The
False Claims Act is the government’s
most powerful tool in fighting and deterring fraud.
I
have devoted much of my time in the Senate to strengthening this law on behalf
of taxpayers.
Last
November, the Judiciary Committee voted on a bill I sponsored to further
strengthen the False Claims Act by
clarifying what violations are material.
Some
of my colleagues expressed concern with my amendment.
Most
of those concerns were based on debunked, recycled talking points from
lobbyists that sound a lot like the ones I’ve been hearing since 1986.
Most
of the time, they’ve come from businesses that profit the most from defrauding
the government.
When
I authored the False Claims Act
amendments in 1986, I did it because fraud against the federal government was
out of control—especially in the defense sector.
At
the time, the Justice Department estimated we were losing 1 to 10 percent of
the federal budget to fraud.
More
importantly, I saw that fraud can put lives at risk, including those of our
military, law enforcement and veterans.
Recent
court misinterpretations have, once again, hurt the government’s ability to
hold these fraudsters accountable.
Some
courts now say that if the government keeps paying a claim despite some
knowledge of potential fraud, then the violation is not material.
That’s
not common sense. If the government knows of fraud but keeps paying for that
fraud, it can’t be prosecuted under the False
Claims Act.
That
doesn’t make sense to the hard workers on Main Street in the Midwest.
It
doesn’t meet the common sense test for the government to protect fraudsters.
This
is wrong, and it’s dangerous.
Today
I want to bring examples to you about real cases with real life
consequences—cases where, had this flawed interpretation been applied, the
results would have been absurd and tragic.
First,
in 2009, a major defense contractor settled a False Claims Act case with the federal government for $325 million
after allegations arose that they provided faulty parts for spy satellites.
Due
to the faulty parts, several satellites started to malfunction.
One
of them was on an important mission over the Middle East during a time of war.
Evidence
showed that the contractor knew about the malfunctions but hid these
modifications from the government.
But,
even if the government had some idea about the fraud, it couldn’t stop payment
because the contractor was the only company that could manufacture and support
these satellites.
Had
this case been brought today, a court could incorrectly find that the violation
was not material.
This
is unacceptable. This kind of fraud can hurt our troops and damage national
security.
Second,
fraud hurts our law enforcement officers here at home.
In
2018, the Justice Department settled a fraud claim brought by a whistleblower
against a manufacturer of bullet proof vests.
According
to public records, the manufacturer knew the vests would degrade quickly under
normal heat and humidity.
The
manufacturer tried to cover its tracks by publishing misleading data.
Those
actions delayed the government’s efforts to determine the true extent of the
damage to these bullet proof vests.
After
years of investigations, a National Institute of Justice study found that more
than 50% of the used vests could not stop a bullet, a life threatening issue.
In
this case, the manufacturer argued that since the government kept paying for
the vests, the fact that they didn’t work was immaterial.
Thankfully,
the judge had enough common sense to see past such a ridiculous argument. Common
sense prevailed!
Remember,
the actions of these fraudsters put our law enforcement officers’ lives at risk.
Thanks
to a brave whistleblower who uncovered this fraud, the money recovered from the
settlement was used to purchase new bullet proof vests.
Third,
fraud hurts our veterans and undermines the federal programs Congress created
to support them and their families.
Another
case involved fraud in home loans insured by the VA.
The
goal of these loans is to keep veterans in their homes.
So,
as most veterans know, VA loans prohibit lenders from charging veterans hidden fees.
In
this instance, a mortgage lender was illegally charging our veterans fees for
VA-insured loans.
But,
the government never ceased payment because doing so would hurt the program and
the veterans it was meant to help.
Not
to mention that, once a loan guarantee is approved, the VA is prohibited by law
from declining payment.
Despite
this, the district court applied the bogus new interpretation of materiality.
The
court dismissed the case, saying that the government’s continued payment meant
the fraud was not material.
Let
me underscore the obvious. I’m telling you, Congress didn’t intend for courts
to find that fleecing veterans for profit is “immaterial”.
My
bill will fix this nonsense.
It
clarifies that the government’s decision to continue paying a claim despite
knowledge of fraud is not dispositive if other reasons exist for the continued
payment—reasons like protecting our troops, officers and veterans.
As
shown by the examples I highlighted today, the government’s decision to
continue paying a claim by itself doesn’t prove materiality.
You
must ask - why did the government continue payment? It’s simply common sense.
My
amendment will guarantee that the government can hold fraudsters accountable
even when the government has to continue payment for a product or service.
