In a typical claim under the False Claims Act, the whistleblower alleges that a person or company submitted a bill to the government for work that was not performed or was performed improperly, resulting in an undeserved, or unearned payment flowing to the person or company. A reverse false claim, however, is not premised on the improper submission of a claim for payment. Instead, the reverse claim is based on the theory that a company has retained money it should have otherwise paid to the government. See United States ex rel., Customs Fraud Investigations, LLC v. Victaulic Company, No. 15-2169 (3rd Cir. Oct. 5, 2016).

In 2009, Congress expanded the scope of the reverse false claim when it passed the Fraud Enforcement and Recovery Act of 2009 (“FERA”). Congress passed FERA in part due to concerns that recent court decisions had narrowed the scope of the reverse false claim provision under the False Claims Act. FERA made two changes to reverse false claims. First, it expanded this category of claim to include “knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government.” Second, FERA defines “obligation” to include “an established duty, whether or not fixed, arising from an express or implied contractual, grantor-grantee, or licensor-licensee relationship, from a fee-based relationship or similar relationship, from statute or regulation, or from the retention of any overpayment.” Victaulic at *20, quoting 31 U.S.C. 3729 (2009). These two sections expanded the net for reverse false claims liability. Id.

Before the 2009 amendment to the False Claims Act, a relator wishing to establish a reverse false claim had to establish that a false statement or record was created. Under the amendments, however, a false statement is no longer necessary. Instead, the FCA specifies that a defendant’s mere knowledge and avoidance of an obligation is enough, even without submission of a false record, to create liability under the Act. Id. at 24.

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Jason Cornell is an attorney who represents whistleblowers with the law firm Clark Fountain LaVista Prather Keen & Littky-Rubin. Clark Fountain represents plaintiffs in various matters throughout the United States. If you have questions regarding the issues addressed in this or other posts, you can reach Jason at jcornell@clarkfountain.com.