[House Report 111-97]
[From the U.S. Government Publishing Office]


111th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     111-97

======================================================================



 
                FALSE CLAIMS ACT CORRECTION ACT OF 2009

                                _______
                                

  May 5, 2009.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

    Mr. Conyers, from the Committee on the Judiciary, submitted the 
                               following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 1788]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on the Judiciary, to whom was referred the bill 
(H.R. 1788) to amend the provisions of title 31, United States 
Code, relating to false claims to clarify and make technical 
amendments to those provisions, and for other purposes, having 
considered the same, reports favorably thereon without 
amendment and recommends that the bill do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     2
Background and Need for the Legislation..........................     2
Hearings.........................................................     8
Committee Consideration..........................................     8
Committee Votes..................................................     8
Committee Oversight Findings.....................................    11
New Budget Authority and Tax Expenditures........................    11
Congressional Budget Office Cost Estimate........................    11
Performance Goals and Objectives.................................    13
Constitutional Authority Statement...............................    13
Advisory on Earmarks.............................................    13
Section-by-Section Analysis......................................    13
Changes in Existing Law Made by the Bill, as Reported............    15
Dissenting Views.................................................    27

                          Purpose and Summary

    H.R. 1788 amends title 31, United States Code, to remove 
judicially-created limitations and qualifications which have 
undermined the effectiveness of the False Claims Act. The 
central purpose of the False Claims Act is to enlist private 
citizens in combating fraud against the United States. The 
Act's qui tam provisions were crafted to provide clear 
procedures and appropriate incentives for private citizens to 
report fraudulent schemes and participate in the resulting 
investigations and prosecutions.
    Since the False Claims Act was amended in 1986, recoveries 
under the Act have totaled nearly $22 billion,\1\ with qui tam 
lawsuits responsible for about $14 billion of that amount.\2\ 
However, over the two decades since legislation last addressed 
the False Claims Act, court decisions have created a complex 
patchwork of procedural and jurisdictional hurdles that have 
often derailed meritorious actions and discouraged private 
citizens from filing qui tam actions.
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    \1\See Department of Justice Fraud Statistics 1986-2008, available 
at http://www.usdoj.gov/opa/pr/2008/November/fraud-statistics1986-
2008.htm.
    \2\Id.
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    An Arkansas Federal court recently invited Congress to take 
legislative action to clarify misinterpretations of the False 
Claims Act, stating: ``The Court sympathizes with anyone 
litigating under the False Claims Act. Perhaps Congress will 
elect at some point to give legislative attention to the FCA to 
resolve some of the still unresolved questions about the Act's 
application.''\3\ The False Claims Act Correction Act of 2009 
responds to that request by clarifying the reach of the Act's 
liability provisions, preventing dismissals of certain qui tam 
actions, strengthening anti-retaliation protections, setting a 
uniform statute of limitations, and modifying the requirements 
for plaintiffs to bring qui tam actions.
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    \3\United States ex rel. Montgomery v. St. Edward Mercy Medical 
Center, 2008 WL 110858 (E.D. Ark. Jan. 8, 2008).
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    This legislation is particularly relevant during this 
period of increased reliance on private contractors to perform 
what have traditionally been viewed as governmental functions. 
These amendments to the False Claims Act will strengthen the 
tools available to combat those who seek to pilfer Government 
funds, resulting in a recovery of losses from fraud, as well as 
deterring those who otherwise might consider defrauding the 
Government.

