False Claims Act Updates: History, Current Developments, and Possible Future Trends for FCA Focus and Enforcement

More than 150 years after it was enacted, the False Claims Act remains a powerful vehicle for public enforcement and private recovery—and for potential liability.  Recent years have seen FCA case filings and enforcement continuing to trend upward, including a record-breaking 2024.  This article provides an overview of the background of the FCA, describes key provisions and mechanics of the statute, and assesses the current status, and potential expanded focuses, of FCA enforcement actions.

Background

The FCA was established during the Civil War in 1863, in response to widespread fraud by government contractors, particularly those who sold faulty supplies and substandard provisions to the Union Army.  It provided incentives to private citizens to bring suits on behalf of the U.S. government, through qui tam actions, and to share in any resulting financial recovery.  The FCA created individual whistleblower rights for, in effect, bounty hunters for the government.  Those individuals, the “relators” in the suits, obtain standing by taking on a partial assignment of a claim held by the government, and can make claims directly on the federal government’s behalf.

In its original form, the FCA imposed liability on any person who knowingly submitted false claims to the United States for payment, and entitled relators to a portion of any recovery.  But over time, after an initial period of activity, FCA enforcement waned.  By World War II, the statute was little used, as criminal enforcement of fraudulent conduct became more prevalent, and Congress narrowed the FCA and reduced relators’ share of recoveries.  In the initial postwar decades, the FCA remained infrequently used.

In 1986, however, Congress revitalized and expanded the FCA, strengthening its whistleblower protections, raising penalty amounts, and authorizing the award of treble damages.  Those changes reinvigorated the FCA, and since then the statute has been expanded further, including through the broadening of potential liability and strengthening of whistleblower rights in 2009 and 2010.  In particular, the Affordable Care Act and Dodd-Frank Act increased FCA applicability to healthcare programs and increased incentives for relators.  The civil penalty range also has continued to grow, including via inflation adjustment laws. 

In its modern application, FCA enforcement has shifted increasingly, though not exclusively, toward healthcare and grants.  Through the various enlargements of the incentives and applications of the FCA, Congress has expressed its intent to recover taxpayer dollars lost to fraud in a variety of federally funded programs—and to permit individual whistleblowers to share in those recoveries.

Key Provisions and Mechanics

The current version of the FCA imposes civil liability on anyone who knowingly engages in various fraudulent practices in connection with financial claims made upon the United States.  The statute’s provisions are broad, covering, among other things, the knowing submission of “a false or fraudulent claim for payment or approval,” the knowing creation or use of a false record or statement to induce payment for a false claim, and the so-called “reverse” false claim of knowingly causing the government not to receive money owed, for example by concealing an obligation to pay.

Critically, scienter is broadly defined in the FCA context.  “Knowingly” includes actual knowledge, deliberate ignorance, or reckless disregard of the truth by the individual or entity.  No specific intent to defraud is required; a defendant who was reckless or sloppy about the truth of a claim can be held liable under the statute.  A “claim” is also defined expansively, as any request for government money or property.  In addition to authorizing treble damages for the amount of the government’s loss, the FCA also authorizes inflation-adjusted civil penalties, which for 2025 increase to a minimum of more than $14,000 per claim and a maximum of nearly $29,000 per claim.

When a private individual files a civil complaint alleging an FCA violation on behalf of the U.S., the complaint is filed under seal for at least 60 days and initially is served on the government only; it is not unsealed or served on the defendant until ordered by the court.  Once an FCA action is pending, no other relator can file a later case based on the same facts, and the relator must disclose all material evidence in his or her possession to the government.  During the period when the action is sealed, the government decides whether to intervene.  If the government does intervene, it takes primary responsibility for prosecuting the case; if not, the relator can proceed with the action in his or her own name.

The FCA also includes robust anti-retaliation protections.  Any employee, contractor, or agent who is discharged, demoted, or otherwise discriminated against because of lawful acts in furtherance of an FCA action—e.g., reporting fraud—is entitled to relief.  Remedies for those types of retaliation can include, for example, reinstatement, double back-pay, and special damages.

Notably, there is a narrow statutory defense, although it is only partial: if a defendant self-reports and cooperates, including providing to the government all information known about the violation(s) within 30 days after discovering the relevant information, and before any criminal, civil, or administrative action commences, the court may reduce damages to double the actual loss.

Industry Focus and Current Events

Historically, FCA cases often involved defense contractors, consistent with the original aims of the statute.  In recent decades, however, as noted, the healthcare and life sciences industries have been most targeted by FCA enforcement.  Year after year, healthcare fraud, including fraudulent billing, kickbacks, drug marketing violations, and other similar conduct, accounts for the bulk of FCA filings and enforcement.  In 2024, healthcare cases constituted more than 50% of total recoveries, including enforcement against hospitals, device makers, labs, pharmacies, providers of Medicare and Medicaid services, and doctors.

Over the past several years, the FCA has been an increasingly active enforcement tool, with recoveries in the billions of dollars and near-record levels of whistleblower litigation.  Most recently, in 2024, DOJ statistics reflect the highest number of new qui tam matters ever on record, at nearly a thousand cases—a more than 25% increase over the prior highest number filed in any individual year.  Non-qui tam FCA filings, i.e., those brought directly by the government, also have trended upward in recent years, with the three highest annual numbers of non-qui tam matters filed in 2022, 2023, and 2024.

Recoveries are largely driven by qui tam suits, with more than 80% of the nearly $3 billion recovered in 2024 having resulted from qui tam actions.  In those cases producing monetary damages, the vast majority of relator recoveries came from cases in which the government intervened.  Although the percentages vary year by year, in general, relator-only cases produce vastly lower recovery totals as compared to FCA cases in which the government intervenes.

