[Congressional Record Volume 144, Number 89 (Wednesday, July 8, 1998)]
[Senate]
[Pages S7675-S7677]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




             A HISTORICAL TREATISE ON THE FALSE CLAIMS ACT

  Mr. GRASSLEY. Mr. President, I rise today to speak about an important 
issue for the taxpayers of this country. My purpose today is to:
  First, inform my colleagues;
  Second, alert future Members of this body; and
  Third, create a historical public record so that future Congresses 
will not repeat the mistakes of the past. The issue is the integrity of 
the government's present and future efforts to stop widespread fraud, 
waste and abuse against taxpayer funded programs.
  The government's strongest and most effective tool against fraud is 
the False Claim Act. In recent years, the False Claims Act has been 
under attack from industries targeted by the government's anti-fraud 
efforts. Since 1986, when Congress passed amendments that I sponsored 
to toughen the law, more than $4 billion has been recovered through the 
False Claims Act. Hundreds of billions more in fraud have been saved 
through the deterrent effect that this law has upon those who would 
betray the public's interest.
  In addition to the recovery of money and the deterrent effect of this 
law, the False Claims Act is important for another, perhaps, more 
important reason. The fact is that the False Claims Act is being used, 
day after day, by prosecutors to maintain the integrity of countless 
federal programs funded by American taxpayers. For example, the False 
Claims Act is being used in the health care industry to ensure that 
nursing home residents receive quality care--like enough food.
  Nonetheless, this Congress just witnessed an unconscionable assault 
on the False Claims Act. The law has thus far escaped unharmed. But, 
there is a ``clear and present danger'' lurking in the shadows. It is 
for this reason that I speak today, Mr. President--to chronicle the 
events that occurred over the past seven or so months.
  The perpetrator of this assault on the False Claims Act was the 
American Hospital Association (AHA). The AHA used its notable clout to 
systematically and cleverly orchestrate a major grassroots campaign to 
``gut'' the False Claims Act. In the final analysis, its effort fell 
apart because the approach taken by the AHA lacked an essential 
ingredient--``credibility.'' You see, the AHA appealed to a great many 
legislators by using horror stories from hospitals in their respective 
states and districts. But the horror stories, in the end, had no 
bearing on what the AHA peddled as the solution--gutting the False 
Claims Act.
  The correct solution was not to change the law--indeed there was, and 
is, no problem with the language of the False Claims Act. Rather, the 
solution was to correct a number of missteps made by the Department of 
Justice in implementing the law through its national initiatives. The 
AHA was abundantly aware of this fact. But AHA chose instead to pursue 
a strategy of bait and switch. The AHA allegedly backed a bill to gut 
the law simply to strong arm the Justice Department into changing how 
the False Claims Act was implemented. The strategy succeeded. 
Unfortunately, it comes at the expense of a serious loss of 
credibility, in my eyes, for the AHA.
  Before describing the events of the past months, some historical 
context is in order. The False Claims Act was fathered by President 
Abraham Lincoln. Lincoln had become frustrated by the widespread fraud 
against the Union Army by defense contracts during the Civil War. 
Contractors would sell the same horses twice to the Army; they

[[Page S7676]]

would sell sand instead of gun powder; and sawdust instead of muskets.
  Included in the anti-fraud arsenal of the False Claims Act was a 
provision called qui tam. Qui tam is a concept that dates back to 
feudal times. It allows private citizens who know of fraud against the 
taxpayers to bring a lawsuit against the perpetrators. In other words, 
the citizen acts as a partner with the government. As an incentive, the 
citizen shares in any monetary recovery to the U.S. Treasury.
  Over the decades, the False Claims Act, and especially the qui tam 
provisions, proved to be effective, both in catching and deterring 
fraud. Think about it, Mr. President: The most effective way to catch 
fraud or other wrongdoing is to have ``insider'' information. Insiders 
help make investigations more targeted, more effective and more 
efficient. Congress has long recognized the value of insiders. That is 
why Congress established laws to encourage and protect whistle blowers. 
We know the value of inside information, and the role it plays in our 
constitutional system of checks and balances.