                Background and Need for the Legislation

                   A HISTORY OF THE FALSE CLAIMS ACT

    The False Claims Act, often called ``Lincoln's Law,'' was 
first enacted in 1863, as a means to remedy ``the frauds and 
corruptions practiced in obtaining pay from the Government 
during the [Civil] War.''\4\ During the Civil War, fraud by 
Government contractors had become so prevalent that the United 
States Army was often delivered decrepit horses, or sold the 
same horse twice, and packages of gunpowder often arrived 
filled with sawdust.\5\ President Lincoln implored Congress to 
pass legislation to address these and other incidences of 
fraud.
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    \4\Cong. Globe, 37th Cong., 3d Sess. 952 (1863).
    \5\See T.J. Halstead, Constitutional Aspects of Qui Tam Actions: 
Background and Analysis of Issues in Vermont Agency of Natural 
Resources v. United States ex rel. Stevens, CRS Report for Congress 
RL30463 (Mar. 8, 2000).
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    The False Claims Act offered ``a reward to the informer who 
comes into court and betrays his coconspirator, if he be such; 
but it is not confined to that class.''\6\ Pursuant to the Act, 
private individuals, called qui tam relators, were authorized 
to bring lawsuits on behalf of the United States to prosecute 
fraud against the Government and to recover funds that were 
wrongfully obtained.\7\ The Act provided for double damages and 
a $2,000 civil penalty per false claim. Private individuals who 
successfully pursued claims under the Act were entitled to half 
of the Government's recovery, as an incentive to expose fraud 
against the Federal Government.\8\ The Act did not authorize 
the Government to intervene in the private individual's case, 
nor did it preclude qui tam actions based upon the source of 
the relator's information.\9\
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    \6\Cong. Globe, 37th Cong., 3d Sess. 955 (1863).
    \7\Qui tam lawsuits date back to medieval England. The term comes 
from a longer Latin expression meaning ``he who sues in this matter for 
the King as well as for himself.'' Black's Law Dictionary. The qui tam 
procedure was brought to the colonies by English settlers, and included 
in a number of colonial and early American laws, before being enacted 
in the False Claims Act in 1863. See Department of Justice, False 
Claims Act Cases: Government Intervention in Qui Tam (Whistleblower) 
Suits, available at www.usdoj.gov/usao/pae/Documents/fcaprocess2.pdf; 
Whistleblower Qui Tam Law Center, available at www.whistleblower-qui-
tam.com/pages/qui-tam-history.html.
    \8\See Erickson ex rel. United States v. Amer. Inst. of Biological 
Scis., 716 F.Supp. 908, 915 (E.D. Va. 1989).
    \9\Act of March 2, 1863, 12 Stat. 696.
---------------------------------------------------------------------------
    Nearly eighty years later, in the midst of World War II, 
Attorney General Francis Biddle requested that Congress amend 
the False Claims Act to repeal the authorization for qui tam 
lawsuits. Attorney General Biddle expressed concerns that qui 
tam complaints were being filed based solely on information 
contained in criminal indictments.\10\ He argued that such 
cases did not contribute anything new, and could interfere with 
the Government's criminal prosecutions.\11\
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    \10\S. Rep. No. 1708, 77th Cong., 2d Sess. (1942) (reprinting 
Biddle's letter to Congress).
    \11\S. Rep. No. 1708, 77th Cong., 2d Sess. (1942) (reprinting 
Biddle's letter to Congress).
---------------------------------------------------------------------------
    Both the House of Representatives and the Senate considered 
Attorney General Biddle's request. The House passed legislation 
to repeal the qui tam provisions.\12\ The Senate took a 
different approach, and passed legislation providing that 
jurisdiction would only be barred on qui tam suits based on 
information in the possession of the Government, if the relator 
was not an original source of that information. The final 1943 
amendments to the False Claims Act included a ``government 
knowledge bar'' which deprived courts of jurisdiction over qui 
tam actions that were ``based upon evidence or information in 
the possession of the United States, or any agency, officer or 
employee thereof, at the time such suit was brought.''\13\
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    \12\89 Cong. Rec. 2801 (1943).
    \13\Act of December 23, 1943, ch. 377, 57 Stat. 608, codified as 
amended at 31 U.S.C. Sec. Sec. 232-235 (1976); U.S. v. Pittman, 151 
F.2d 851, 853-54 (5th Cir. 1945) (discussing the history of the 1943 
amendments).
---------------------------------------------------------------------------
    The 1943 amendments also impacted suits under the False 
Claims Act by authorizing the Department of Justice to take 
over cases initiated by relators. The amendments required 
relators to submit all of their supporting evidence to the 
Department of Justice at the time they filed a complaint, and 
gave the Department sixty days to decide whether or not to 
intervene and take exclusive control of the suit. If the 
Government elected to intervene, then the relator would have no 
role in the case, and no voice in its resolution.
    The 1943 amendments also reduced the amount of the 
relator's share of any recovery: if the Government prosecuted 
the suit, then the court could award the informer ``fair and 
reasonable compensation'' not to exceed 10 percent of the 
proceeds; if the Government did not intervene, then the 
informer's award could not exceed twenty-five percent of the 
proceeds.\14\ In neither case was there any assurance that the 
relators would obtain even a minimum amount.
---------------------------------------------------------------------------
    \14\Act of December 23, 1943, ch. 377, 57 Stat. 608.
---------------------------------------------------------------------------
    As a result of the 1943 amendments, relators were far less 
likely to come forward and expose fraud against the Government. 
Indeed, from 1943 to 1986, only about six to ten False Claims 
Act cases were brought each year.\15\ Notably, as the number of 
qui tam suits decreased, fraud against the Government was again 
rampant by the 1980's. In 1981, the General Accounting Office 
reported that such fraud was ``widespread'' and was resulting 
in monetary loss, diminished confidence in Government programs, 
Government benefits diverted from intended recipients, and harm 
to public health and safety.\16\ Additionally, the 
effectiveness of the False Claims Act was weakened by some 
court decisions in which judges interpreted the government-
knowledge bar broadly, holding that the bar precluded all qui 
tam cases involving information already known to the 
Government, even when the qui tam relator had been the source 
of that information.\17\
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    \15\Elleta Sangrey Callahan & Terry Morehead Dworkin, Do Good and 
Get Rich: Financial Incentives for Whistleblowing and the False Claims 
Act, 37 Will. L. Rev. 273, 318 (1992).
    \16\General Accounting Office, Fraud in Government Programs: How 
Extensive is It?--How Can It Be Controlled, ii (1981).
    \17\E.g., United States ex rel. State of Wis. (Dep't of Health and 
Soc. Servs.) v. Dean, 729 F.2d 1100 (7th Cir. 1984).
---------------------------------------------------------------------------
    Congress responded to the decrease in False Claims Act 
suits. In 1985, the Senate conducted hearings on legislation to 
reform the False Claims Act.\18\ The next year, the House 
Subcommittee on Administrative Law and Governmental Relations 
of the House Committee on the Judiciary held hearings on 
similar legislation.\19\ These bills sought to empower private 
citizens with knowledge of fraud or false claims to come 
forward and bring the resources of private counsel to bear on 
the Government's behalf under the Act.\20\
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    \18\False Claims Reform Act: Hearing Before the Subcomm. on Admin. 
Practice and Procedure of the Senate Comm. on the Judiciary, 99th 
Cong., 1st Sess. (Sept. 17, 1985).
    \19\Hearing Before the Subcomm. on Admin. Law and Gov't Rel. of the 
House Comm. on the Judiciary, 99th Cong., 2d Sess. (Feb. 5, 1986).
    \20\126 Cong. Rec. 4580 (1980); S. Rep. No. 615, 96th Cong. 2d 
Sess. (1981).
---------------------------------------------------------------------------
    Following the hearings, the legislation was refined to take 
into account concerns raised by the Department of Justice and 
potential defendants, and the False Claims Amendments Act of 
1986 was enacted on October 27, 1986.\21\ The 1986 amendments 
made a number of changes to the False Claims Act.
---------------------------------------------------------------------------
    \21\False Claims Amendments Act of 1986, Pub. L. No. 99-562, 100 
Stat. 3153, codified as amended at 31 U.S.C. Sec. Sec. 3729-3733 
(1994); 22 Weekly Comp. Pres. Doc. 1499 (Nov. 3, 1986).
---------------------------------------------------------------------------
    The 1986 amendments increased the penalties from double 
damages to treble damages. They also provided that qui tam 
actions would be filed under seal for sixty days, and served on 
the United States, but not the defendant, to provide the 
Government time to determine whether to intervene in the 
action. The amendments further provided the Government, upon a 
showing of ``good cause,'' the option of intervening later in a 
case that it had initially declined to join. They provided that 
a qui tam relator could fully participate in cases in which the 
Government intervened, but authorized courts to restrict the 
role of relators, under specified circumstances. The amendments 
eliminated purely discretionary awards to relators, and based 
the relator's share on his or her contributions to the case, 
such that, in most cases, relators would be guaranteed at least 
a fifteen percent share of the Government's recovery.
    The 1986 amendments also replaced the government-knowledge 
bar with a ``public disclosure'' bar, barring qui tam actions 
that were based on allegations or transactions in a Government 
proceeding or investigation, or from the news media--but not 
where the relator was an original source of the 
information.\22\ The amendments created a new right of action 
for any employee who was retaliated against for engaging in 
lawful conduct in furtherance of False Claims Act proceedings. 
Employees who suffered retaliation would be entitled to all 
relief necessary to make them whole, including double back pay 
and attorneys' fees. The amendments authorized the award of 
attorneys' fees to a defendant prevailing in a False Claims Act 
suit that ``the court finds . . . was clearly frivolous, 
clearly vexatious, or brought primarily for purposes of 
harassment.''\23\ Finally, the amendments authorized the 
Department of Justice to use civil investigative demands as an 
investigative tool to obtain documents and testimony.
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    \22\In order to address the Department's concern about politically-
motivated suits, Congress retained the prior broader ban on information 
in the possession of the Government for suits against top Government 
officials. 31 U.S.C. Sec. 3730(e)(2)(A).
    \23\31 U.S.C. Sec. 3730(d)(4).
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  COURT DECISIONS SINCE 1986 HAVE DIMINISHED THE EFFECTIVENESS OF THE 
                            FALSE CLAIMS ACT

