Clash Between Trial Bar and Business Expected Over False Claims Act

The federal False Claims Act, the big gun wielded by private citizens and the government for rooting out government fraud, soon may be retooled, triggering a classic confrontation between business and the trial bar.

Both the House and Senate now have very similar bills pending final action that would make the most substantive changes in the law in 22 years.

Known as the "Lincoln Law," the False Claims Act was enacted in 1863 to combat fraud by companies that sold supplies to the Union Army. The law contains "qui tam" provisions that allow private citizens -- qui tam plaintiffs, also called "relators" and whistleblowers -- to sue on the government's behalf those companies or individuals defrauding the government.

The sponsors of the 1986 amendments -- Sen. Charles Grassley, R-Iowa, and Rep. Howard Berman, D-Calif. -- are back with bipartisan support for the proposed False Claims Corrections Act which, they say, is intended to correct U.S. Supreme Court and lower court decisions that have misinterpreted and weakened the powerful anti-fraud tool.

If the opposing parties in this legislative debate agree on anything, it is that the FCA has been an effective tool. Since the act was amended in 1986, the government has recovered more than $20 billion, with recoveries steadily increasing and culminating in settlements and judgments of more than $5 billion in the past two years, according to the U.S. Department of Justice.