Prepared Floor Statement by Senator Chuck Grassley of Iowa
Chairman, Senate Judiciary Committee
On the False Claims Act
July 29, 2015
Mr. President,
On July 30, 1778, the Continental Congress passed the very first whistleblower law in the United States. It read:
[I]t is the duty of all persons in the service of the United States . . . to give the earliest information to Congress or other proper authority of any misconduct, frauds or misdemeanors committed by any officers or persons in the service of these states, which may come to their knowledge.
Whistleblowers have always been crucial in helping Congress and the federal Government route out fraud and misconduct. It is simple common sense to reward and protect whistleblowers who report waste, fraud, and abuse. The False Claims Act does that.
In Fiscal Year 2014 alone, the federal Government recovered nearly $6 billion under the Act. That makes more than $22 billion since January 2009, and more than $42 billion since 1986. These recoveries represent victories across a wide array of industries and government programs. Those programs include mortgage insurance, federal student aid, and Medicare and Medicaid, as well as Defense contracts.
The Department of Justice credits whistleblowers for their important role in this success.
According to the Justice Department, whistleblowers accounted for $3 billion in recoveries under the Act in Fiscal Year 2014. In fact, over 80% of False Claims Act cases are initiated by whistleblowers. Clearly the False Claims Act is working very well.
Of course, the Act has no shortage of critics—typically the groups where you find perpetrators of fraud. But we have learned our lesson that a weak False Claims Act is not in the taxpayer’s best interest.
In 1943, Congress bowed to pressure to undo the Act’s crucial qui tam provisions.
Amendments passed back then barred actions where the Government already had knowledge of the fraud. The result was to block nearly all private actions. Congress assumed that the Justice Department could do a good job prosecuting fraud all by itself. They were wrong.
Between 1943 and 1986, fraud against the Government skyrocketed. Most of those accused went unpunished.
A 1981 report by the Government Accountability Office said:
“For those who are caught committing fraud, the chances of being prosecuted and eventually going to jail are slim . . . . The sad truth is that crime against the Government often does pay.”
So in 1986, I co-authored much needed amendments to the False Claims Act. The 1986 Amendments once again gave citizens the ability to help the government go after fraud in a meaningful way. For example, the amendments provided protections for whistleblowers and eliminated the impossible government knowledge bar. Essentially, a relator’s suit was only barred where the fraud had already been publicly disclosed.
The Amendments also clarified that the Act covers false claims made not just directly to a Government agency. It also covers fraud against grantees, States, and other recipients of Federal funds, whether or not the fund obligation is fixed.
These provisions and others were intended to give the False Claims Act teeth again. But courts chipped away at the heart of the False Claims Act and ignored the intent of Congress. The assault on the Act came to a head in the Supreme Court’s erroneous opinions in the well-known cases Allison Engine and Totten. The Court held that the Act required proof of intent that the Government itself pay a claim, and that a claim is presented directly to the Government. The problem with this logic is that it creates a loophole big enough to drive a truck through. A third party paid with Government money would get away with fraud because a contractor, not the government agency, paid the claim.
In 2009, we passed the Fraud Enforcement and Recovery Act and made clear that this was not consistent with our original intent. The Act reaches false claims for government money or property, whether or not the wrongdoer deals directly with the Government. It was never the intent of Congress to give a free pass to subcontractors or other parties receiving government funds. In fact, those folks are some of the biggest perpetrators of fraud today.
The Inspector General for the Department of Health and Human Services has reported a 134% increase in complaints against Medicare Part D in the last five years. By not stopping fraud against programs like Medicare Part D, the Government is hemorrhaging funds. Taxpayer money is taxpayer money—period.
Fraud does not magically become okay just because a third party is involved.
Of course, the issue of presentment to government officials is not the only sticking point. There has been pushback in the courts and from lobbyists about all sorts of issues, like the “public disclosure bar,” settlement practices, and award shares for relators. Through it all Congress has had to stay vigilant in keeping courts and the feds true to legislative intent.
Just recently the Justice Department tried to minimize a relator award in a Medicare and Medicaid fraud suit. The relator contributed significantly to the case. The Judge recognized that Congress intended that “the only measuring stick” for an award is “the contribution of the relator.”
That Judge was right. Congress intended to empower, protect, and reward relators who identify fraud against the taxpayers. History teaches us that weakening the relator’s rights weakens the government’s ability to fight fraud. All that does is let wrongdoers off the hook and cost the taxpayers money. That is not the result we intended with the False Claims Act. It is also not the result the Continental Congress, so concerned about identifying “misconduct, frauds and misdemeanors,” would have wanted.
I want to remind my colleagues to stand strong for the most effective tool we have to combat fraud.
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