    Unfortunately, since the 1986 amendments were enacted, 
several court decisions have limited the reach of the False 
Claims Act, jeopardizing billions in Federal funds. For 
example, in 2005, the D.C. Circuit ruled that the False Claims 
Act does not reach false claims that are (i) presented to 
Government grantees or contractors, and (ii) paid with 
Government grant or contract funds.\24\ The Court indicated 
that Congress's intent to include those claims under the law 
was unclear. Several other courts have held similarly, which 
has lead to widespread confusion regarding the scope of the 
law.\25\
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    \24\United States ex rel. Totten v. Bombardier Corp., 380 F. 3d 488 
(D.C. Cir. 2005) (where a former Amtrak employee who filed suit against 
two Amtrak contractors alleged that the contractors violated the False 
Claims Act by supplying Amtrak with non-compliant goods).
    \25\E.g., United States ex rel. Atkins v. McInteer, 345 F. Supp. 2d 
1302 (N.D. Ala. 2004), aff'd on other grounds, 470 F.3d 1350 (11th Cir. 
2006); United States ex rel. Rutz v. Village of River Forest, 2007 
LEXIS 80506 (N.D. Ill. Oct. 25, 2007); United States ex rel. Arnold v. 
CMC Engineering, 2007 WL 442237 (W.D. Pa. Feb. 7, 2007); United States 
ex rel. Rafizadeh v. Continental Common, Inc., 2006 WL 980676 (E.D. La. 
April 10, 2006); United States v. City of Houston, 2006 WL 2382327 
(S.D. Tex. Aug. 16, 2006).
---------------------------------------------------------------------------
    More recently, in 2008, the Supreme Court held that 
plaintiffs must prove that the defendant intended for its false 
statements to cause the Federal Government itself to rely on 
the false statements as a condition for payment.\26\ With the 
Federal Government increasingly relying on private entities to 
disburse Federal funds, this situation would presumably become 
increasingly rare.
---------------------------------------------------------------------------
    \26\Allison Engine Co. v. United States ex rel. Sanders, 128 S. Ct. 
2123 (2008). For an analysis of the case, see Jennifer Staman, The 
False Claims Act, the Allison Engine Decision, and Health Care Fraud 
Enforcement, CRS Report for Congress RS22982 (Apr. 16, 2009).
---------------------------------------------------------------------------
    In 2006, another Federal court ruled that the False Claims 
Act does not cover false claims for funds that are administered 
by, but not owned by, the Government.\27\ Even though false 
claims made against Government-administered funds harm 
Government interests and frustrate Government programs and 
purposes, the Act was read not to cover those claims--removing 
protection of funds intended for the Iraq War, for example. 
Similarly, although the Act prohibits conspiring to defraud the 
Government, several courts have read the conspiracy provision 
narrowly, applying it to some violations of the Act, but not 
others.\28\
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    \27\United States ex rel. DRC, Inc. v. Custer Battles, LLC, 376 F. 
Supp. 2d 617, 636-641 (E.D. Va. 2006) (holding that while the False 
Claims Act protects funds ``presented to'' the Government, a $10 
million verdict for fraud against a defense contractor in Iraq was 
invalid on the ground that the money lost was not taxpayer money, but 
rather Iraqi money under the control of the United States, and thus not 
covered by the False Claims Act).
    \28\See, e.g., United States ex rel. Huangyan Imp. & Exp. Corp. v. 
Nature's Farm Prod., Inc., 370 F.Supp.2d 993 (N.D. Cal. 2005) (holding 
that section 3729(a)(3) does not extend to conspiracies to violate 
section 3729(a)(7)).
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    In 1998, the Tenth Circuit decided a case involving a 
provision of the False Claims Act that imposes liability upon 
those who wrongfully possess more Government money or property 
than the amount for which they have a certificate or 
receipt.\29\ In its decision, the court focused on the 
technical element of whether the defendant had a receipt or 
certificate for the property, not on whether the defendant 
actually wrongfully possessed or converted the property. As a 
result, a seemingly meritorious case was dismissed.
---------------------------------------------------------------------------
    \29\United States ex rel. Aakhus v. Dyncorp, Inc., 136 F.3d 676 
(10th Cir. 1998)
---------------------------------------------------------------------------
    Similarly, several cases have greatly limited the ``reverse 
false claims'' provision of the Act, which imposes liability on 
those who make or use false records or statements to conceal, 
avoid, or decrease an obligation to pay or transmit money or 
property to the Government.\30\ Indeed, the provision has been 
read so narrowly that the Government is presently able to 
prosecute only those rare fraudfeasors who submit reports 
concealing their wrongful retention of Government funds. 
Without adequate prosecutorial tools, the ``finders, keepers'' 
mentality continues to infect Government contracting.
---------------------------------------------------------------------------
    \30\E.g., United States ex rel. Prawer & Co. v. Verrill & Dana, 946 
F. Supp. 87 (D. Me. 1996); Am. Textile Mfrs. Inst., Inc. v. The 
Limited, Inc., 190 F.3d 729 (6th Cir. 1999).
---------------------------------------------------------------------------
    When the 1986 amendments were enacted, Congress expressly 
stated that the public disclosure bar was intended to bar only 
truly parasitic qui tam lawsuits; the provision was not 
intended to bar suits solely because the Government already 
knew of the fraud or could have learned of the fraud from 
information in the public domain, such as from a media 
report.\31\ Congress drafted the public disclosure bar to 
provide a balance between ``encouraging people to come forward 
with information and preventing parasitic lawsuits.''\32\ Yet, 
despite this clear congressional intent and Department of 
Justice recommendations, courts have used the public disclosure 
bar to dismiss relators who provided important information in 
cases still being pursued by the Government.
---------------------------------------------------------------------------
    \31\132 Cong. Rec. H9382-03 (daily edition Oct. 7, 1986).
    \32\False Claims Act Implementation: Hearing Before the Subcomm. on 
Admin. Law and Gov't Rel. of the H. Comm. on the Judiciary, 101st 
Cong., 2d Sess. 3, (1990) (statement of Sen. Grassley).
