, the False Claims Act is constantly under attack by industries looking to make it easier, to make a dollar out of defrauding the government.” Senator Grassley also explained that fixing the materiality loophole is important because fraudsters violating a government requirement could easily escape prosecution by proving that a government employee knew about the violation, even if that does not necessarily reflect the requirement’s overall importance to the federal government.

The FCA has been essential to combating fraud and waste that negatively impacts the federal government and American taxpayers. Since working on its modern amendments in 1986, Senator Grassley has been a champion for the FCA and the whistleblowers who depend on it to denounce fraudulent behavior, and he intends on strengthening the Act to enhance the government’s ability to recover money from bad actors. Especially now, after a global pandemic that prompted the federal government to provide more financial aid to its citizens and businesses, we need to ensure that the government has the necessary resources and protections to fight criminals who aim to take advantage of the programs designed to help those in need.