  Then, in 1943, things changed. That is when private industry played a 
role in amending the False Claims Act. The amendments neutralized the 
law's effectiveness--instead of having a powerful tool against fraud 
perpetrated against the government we had a toothless piece of 
legislation. Would-be perpetrators of fraud now had every reason to be 
celebrating in the streets; and taxpayers had suffered a major blow.
  During the early 1980s, our defense budget was rising rapidly to 
counter the Soviet threat. It rose so rapidly, in fact, that it was 
beyond our ability to manage the money properly. As one defense 
official said, it was as if we opened up the money bags at both ends, 
laid them on the doorstep of the Pentagon, and told the contractors to 
``come and get it.''
  Fraud against the government was suddenly out of control. I recall at 
one point that eight out of the top ten defense contractors were under 
federal investigation for fraud. Amazing!!!
  Not coincidentally, that is the year Congress restored the teeth to 
the False Claims Act that were removed some 40 years earlier. It was in 
1986 that I sponsored, along with Howard Berman of the House of 
Representatives, amendments to the False Claims Act intended to put the 
``bite'' back in the statute. Since that time, the law has been a 
tremendous success. It has recovered more than $4 billion for the 
taxpayers, and continues to deter fraud in amounts estimated in the 
hundreds of billions.
  Since passage of the 1986 amendments to the False Claims Act, private 
industry has been plotting to once again gut the law. Even before the 
amendments were passed, a major effort was underway by the defense and 
other industries to undermine passage. Even supporters of my amendments 
suddenly turned against my bill. There were curious instances, as I 
read in news accounts, of campaign money being given in close proximity 
to actions taken by Members to stop my bill. In the final analysis, the 
public's concern about fraud prevailed. My amendments passed and the 
False Claims Act has demonstrated itself to be one of the most powerful 
tools in the war against fraud.
  I knew at the time, Mr. President, that it would only be a matter of 
time before some industry would mount yet another assault on the False 
Claims Act. It is for that reason I have come to be ever vigilant. 
There are many citizen groups around the country that have joined me in 
this vigil. They have the taxpayers' best interests in mind.
  One such assault occurred in 1990, led by the defense contracting 
community. It was unsuccessful. One main reason for the failure of the 
defense contracting community was because that industry lacked 
credibility. The public grew skeptical of that industry's attempts to 
exempt itself--under the guise of competitiveness--from anti-fraud 
statutes.
  This year, the defense industry succeeded in persuading the 
Department of Defense to propose an exemption for that industry from 
the False Claims Act. Fortunately, the Department of Justice, with the 
assistance of the Inspector General's Office at the Department of 
Defense preempted the plans of the defense industry.
  A major and well orchestrated assault on the False Claims Act came in 
1998 from the health care industry, and more particularly, from the 
hospitals. The hospital industry has a great deal of credibility with 
members of Congress. We all have hospitals in our states and districts, 
and we work closely with them in addressing their concerns.
  So, while the defense industry sat back after their attempt failed, 
the hospital industry took the lead in seeking to carve out an 
exemption from the False Claims Act for the entire health care 
industry. The health care industry played heavily on its credibility 
with the public in pursuing its agenda to exempt itself from the False 
Claims Act. It was reported to me that all the while, the defense 
industry watched in awe as progress was made. We all knew that if the 
hospitals succeeded in carving out an exemption from the False Claims 
Act, the defense industry would be next in line. And soon other 
industries would be lining up, too.