---------------------------------------------------------------------------
    For example, in 2007 the Supreme Court upheld the granting 
of a defendant's motion to dismiss a relator from a lawsuit 
after judgment against the defendant was entered, and despite 
strong objections from the Department of Justice who had filed 
a brief with the Court in support of the relator.\33\ Many 
other courts have misapplied the public disclosure bar, 
resulting in decisions that Congress never intended.\34\ The 
confusing patchwork of public disclosure case law has not only 
frustrated meritorious suits; it has discouraged relators from 
even filing qui tam suits, removing a critical source of 
assistance to Government investigations.
---------------------------------------------------------------------------
    \33\Rockwell Int'l Corp. v. U.S., 127 S. Ct. 1397 (2007).
    \34\E.g., United States ex rel. Bly-Magee v. Premo, 470 F.3d 914 
(9th Cir. 2006), cert. denied, 128 S.Ct. 1119 (2008); United States ex 
rel. Fowler v. Caremark RX, LLC, 496 F.3d 730, 736 (7th Cir. 2007), 
cert denied, 128 S.Ct. 1246 (2008); United States ex rel. Gear v. 
Emergency Med. Assocs. of Illinois, Inc., 436 F.3d 726 (7th Cir. 2006); 
United States ex rel. Paranich v. Sorgnard, 396 F.3d 326 (3d Cir. 
2005); United States ex rel. Mathews v. Bank of Farmington, 166 F.3d 
853 (7th Cir. 1999); United States ex rel. Mistick PBT v. Hous. Auth. 
of City of Pittsburgh, 186 F.3d 376 (3d Cir. 1999); United States ex 
rel. McKenzie v. BellSouth Telecomm., Inc., 123 F.3d 935 (6th Cir. 
1997); United States ex rel. Doe v. John Doe Corp., 960 F.2d 318 (2d 
Cir. 1992); United States ex rel. Stinson, Lyons, Gerlin & Bustamante, 
P.A. v. Prudential Ins. Co., 944 F.2d 1149, 1158 (3d Cir. 1991); United 
States ex rel. Maxwell v. Kerr McGee Oil & Gas Corp., 486 F. Supp. 2d 
1217 (D. Colo. 2007); United States ex rel. Montgomery v. St. Edwards 
Mercy Med. Ctr., 2007 U.S. Dist. LEXIS 73376 (E.D. Ark. Sep. 28, 2007).
---------------------------------------------------------------------------
    Since the 1986 amendments, courts have also limited the 
scope of the False Claims Act's anti-retaliation provisions. 
For instance, several courts have read new limits into the Act 
by holding that the protections of the Act's anti-retaliation 
provisions apply only to ``employees,'' and not to independent 
contractors, subcontractors, or agents.\35\
---------------------------------------------------------------------------
    \35\E.g., United States, ex rel., Watson v. Connecticut Gen. Life 
Ins., 2004 U.S. App. LEXIS 1736 (3d Cir. Jan. 16, 2004) (independent 
contractor held not protected); Vessell v. DPS Assocs. of Charleston, 
Inc., 148 F.3d 407 (4th Cir. 1998) (landscaper of real estate agency 
deemed not protected); cf. United States, ex rel., Conner v. Salina 
Reg'l Health Ctr., 459 F. Supp. 2d 1981 (D. Kan. 2006) (concluding that 
doctor adequately alleged that he was an ``employee'' of the hospital 
even though the hospital did not pay him a salary).
---------------------------------------------------------------------------
    A 2005 Supreme Court decision has also complicated statute 
of limitations questions even though the 1986 amendments 
extended the False Claims Act's statute of limitations. In 
interpreting the False Claims Act, the Supreme Court held that 
the law's statute of limitations did not apply to retaliation 
claims brought under the False Claims Act; rather, relators 
must conform their claims to the most similar type of action 
available under State law.\36\ Because many State false claims 
statutes of limitations are short, the Court's decision created 
a significant obstacle to recovery for legitimate retaliation 
claims. Consequently, many whistleblowers who encounter 
retaliatory tactics from their employers are now forced to file 
their false claims actions within a narrow window in order to 
obtain relief, or be limited to less attractive legal avenues 
for relief.
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    \36\Graham County Soil & Water Conservation Dist. v. United States, 
ex rel., Wilson, 545 U.S. 409 (2005).
---------------------------------------------------------------------------
    Finally, many courts have overly strictly applied Rule 9(b) 
of the Federal Rules of Civil Procedure to False Claims Act 
suits. Rule 9(b) requires claims to be pled with particularity, 
to ensure that defendants are given proper notice of any claims 
that are being leveled against them so they can formulate a 
vigorous defense.\37\ In False Claims Act suits, however, many 
courts have required a degree of specificity that is not only 
beyond what is necessary to give defendants notice of the 
charges against them but goes far beyond the information 
readily available at the pleading stage to many qui tam 
relators with meritorious allegations.
---------------------------------------------------------------------------
    \37\Rule 9(b) states: ``In all averments of fraud or mistake, the 
circumstances constituting fraud or mistake shall be state with 
particularity. Malice, intent, knowledge, and other condition of mind 
of a person may be averred generally.''
---------------------------------------------------------------------------
    A relator may have knowledge of the method of fraud 
employed, for example, but not be in possession of detailed 
records documenting precisely how the fraud was executed. 
Courts have nevertheless ruled against relators who could not 
provide the false invoices or phoney billing records, even 
though they are not generally available to anyone outside a 
company's billing department--often without even providing an 
opportunity for discovery.\38\
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    \38\E.g., United States ex rel. Bledsoe v. Community Health Sys., 
Inc., 501 F.3d 493 (6th Cir. 2007); United States ex rel. Joshi v. St. 
Luke's Hosp., Inc., 441 F.3d 552, 559 (8th Cir. 2006); United States ex 
rel. Sikkenga v. Bluecross, 472 F.3d 702 (10th Cir. 2006) (10th Cir., 
Dec. 5, 2006); Sanderson v. HCA, 447 F.3d 873, 877 (6th Cir. 2006); 
United States ex rel. Karvelas v. Melrose-Wakefield Hosp., 360 F.3d 220 
(1st Cir. 2004); In re Genesis Health Ventures, Inc., 112 Fed. Appx. 
140, 144 (3rd Cir. 2004); United States ex rel. Clausen v. Lab Corp. of 
America, 290 F.3d 1301 (11th Cir. 2002), cert. denied, 537 U.S. 1105 
(2003).
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                                Hearings

