[Congressional Record (Bound Edition), Volume 153 (2007), Part 27]
[Extensions of Remarks]
[Pages 36495-36496]
[From the U.S. Government Publishing Office, www.gpo.gov]




      INTRODUCTION OF THE FALSE CLAIMS ACT CORRECTIONS ACT OF 2007

                                 ______
                                 

                         HON. HOWARD L. BERMAN

                             of california

                    in the house of representatives

                      Wednesday, December 19, 2007

  Mr. BERMAN. Madam Speaker, I am pleased to introduce the False Claims 
Act Corrections Act of 2007, a bill designed to return the False Claims 
Act to its original intent. This legislation is sorely needed today, 
with the Department of Defense budget raided by unscrupulous 
contractors willing to enrich themselves at the expense of our Nation, 
and the Medicare program at risk of insolvency while organized crime 
and others pilfer funds meant for the care of our elderly and disabled. 
The proposed amendments would correct the effect of unduly restrictive 
judicial opinions by clarifying that Congress intends the law to reach 
all types of fraud on the Federal fisc, regardless of the form of the 
transaction. The amendments would also restore the intended incentives 
for whistleblowers, to act when they discover fraud against the United 
States Government.
  The False Claims Act was signed into law by President Abraham Lincoln 
in order to combat rampant fraud in Civil War defense contracts. The 
Supreme Court has called the law the ``Government's primary litigative 
tool for combating fraud,'' a law ``intended to reach all types of 
fraud, without qualification, that might result in financial loss to 
the Government.'' The statute, which embodies principles developed in 
centuries-old English common law, contains incentives for private 
individuals to report false claims and fraudulent activity. It also 
allows private parties to sue on behalf of the United States and bring 
their private resources to support the Government's investigation and 
litigation. If the United States investigates and finds merit to the 
private party's allegations, it may intervene in and take control of 
the lawsuit.
  During the first century after its enactment, however, the law fell 
into disuse as amendments and adverse case law chipped away at the 
incentives needed to bring whistleblowers forward. Moreover, the courts 
had restricted the law by construing ambiguities in the act against the 
Government. It had also become apparent that, in order for the law to 
have its intended impact, the Department of Justice needed the power to 
compel testimony and production of documents to investigate allegations 
made by informants.
  In 1986, Senator Charles Grassley and I worked together in an effort 
to restore the requisite incentives for whistleblowers and to clarify 
that the law was intended to reach all frauds on the Government, 
regardless of the form of the transaction. The False Claims Amendments 
Act was passed by Congress and signed into law on October 27, 1986. In 
addition to addressing incentives, the new law also provided for a 
subpoena-type authority for the Department of Justice so that the 
Department could fully investigate allegations raised by 
whistleblowers. Congress intended that the Department of Justice would 
use this new ``civil investigative demand'' authority to obtain 
documents and testimony, and then question witnesses and experts about 
this information to fully comprehend its significance.
  I am very happy to report that, in the years since 1986, the amended 
Act has returned over $20 billion to the United States Government that 
otherwise would have been lost to fraud. For the most part, the law has 
been a resounding success. The Government has received full 
compensation for many of its losses, and has also imposed financial 
penalties on many who have knowingly over-billed the Government. It has 
utilized information from False Claims Act informants to impose 
criminal sanctions, including imprisonment, on the worst offenders. The 
Department of Defense and the Department of Health and Human Services, 
in turn, have debarred from Government contracting, and excluded from 
participation in the Medicare program, some of those subject to 
judgments and convictions. Other agencies have taken similar action. As 
a result of this aggressive enforcement action by our executive branch, 
many companies have been motivated to initiate compliance efforts, and 
have been deterred from engaging in the types of fraudulent schemes 
subject to enforcement activity.
  Nonetheless, the law has not been a success in one critical respect: 
it could be doing far more. If construed according to Congress' 
original intent, it could be bringing in many billions of additional 
dollars in recoveries from those who have cheated at the expense of the 
taxpayer. Instead, some courts have misconstrued our intent, even in 
clear language in the law, in a manner that leaves entire categories of 
fraud outside the reach of the law. For example, courts have thrown out 
cases in which the Government has administered Government programs, and 
expended its funds through contractors and other agents, as opposed to 
direct expenditure. Many courts unreasonably have barred whistleblowers 
with potentially meritorious claims from pursuing cases. For example, 
the courts have dismissed cases brought by insiders who know key 
details of fraudulent schemes because they can't plead specific details 
of the billing documentation, such as the dates and identification 
numbers of invoices--information ordinarily sought and obtained in 
discovery. Finally, due to procedural requirements and an oversight in 
our original drafting, the Department of Justice has not employed the 
civil investigative demand authority as hoped.
  The amendments proposed in this legislation will remove these 
debilitating qualifications and to clarify that the Act is intended to 
``reach all types of fraud, without qualification'' leading to 
Government losses. We intend for these amendments to apply to all 
future cases as well as all cases that are pending in the courts on the 
date the amendments become law.
  The Amendments' most critical goals are the following: Clarifying 
that the Act covers fraud on Government programs even when the 
Government uses agents and other third parties to administer Government 
programs and contracts; Clarifying that the Government's new or amended 
complaint in a qui tam action relates back to the original qui tam 
complaint to the same extent it would relate back if the Government had 
filed the original complaint; Clarifying that plaintiffs do not need to 
have access to individual claims data or documents to bring a False 
Claims Act case; Amending the Act so that a qui tam case may be 
dismissed in light of prior public disclosures only upon motion of the 
Government, and only if the case is truly parasitic; Amending and 
clarifying the Act to specify how the Act's chief investigative tool--
the civil investigative demand--may be used to investigate violations 
of the Act; and clarifying how the Act applies to Federal employees who 
discover fraud during the course of their employment, by providing the 
Government authority to move to dismiss the action of any Federal 
employee who brings a qui tam action under the Act without first having 
provided the Government fair notice and opportunity to pursue such 
wrongdoing through its own False Claims Act action or other appropriate 
remedy.
  Fighting fraud against U.S. taxpayers is not a partisan issue. When 
we passed the False Claims Act amendments in 1986, we did so with a 
strong bipartisan coalition in both houses. I'm pleased to continue 
that tradition by introducing this bill today with Representative Jim 
Sensenbrenner as my partner. I look forward to working with him to make 
these amendments to the False Claims Act law this Congress.

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