[Congressional Record Volume 167, Number 53 (Monday, March 22, 2021)]
[Senate]
[Pages S1666-S1667]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]



                            False Claims Act

  Mr. GRASSLEY. A Civil War legislation called the False Claims Act has 
been on the books since that period of time. In 1986, I believe it was, 
I got some amendments to it that made it a much more valuable piece of 
legislation than it was before that time.
  It is called the False Claims Act, and it has brought, I think, 
something like $64 billion back into the Federal Treasury of 
fraudulently taken money since then.
  The problem today, even though it has been a successful law, is that 
the courts tend, from time to time, to neuter its capabilities by 
interpreting it in a way so it is not quite as effective. From time to 
time, we have passed legislation to overcome some of those court 
decisions.
  I am here today to talk about another opportunity this Senate has to 
make the False Claims Act the effective piece of legislation it was.
  So I want to alert my colleagues about the most recent limitations 
the courts have imposed on the False Claims Act.
  The False Claims Act was signed into law by President Abraham Lincoln 
in 1863, for the very same purpose it serves today: to fight fraud, not 
just with military matters, as was the reason for doing it because the 
Union Army was being defrauded at that particular time, but, today, it 
fights fraud governmentwide.
  Today, it is the government's most powerful anti-fraud statute. That 
is because amendments that I offered in 1986 empowered whistleblowers 
to sue fraudsters on the government's behalf with or without the 
government's help. Since then, we have recovered more than $64 billion 
of taxpayer money lost to fraud.
  Now, when we talk about anti-fraud statutes like the False Claims 
Act, we use the term ``materiality.'' It is because of that term that 
the courts have caused--their interpretation of that term has caused--
the act to be less effective. The False Claims Act defines 
``materiality'' as ``having a natural tendency of influencing the 
payment or receipt of money or property.'' Basically, if the government 
could have withheld payment, then it was likely material.
  However, based on a 2016 Supreme Court opinion, the Federal courts 
are trying to reshape the act's materiality requirement. In the Supreme 
Court's opinion in Escobar, ``if the Government pays a particular claim 
in full despite its actual knowledge that certain requirements were 
violated, that is very strong evidence that those requirements are not 
material.''
  Citing this language, other courts have made the government's payment 
decisions in these cases a deciding factor. Consequently, the Justice 
Department now shies away from prosecuting these cases. That is the 
case even when the fraud is very obvious and then, obviously, material.
  Recently, the Office of the Special Inspector General for Afghan 
Reconstruction briefed me on a report about a botched Defense 
Department effort to quickly buy cargo planes from an Italian 
manufacturer called Alenia.
  In 2009, the Department of Defense bought 20 cargo planes from this 
company, Alenia, for $549 million. These planes were intended to move 
goods and train Afghan pilots. This is the type of plane we are talking 
about. The contract required the manufacturers to refurbish 20 retired 
aircraft and provide enough spare parts for 10 years of maintenance. To 
seal the deal, the company even took Department of Defense personnel on 
several warehouse tours to prove they had all these spare parts.
  When the planes arrived in Afghanistan, mechanics quickly noted the 
planes were very poorly refurbished. Worse, they couldn't actually fly. 
The poor state of the planes and the hazards of the Afghan elements 
made that impossible. The company, Alenia, also lied about their 
maintenance commitments.
  Now, remember, I already told you about their promise that those 
warehouses were full of parts for the next 10 years. These spare parts 
that they

[[Page S1667]]

showed them were not for these planes. In other words, they were for 
the wrong planes.
  Despite this blatant fraud, the Department of Defense inspectors kept 
certifying the planes, and the government kept making payments.
  But here is the catch: The inspectors later admitted that many of the 
documents and manuals they reviewed were in Italian, and none of them 
spoke Italian.
  In the final count, out of 20 aircraft, 4 never even made it to 
Afghanistan.
  It is unclear why the Department of Defense continued making payments 
despite these flagrant violations, but by 2013, it became clear that 
continuing this program was unfeasible, and the government tried to 
sell the remaining 16 planes. You can imagine that nobody wanted these 
planes. So the Obama-Biden administration sold them all for scrap 
metal. You can see the scrap metal right here.
  To recap, the government bought 20 airplanes for $549 million and, in 
less than 5 years, sold them for $40,257 worth of scrap metal. The 
photos next to me show what we bought compared to what it was actually 
worth, a little pile of garbage.
  It is clear that the actual condition of the planes and the lack of 
parts were very material components of this contract. See, there is 
that word ``material.''
  Now, thanks to the Department of Defense's poor judgment and also the 
courts' new standard on materiality, the Justice Department won't bring 
False Claims Act charges against that company.
  Materiality is important to protect against parasitic lawsuits, but 
we can't allow defendants to get away with scalping the taxpayers 
because some government bureaucrats failed to do their jobs.
  Government bureaucrats are highly segmented and often unable to make 
key decisions for their organizations. Now, that is not the employee's 
fault. That is just kind of the way government, I am sorry to say, 
operates.
  Also, the government typically stops payments only when it has fully 
investigated and corroborated a claim of fraud.
  In my many years of investigating the Department of Defense, it has 
taught me that a Pentagon bureaucrat is rarely motivated to recognize 
fraud. That is because the money doesn't come out of their pocket. This 
example highlights how the courts' narrow interpretation of 
``materiality'' fails to take into account how the government really 
works and why we need to overcome the courts' decision on the 
definition of ``materiality.''

  When the False Claims Act was originally passed, one fraudster 
boasted--and this is a direct quote--``You can sell anything to the 
government at almost any price if you've got the guts to ask.''
  Unfortunately, that was true in this case as well. I have already 
made it public that I am working to patch this hole in the taxpayer's 
pocket. This example perfectly illustrates the need for change. I am 
working on introducing legislation to address the issue, and I am in 
the final stages of negotiating and look forward to putting forward a 
very bipartisan bill in the coming weeks.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The senior assistant legislative clerk proceeded to call the roll.
  Mr. CORNYN. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.