    The Committee held a hearing on proposals to fight fraud 
and to protect taxpayers on April 1, 2009. The Committee heard 
testimony on H.R. 1788, among several other bills. Testimony on 
H.R. 1788 was received from two witnesses--Joseph E. B. White, 
President and CEO of Taxpayers Against Fraud; and Marcia 
Madsen, an attorney with Mayer Brown LLP, who appeared on 
behalf of the United States Chamber of Commerce and the United 
States Chamber Institute for Legal Reform.
    During the 110th Congress, the Committee's Subcommittee on 
Commercial and Administrative Law and the Subcommittee on 
Courts, the Internet, and Intellectual Property held a joint 
hearing on substantially identical legislation, H.R. 4854, the 
``False Claims Act Correction Act of 2007.'' Testimony was 
received from Albert Campbell, a small business owner from 
Florida; Shelley Slade, an attorney with Vogel, Slade, & 
Goldstein, LLP; Peter B. Hutt, II, an attorney with Akin Gump 
Strauss Hauer & Feld, LLP, who appeared on behalf of the United 
States Chamber of Commerce and the United States Chamber 
Institute for Legal Reform; and James B. Helmer, Jr., President 
of the law firm Helmer, Martins, Rice & Popham Co., L.P.A.

                        Committee Consideration

    On April 28, 2009, the Committee met in open session and 
ordered the bill H.R. 1788 favorably reported without 
amendment, by a rollcall vote of 20 to 6, a quorum being 
present.

                            Committee Votes

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
following rollcall votes occurred during the Committee's 
consideration of H.R. 1788.
    1. An amendment offered by Mr. Issa to explicitly require 
the court to consider, in determining whether to reduce the 
share of recovered proceeds that a relator receives, the value 
to the relator of avoiding prosecution. Defeated 18 to 10.

                                                 ROLLCALL NO. 1
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Conyers, Jr., Chairman......................................                              X
Mr. Berman......................................................                              X
Mr. Boucher.....................................................
Mr. Nadler......................................................                              X
Mr. Scott.......................................................                              X
Mr. Watt........................................................                              X
Ms. Lofgren.....................................................                              X
Ms. Jackson Lee.................................................
Ms. Waters......................................................                              X
Mr. Delahunt....................................................
Mr. Wexler......................................................
Mr. Cohen.......................................................                              X
Mr. Johnson.....................................................                              X
Mr. Pierluisi...................................................                              X
Mr. Gutierrez...................................................
Mr. Sherman.....................................................
Ms. Baldwin.....................................................
Mr. Gonzalez....................................................                              X
Mr. Weiner......................................................                              X
Mr. Schiff......................................................                              X
Ms. Sanchez.....................................................                              X
Ms. Wasserman Schultz...........................................
Mr. Maffei......................................................                              X
[Vacant]........................................................
Mr. Smith, Ranking Member.......................................              X
Mr. Sensenbrenner, Jr...........................................                              X
Mr. Coble.......................................................              X
Mr. Gallegly....................................................
Mr. Goodlatte...................................................              X
Mr. Lungren.....................................................                              X
Mr. Issa........................................................              X
Mr. Forbes......................................................              X
Mr. King........................................................              X
Mr. Franks......................................................              X
Mr. Gohmert.....................................................
Mr. Jordan......................................................              X
Mr. Poe.........................................................
Mr. Chaffetz....................................................              X
Mr. Rooney......................................................                              X
Mr. Harper......................................................              X
                                                                 -----------------------------------------------
    Total.......................................................             10              18
----------------------------------------------------------------------------------------------------------------

    2. An amendment offered by Mr. Issa to bar an employee from 
bringing a qui tam suit against his or her employer without 
first notifying the employer, and to bar anyone from bringing a 
qui tam suit against any entity other than his or her employer 
without first notifying the applicable agency's Inspector 
General, and unless the employer or Inspector General fails to 
take action within 90 days. Defeated 18 to 8.