  The AHA's official and public assault on the False Claims Act began 
early this year. On January 30, 1998, the AHA met with staff members of 
the Committee on Aging, which I chair. It was determined at that 
meeting that the AHA's concerns were not with the language of the False 
Claims Act, but with the Justice Department's implementation of that 
law. The AHA alleged that the Justice Department was heavy-handed in 
its implementation of the law and was not separating innocent billing 
errors from actual fraud. All this from an industry where a recent 
survey found that the majority of hospitals pooled did not even have a 
compliance officer who is responsible (1) for developing and 
maintaining compliance programs, (2) investigating compliance issues, 
(3) overseeing Medicare and Medicaid reimbursement, (4) overseeing 
billing and coding, as well as (5) overseeing tax-related issues.
  A few days later, my staff met with the Iowa Hospital Association, 
which expressed the same concerns as the national association. As a 
result of these meetings, I took a personal interest in the allegations 
of the AHA. Consequently, I met with Attorney General Reno on March 3, 
1998, to discuss the AHA's concerns. Furthermore, I urged the Attorney 
General to take whatever action was necessary to insure that the 
implementation of the False Claims Act was being done properly, and if 
not, to take expeditious action to correct the situation. She agreed.
  I also met with Congressman McCollum of Florida who had expressed an 
interest in introducing a bill to amend the False Claims Act. During 
that meeting, he agreed to a one month reprieve before introducing the 
bill so that I could, among other things, facilitate a dialogue between 
the Justice Department and the AHA in the hope of reaching a 
resolution. Unfortunately, I was dismayed when Mr. McCollum introduced 
H.R. 3523 on March 19, 1998--a little over a week after our meeting. 
This changed the debate dramatically. As opposed to concentrating on 
resolving the concerns of the AHA through dialogue and communication, I 
was forced to expend my energies protecting the False Claims Act and 
the Medicare Trust Funds. Sometime later, on April 29, 1998, two of my 
Senate colleagues, Senators Cochran and Hollings introduced S. 2007, a 
parallel bill to H.R. 3523.
  The bills introduced in the House and Senate were characterized as 
innocuous by, among others, Representative McCollum and the AHA. But, 
the changes were not simple, the changes were not minor and the changes 
were not clarifying. Quite the contrary, the changes were devastating 
to the future use of the False Claims Act against the health care 
industry. So stated the Justice Department, the American Association of 
Retired Persons and others. Even the Clinton Administration voiced its 
concern with the bills and was prepared to issue a veto order if it 
became necessary.
  The House bill demonstrated itself to be popular among House members, 
Indeed, H.R. 3523 enjoys bipartisan support, boasting 201 co-sponsors. 
However, the McCollum bill stumbled.
  On June 3, 1998 the Department of Justice issued written guidance on 
the appropriate use of the False Claims Act in health care matters. 
This guidance

[[Page S7677]]

was issued in response to concerns relating to the Justice Department's 
enforcement strategies in national health care projects. In response, 
Congressman Delahunt, co-sponsor of H.R. 3523, determined that the 
written guidance made this new legislation inadvisable. Mr. Delahunt 
then courageously decided to pull back his support for H.R. 3523. 
Shortly thereafter Congressmen Bliley, Barton, Dingell, Stark, and 
Berman stated in a Dear Colleague that: ``The Department's guidelines 
are quite extensive and sufficient time must be given to allow for 
their appropriate implementation. A non-legislative solution is the 
appropriate manner to address their issues.''

  At this juncture it must be said that the Department of Justice, 
despite the attacks, despite the rhetoric and despite the 
misinformation, raised itself up from its bootstraps and, in good 
faith, issued guidance documenting its implementation of the False 
Claims Act. And even more amazing, Congressman McCollum, it is 
reported, still plans to move forward with the bill that would gut the 
False Claims Act.
  I suppose there are certain people associated with this effort who 
just don't get it. Who don't mind moving forward despite major 
questions of credibility. There are many more important issues that I 
and my staff could have been working on for the last seven months on 
behalf of the taxpayers. Instead we spent seven months of negative 
energy trying to put out brush fires as the False Claims Act came under 
assault.
  How anyone could ever suggest someone would enjoy that kind of 
politics is beyond me. To say the bill is ``innocuous'' is beyond me. 
And that's what I mean, Mr. President, when I talk about major 
questions of credibility.
  In the Senate, my colleagues, Senators Cochran and Hollings, played a 
critical role in having the Department of Justice issue responsible 
guidance to the health care industry without gutting the False Claims 
Act. In addition, my Senate colleagues worked hand-in-hand with me to 
develop legislative and report language that assures the future 
integrity of the False Claims Act and the good faith implementation of 
the guidance by the Department of Justice. I thank you, Senator Cochran 
and Senator Hollings.
  All in all, the history of the assault of the False Claims Act sends 
us on a long and winding road. But it is important to recognize that 
future attacks on the False Claims Act are undoubtedly around the 
corner--this despite the fact that the law's success is in many ways 
unparalleled in the enforcement community.
  Consequently, the False Claims Act is, and will remain, a target of 
those industries that accept billions and billions of taxpayer dollars 
annually and balk at strict accountability. I ask only that we, as 
legislators, remember the history of the assault made upon the False 
Claims Act by the AHA in the present. I ask further that we agree to be 
strong despite the strength of an industry, simply because it is the 
``right'' thing to do. Taxpayers deserve no less--and as legislators, 
we should deliver no less.

                          ____________________