John Eriksen
|
As was widely anticipated, on May 14, the Senate passed by unanimous consent S. 386, the Fraud Enforcement and Recovery Act
of 2009 (FERA), which President Obama signed on May 20.
FERA has the effect of expanding the False Claims Act (FCA) as well as curtailing the protections afforded defendants in recent
court cases such as Allison Engine Co. v. United States ex rel. Sanders, 128 S. Ct. 2123 (2008). While the FCA does not require
a false statement be presented directly to the government, proof is required that the defendant made an intentional false
statement that the government materially relied upon in deciding to pay a claim.
First on the list of changes is FERA's expanded grant of authority through the elimination of the prior requirement that a
false claim be presented to a federal official, or that such a claim directly involve federal funds. The new law "clarifies
that liability under 31 U.S.C. §3729(a) attaches whenever a person knowingly makes a false claim to obtain money or property,
any part of which is provided by the government without regard to whether the wrongdoer deals directly with the federal government;
with an agent acting on the government's behalf; or with a third-party contractor, grantee or other recipient of such money
or property," says the Senate Judiciary Committee report on the measure.
This appears to authorize the government to enforce the FCA not just against alleged fraud by direct recipients of a federal
dollar, but, potentially, for as far as the federal dollar extends into the economy as long as the wrongdoer knows there is
federal money at stake. FERA also expands the FCA's reverse false claim by adding a new definition of the term "obligation" (a term previously interpreted
by the courts) that provides that the knowing retention of an overpayment is a violation of the FCA. The "reverse" FCA provision
in 31 U.S.C. § 3729(a)(7) makes it illegal for a defendant to misrepresent the facts to avoid paying an "obligation" owed
the government. This amendment was clarified to ensure that, for research institutions or hospitals, retaining an overpayment
pending repayment through the normal reconciliation process as established by the applicable law or guidance would not constitute
a violation.
Other significant changes include:
- If the government elects to intervene in an FCA action and files a complaint or adds additional claims, the government's pleading
will relate back to the filing date of the original complaint. This would potentially impact the ability of defendants to
defend themselves.
- The attorney general appoints a designee to approve a civil investigative demand (CID). This change may result in an erosion
of defendants' ability to rely on the Federal Rules of Civil Procedure 9(b) that requires a fraud claim to be pled with specificity
because, under the change, relators having no specific knowledge of the alleged fraudulent conduct may be permitted to use
CID material shared with them to satisfy the requirements of Rule 9(b) or to expand a complaint.
- Relief from retaliatory actions by whistleblowers is provided by prohibiting discrimination against contractors and agents,
in addition to employees, and eliminating the requirement that the prohibited retaliatory acts be taken by an "employer."
This will result in potential liability extending to relationships outside the employee-employer relationship.
This column is written for informational purposes only and should not be construed as legal advice.
John Eriksen is a senior associate at Epstein, Becker and Green, P.C. in its Health Care and Life Sciences practice group
and focuses primarily on health regulatory, compliance, managed care and transactional matters.