                                                 ROLLCALL NO. 2
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Conyers, Jr., Chairman......................................                              X
Mr. Berman......................................................                              X
Mr. Boucher.....................................................
Mr. Nadler......................................................                              X
Mr. Scott.......................................................                              X
Mr. Watt........................................................                              X
Ms. Lofgren.....................................................                              X
Ms. Jackson Lee.................................................
Ms. Waters......................................................                              X
Mr. Delahunt....................................................
Mr. Wexler......................................................
Mr. Cohen.......................................................                              X
Mr. Johnson.....................................................                              X
Mr. Pierluisi...................................................                              X
Mr. Gutierrez...................................................                              X
Mr. Sherman.....................................................
Ms. Baldwin.....................................................
Mr. Gonzalez....................................................                              X
Mr. Weiner......................................................                              X
Mr. Schiff......................................................                              X
Ms. Sanchez.....................................................                              X
Ms. Wasserman Schultz...........................................
Mr. Maffei......................................................                              X
[Vacant]........................................................
Mr. Smith, Ranking Member.......................................
Mr. Sensenbrenner, Jr...........................................                              X
Mr. Coble.......................................................              X
Mr. Gallegly....................................................              X
Mr. Goodlatte...................................................
Mr. Lungren.....................................................                              X
Mr. Issa........................................................              X
Mr. Forbes......................................................
Mr. King........................................................
Mr. Franks......................................................              X
Mr. Gohmert.....................................................              X
Mr. Jordan......................................................              X
Mr. Poe.........................................................
Mr. Chaffetz....................................................              X
Mr. Rooney......................................................
Mr. Harper......................................................              X
                                                                 -----------------------------------------------
    Total.......................................................              8              18
----------------------------------------------------------------------------------------------------------------

    3. The motion to report H.R. 1788 favorably, without 
amendment, was approved 20 to 6.

                                                 ROLLCALL NO. 3
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Conyers, Jr., Chairman......................................              X
Mr. Berman......................................................              X
Mr. Boucher.....................................................
Mr. Nadler......................................................              X
Mr. Scott.......................................................              X
Mr. Watt........................................................              X
Ms. Lofgren.....................................................              X
Ms. Jackson Lee.................................................
Ms. Waters......................................................              X
Mr. Delahunt....................................................
Mr. Wexler......................................................
Mr. Cohen.......................................................              X
Mr. Johnson.....................................................              X
Mr. Pierluisi...................................................              X
Mr. Gutierrez...................................................              X
Mr. Sherman.....................................................
Ms. Baldwin.....................................................
Mr. Gonzalez....................................................              X
Mr. Weiner......................................................              X
Mr. Schiff......................................................              X
Ms. Sanchez.....................................................              X
Ms. Wasserman Schultz...........................................
Mr. Maffei......................................................              X
[Vacant]........................................................
Mr. Smith, Ranking Member.......................................
Mr. Sensenbrenner, Jr...........................................              X
Mr. Coble.......................................................                              X
Mr. Gallegly....................................................                              X
Mr. Goodlatte...................................................
Mr. Lungren.....................................................              X
Mr. Issa........................................................                              X
Mr. Forbes......................................................
Mr. King........................................................
Mr. Franks......................................................              X
Mr. Gohmert.....................................................              X
Mr. Jordan......................................................                              X
Mr. Poe.........................................................
Mr. Chaffetz....................................................                              X
Mr. Rooney......................................................
Mr. Harper......................................................                              X
                                                                 -----------------------------------------------
    Total.......................................................             20               6
----------------------------------------------------------------------------------------------------------------

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII of the Rules 
of the House of Representatives, the Committee advises that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

               New Budget Authority and Tax Expenditures

    Clause 3(c)(2) of rule XIII of the Rules of the House of 
Representatives is inapplicable because this legislation does 
not provide new budgetary authority or increased tax 
expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, the Committee sets forth, with 
respect to the bill, H.R. 1788, the following estimate and 
comparison prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act of 
1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                       Washington, DC, May 5, 2009.
Hon. John Conyers, Jr., Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1788, the False 
Claims Act Correction Act of 2009.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Leigh Angres, 
who can be reached at 226-2860.
            Sincerely,
                                      Douglas W. Elmendorf,
                                                  Director.

Enclosure

cc:
        Honorable Lamar S. Smith.
        Ranking Member
H.R. 1788--False Claims Act Correction Act of 2009.
    H.R. 1788 would amend certain provisions of the False 
Claims Act (FCA), which generally provides that a person who 
knowingly submits a false or fraudulent claim for overpayments 
to the U.S. Government may be subject to a civil action in a 
federal court. The FCA also allows for private individuals with 
knowledge of past or present fraud committed against the 
Government to file qui tam claims against federal contractors. 
In qui tam claims, such individuals (known as relators or 
whistleblowers) receive a share of any amounts recovered as a 
result of such claims. The amendments in the bill would take 
effect on the date of enactment and most would apply to cases 
pending or filed on or after such date. Among other changes, 
the bill would:

         LStipulate that individuals who present false 
        claims to contractors, grantees, and others can be held 
        liable under the FCA (under current law, that liability 
        exists only for false claims presented to Government 
        employees);

         LClarify that only actions where all the 
        essential parts of a case are derived from public 
        disclosure can be dismissed; and

         LSet a uniform statute of limitations of eight 
        years for any claim brought under the FCA.

    Each year, the Department of Justice's (DOJ's) docket 
includes several hundred cases filed under the FCA. In 2008, 
the Government recovered more than $1.3 billion from 
settlements and judgments in such cases. Under H.R. 1788, the 
Government would be able to initiate additional FCA cases that 
it otherwise would not be able to pursue. Accordingly, 
additional litigation activities could require more resources. 
Funding needed for such activities would depend on the 
complexity and number of cases DOJ chooses to pursue and would 
be subject to the availability of appropriated funds.
    More prosecutions also would result in the collection of 
civil fines, which are recorded in the budget as revenues, and 
additional recoveries, which are recorded as offsetting 
receipts and collections to the Government. CBO cannot estimate 
the magnitude of such amounts because the outcome of any new 
FCA cases pursued as a result of this legislation is uncertain. 
Furthermore, the outcome of cases that might be prosecuted 
under other authorities if H.R. 1788 were not enacted is 
unknown.
    H.R. 1788 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of State, local, or tribal 
governments.
    The CBO staff contact for this estimate is Leigh Angres. 
This estimate was approved by Theresa Gullo, Deputy Assistant 
Director for Budget Analysis.