Healthcare continues to be a primary focus of FCA filings and recoveries; every year brings multi-million-dollar claims and settlements from hospitals and clinics for upcoding or billing for unnecessary services, and from drug and medical device companies for off-label promotion or kickback schemes.  DOJ also recently has brought cases relating to cybersecurity compliance, in connection with entities failing to meet cybersecurity requirements set forth in government contracts.

Additionally, FCA filings are affected by occurrences and trends that impact government spending and collections.  One such instance occurred recently; another may emerge as significant in the near future.

Since the COVID-19 crisis, there have been a number of FCA cases involving fraud in connection with pandemic relief and other stimulus.  The Paycheck Protection Program (PPP) and other CARES Act funds spawned numerous FCA investigations and actions, and prompted the DOJ to intervene in and publicly announce several cases of improper double-dipping in relief funds and false certifications of PPP eligibility.  Many of those cases are still playing out in court, and for a period of time they represented a significant increase and shift in FCA focus.  

Most recently, public policy relating to the imposition of tariffs could create significant potential liability for companies and individuals—and for awards to relators—in connection with customs duties.

Use of the FCA in Connection with Tariffs

As tariff rates on foreign products have risen sharply in recent months, incentives for evasion have similarly increased.  FCA enforcement is a way for the DOJ to attempt to reduce payment avoidance and fraud, and the relators’ bar may also see an opportunity to bring cases that are both potentially lucrative and aligned with current government priorities.

Customs duties—that is, payments required to be made to the government in connection with imported goods—fall squarely within the ambit of the FCA.  Avoidance of such required payments is covered by the FCA under the kind of “reverse” false claim described above, in which a defendant knowingly and improperly causes the government not to receive money it is owed. 

Traditionally, qui tam actions stemming from unmet customs obligations related to a handful of different types of schemes.  One such genre of misconduct involves entities or individuals misrepresenting the country of origin of incoming products or their component parts.  Companies attempting to dodge tariffs might move goods to an intermediary country subject to lower tariff rates before transporting those products to the United States.  Although the goods technically then arrive from the intermediary, such conduct nevertheless violates the statutory scheme for payment of duties.  Tariff rates are charged based on where goods were most recently manufactured, not merely from what country they are most recently being shipped.  Accordingly, this kind of mislabeling avoids antidumping duties or other tariffs, or artificially reduces tariff rates that apply to the falsely identified country of origin. 

Importers may also violate the FCA by underreporting the true value of imported goods to avoid or reduce duties.  Doing so can lower the required tariff payments because they are charged as a percentage of the overall import price.  Importers may also misclassify products, sometimes as brazenly as by identifying products as something entirely different, or by misreporting the parts or components of a product, to cause the products to fall under a different, lower tariff rate.

Another potential method of tariff evasion with increased recent salience is the possibility of misreporting the timing of imports.  Depending on the precise timing of the imposition of different tariff rates by the government, payment obligations could vary dramatically from one day to the next, costing—or saving—companies millions of dollars.

In sum, when tariff rates vary across countries, there are incentives to disguise or alter the actual country of origin fraudulently in favor of a country with lower rates—sometimes referred to as re-exportation, entrepot trade, or white-labeling.  When tariff rates vary across products, there are incentives to misreport or mislabel the contents or component parts of imported products fraudulently, to make them appear to be subject to lower rates.  Any tariff at all creates the incentive to underreport the overall value of goods, and substantial changes to tariff rates in relatively short periods of time can create incentives to misrepresent the timing of the relevant transactions.

Policy changes relating to import duties, regardless of any other benefits or drawbacks of the tariffs themselves, create pressures and incentives for companies to try to avoid additional costs, even through fraud or misrepresentations.  Such changes similarly fuel the interests of relators and the relators’ bar to bring cases based on any such fraud.  Additionally, and perhaps more so than in the past, the recent tariff fluctuations may also incentivize honest market participants in affected industries to report wrongdoing by competitors, given the increasing disparity in financial effects of paying versus evading tariffs. 

DOJ intervention rates in FCA cases historically have varied, but the recent trend is high intervention, and recoveries are greatly skewed toward cases in which the government intervenes.  This pattern reflects a selective approach by the DOJ, with the government typically taking over cases it views as most meritorious or compelling.  Given the current policy focus on tariffs and their enforcement, it would not be surprising if the DOJ were especially likely to intervene in, and focus on, FCA cases relating to customs duty violations. 

Conclusion

FCA enforcement remains a meaningful and growing priority for the DOJ.  Companies will need to maintain thoughtful and comprehensive compliance and training programs, especially in connection with healthcare ventures but also with respect to other areas of government contracting and payments.

Tariff policies, and in particular frequent changes in rates of tariffs and the countries to which they apply, present elevated compliance and regulatory considerations for companies navigating a shifting landscape with respect to trade and customs laws and enforcement.  Although those challenges are not strictly new, the increased variance of tariff rates and the shifting applications of different rules to different countries creates an environment of heightened scrutiny, and potentially heightened motivations for evasion of payments to the government.  As with any regulatory consideration, entities that discover potential FCA liability should carefully weigh the option of self-reporting. 

Conversely, individuals who are aware of misconduct in connection with financial claims made to the government, or in connection with nonpayment of monies owed to the government, remain well positioned to bring FCA claims, including in an area of public policy that is a significant current government focus.  FCA whistleblower activity may continue to increase in the coming months and years, and FCA claims relating to trade especially could see significant growth under the current geopolitical circumstances.