                    Performance Goals and Objectives

    The Committee states that pursuant to clause 3(c)(4) of 
rule XIII of the Rules of the House of Representatives, H.R. 
1788 amends title 31, United States Code, to correct the effect 
of unduly restrictive judicial opinions by clarifying that 
Congress intends the law to reach all types of fraud concerning 
Federal funds, regardless of the form of the transaction, and 
to restore the intended incentives for whistleblowers to act 
when they discover fraud against the United States Government.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds the authority for 
this legislation in article I, section 8 of the Constitution.

                          Advisory on Earmarks

    In accordance with clause 9 of rule XXI of the Rules of the 
House of Representatives, H.R. 1788 does not contain any 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as defined in clause 9(d), 9(e), or 9(f) of Rule XXI.

                      Section-by-Section Analysis

    The following discussion describes the bill as reported by 
the Committee.
    Sec. 1. Short Title. Section 1 sets forth the short title 
of the bill as the ``False Claims Act Correction Act of 2009.''
    Sec. 2. Liability for False Claims. Section 2 clarifies 
liability under the False Claims Act. It clarifies that 
liability 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 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. Section 2 amends the False Claims Act to apply to all 
instances where there is unlawful conversion of Government 
money to unauthorized uses or the knowing retention of 
Government overpayments.
    Section 2 specifies that conspiracy under the False Claims 
Act arises whenever a person conspires to violate any of the 
provisions of 31 U.S.C. Sec. 3729. Section 2 defines the term 
``government money or property'' broadly, and redefines the 
term ``claim'' to cover all requests or demands for Government 
money or property, without regard to whether the United States 
holds title to the money or property or is merely managing it. 
Finally, section 2 also provides that all elements necessary to 
state a claim under the False Claims Act are set forth in 
Sec. 3729, and that no additional elements should be implied or 
required.
    Sec. 3. Civil Actions for False Claims. Subsection 3(a)(1) 
streamlines the procedures under which a court may dismiss a 
qui tam action on the plaintiff's motion. Subsection 3(a)(2) 
provides that--absent a showing of extraordinary need--the 
written disclosure of any material evidence and information and 
any other attorney work product that the plaintiff provides to 
the Department of Justice in anticipation of the Government 
joining the case is not subject to discovery. Subsection 
3(a)(3) crafts a uniform timetable for relators to decide to 
either dismiss the case or move forward alone where the 
Government declines to take up a case. Subsection 3(a)(4) 
provides that the joinder of qui tam plaintiffs in similar 
False Claims Act actions is permissible, and it bars an 
individual from bringing a case that is based on the facts 
underlying a similar pending action.
    Subsection 3(c)(1) requires that awards withheld from 
successful qui tam plaintiffs by the Government would accrue 
interest at the Internal Revenue Service underpayment rate, 
beginning 30 days after the Government obtains an award until 
it is fully paid to the plaintiff. Subsection 3(c)(2) allows 
successful relators to recover reasonable incurred expenses 
from defendants, and subsection 3(c)(3) gives courts wide 
discretion to reduce a relator's award in those instances where 
the relator's case is derived primarily from public 
disclosures.
    Subsection 3(d) clarifies that the public disclosure bar 
precludes only actions where all the essential elements of a 
relator's case are derived from a public disclosure that has 
been made on the public record or broadly disseminated to the 
general public, and provides that only the Government, and not 
a defendant, may move to dismiss an action based on the public 
disclosure bar. This clarifying language should return the 
meaning of the public disclosure bar to what Congress intended 
in the 1986 amendments, while still preventing truly parasitic 
suits.\39\
---------------------------------------------------------------------------
    \39\See fn 32.
---------------------------------------------------------------------------
    Subsection 3(e) would broaden protections for 
whistleblowers by expanding the False Claims Act's anti-
retaliation provision to cover any retaliation against those 
who planned to file an action (but did not), people related to 
or associated with relators, and contract workers and others 
who are not technically ``employees.''
    Sec. 4. False Claims Procedures. Subsection 4(a) sets a 
uniform statute of limitations of 8 years for any claim brought 
under the False Claims Act, and clarifies that in cases where 
the Government intervenes, its amended complaint relates back 
to the date the initial action was filed. The uniform standard 
addresses the divergence among the Federal circuits in 
interpreting the statute of limitations, and takes into 
consideration concerns expressed by potential defendants 
regarding a 10-year statute of limitations period. Subsection 
4(b) makes the standard of proof required under the statute the 
same whether an action is pursued by the Government or by a 
relator.
    Subsection 4(c) specifies that a plaintiff need not 
identify specific claims on alleged misconduct so long as the 
facts alleged provide a reasonable indication that a False 
Claims Act violation occurred and that the allegations 
proffered by the relator provide adequate notice to the 
Government and the defendant. Subsection 4(c) will not 
encourage baseless suits, but instead still place defendants on 
adequate notice of the claims against them. Subsection 4(c) 
voids any contract, private agreement, or private term or 
condition of employment intended to limit or circumvent the 
ability of any individual to take part in a False Claims Act 
action. Subsection 4(c) will ensure that qui tam relators will 
not be prevented from bringing actions under the False Claims 
Act.
    Sec. 5. False Claims Jurisdiction. Section 5 adds a new 
subsection to Sec. 3732 to clarify that, with respect to any 
State or local government that is named as a co-plaintiff with 
the United States in an action, a seal imposed by a Federal 
court does not preclude the Government or a qui tam relator 
from complying with State requirements to serve a complaint, 
other pleadings, or the written disclosure of all material 
evidence and information possessed by the person bringing the 
action on the State or local authorities.
    Sec. 6. Civil Investigative Demands. Section 6 amends 
Sec. 3733 to permit the Attorney General to delegate his 
authority to issue a civil investigative demand to a designee 
and allows the Department of Justice to share any information 
obtained through a civil investigative demand with a relator in 
any case where the Attorney General or a designee deems it 
necessary to a False Claims Act investigation.
    Sec. 7. Effective Date. This section provides that the 
amendments made by this bill take effect on the date of the 
bill's enactment, and that they apply to both pending and 
future cases, with the exception of the provisions dealing with 
overpayments in Section 2, retaliation against associates in 
Section 3(e), and the statute of limitations, which will apply 
only to cases filed on or after the date of enactment.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, existing law in which no change 
is proposed is shown in roman):

                      TITLE 31, UNITED STATES CODE



           *       *       *       *       *       *       *
SUBTITLE III--FINANCIAL MANAGEMENT

           *       *       *       *       *       *       *


CHAPTER 37--CLAIMS

           *       *       *       *       *       *       *


SUBCHAPTER III--CLAIMS AGAINST THE UNITED STATES GOVERNMENT

           *       *       *       *       *       *       *


[Sec. 3729. False claims

  [(a) Liability for Certain Acts.--Any person who--
          [(1) knowingly presents, or causes to be presented, 
        to an officer or employee of the United States 
        Government or a member of the Armed Forces of the 
        United States a false or fraudulent claim for payment 
        or approval;
          [(2) knowingly makes, uses, or causes to be made or 
        used, a false record or statement to get a false or 
        fraudulent claim paid or approved by the Government;
          [(3) conspires to defraud the Government by getting a 
        false or fraudulent claim allowed or paid;
          [(4) has possession, custody, or control of property 
        or money used, or to be used, by the Government and, 
        intending to defraud the Government or willfully to 
        conceal the property, delivers, or causes to be 
        delivered, less property than the amount for which the 
        person receives a certificate or receipt;
          [(5) authorized to make or deliver a document 
        certifying receipt of property used, or to be used, by 
        the Government and, intending to defraud the 
        Government, makes or delivers the receipt without 
        completely knowing that the information on the receipt 
        is true;
          [(6) knowingly buys, or receives as a pledge of an 
        obligation or debt, public property from an officer or 
        employee of the Government, or a member of the Armed 
        Forces, who lawfully may not sell or pledge the 
        property; or
          [(7) knowingly makes, uses, or causes to be made or 
        used, a false record or statement to conceal, avoid, or 
        decrease an obligation to pay or transmit money or 
        property to the Government,
is liable to the United States Government for a civil penalty 
of not less than $5,000 and not more than $10,000, plus 3 times 
the amount of damages which the Government sustains because of 
the act of that person, except that if the court finds that--
the court may assess not less than 2 times the amount of 
damages which the Government sustains because of the act of the 
person. A person violating this subsection shall also be liable 
to the United States Government for the costs of a civil action 
brought to recover any such penalty or damages.
  [(b) Knowing and Knowingly Defined.--For purposes of this 
section, the terms ``knowing'' and ``knowingly'' mean that a 
person, with respect to information--
          [(1) has actual knowledge of the information;
          [(2) acts in deliberate ignorance of the truth or 
        falsity of the information; or
          [(3) acts in reckless disregard of the truth or 
        falsity of the information,
and no proof of specific intent to defraud is required.
  [(c) Claim Defined.--For purposes of this section, ``claim'' 
includes any request or demand, whether under a contract or 
otherwise, for money or property which is made to a contractor, 
grantee, or other recipient if the United States Government 
provides any portion of the money or property which is 
requested or demanded, or if the Government will reimburse such 
contractor, grantee, or other recipient for any portion of the 
money or property which is requested or demanded.
  [(d) Exemption From Disclosure.--Any information furnished 
pursuant to subparagraphs (A) through (C) of subsection (a) 
shall be exempt from disclosure under section 552 of title 5.
  [(e) Exclusion.--This section does not apply to claims, 
records, or statements made under the Internal Revenue Code of 
1986.]

Sec. 3729. False claims

  (a) Liability for Certain Acts.--
          (1) In general.--Any person who--
                  (A) knowingly presents, or causes to be 
                presented for payment or approval, a false or 
                fraudulent claim for Government money or 
                property,
                  (B) knowingly makes, uses, or causes to be 
                made or used, a false record or statement to 
                get a false or fraudulent claim for Government 
                money or property paid or approved,
                  (C) has possession, custody, or control of 
                Government money or property and either--
                          (i) fails to comply with a statutory 
                        or contractual obligation to disclose 
                        an overpayment about which the person 
                        is on actual notice, or
                          (ii) intending to--
                                  (I) defraud the Government, 
                                or
                                  (II) knowingly convert the 
                                money or property, permanently 
                                or temporarily, to an 
                                unauthorized use,
                        fails to deliver or return, or fails to 
                        cause the return or delivery of, the 
                        money or property, or delivers, 
                        returns, or causes to be delivered or 
                        returned less money or property than 
                        the amount due or owed,
                  (D) authorized to make or deliver a document 
                certifying receipt of property used, or to be 
                used, by the Government and, intending to 
                defraud the Government, makes or delivers the 
                receipt without completely knowing that the 
                information on the receipt is true,
                  (E) knowingly buys, or receives as a pledge 
                of an obligation or debt, Government money or 
                property from an officer or employee of the 
                Government, or a member of the Armed Forces, 
                who lawfully may not sell or pledge the money 
                or property,
                  (F) knowingly makes, uses, or causes to be 
                made or used, a false record or statement to 
                conceal, avoid, or decrease an obligation to 
                pay or transmit money or property to the 
                Government, or
                  (G) conspires to commit any violation set 
                forth in any of subparagraphs (A) through (F),
        is liable to the United States Government for a civil 
        penalty of not less than $5,000 and not more than 
        $10,000, plus 3 times the amount of damages that the 
        Government or its administrative beneficiary sustains 
        because of the act of that person, subject to 
        paragraphs (2) and (3).
          (2) Lesser penalty if defendant cooperates with 
        investigation.--In an action brought for a violation 
        under paragraph (1), the court may assess not less than 
        2 times the amount of damages that the Government or 
        its administrative beneficiary sustains because of the 
        act of the person committing the violation if the court 
        finds that--
                  (A) such person provided to those officials 
                of the United States who are responsible for 
                investigating false claims violations, all 
                information known to the person about the 
                violation within 30 days after the date on 
                which the person first obtained the 
                information;
                  (B) such person fully cooperated with any 
                Government investigation of the violation; and
                  (C) at the time such person provided to the 
                United States the information about the 
                violation under subparagraph (A), no criminal 
                prosecution, civil action, or administrative 
                action had commenced with respect to such 
                violation, and the person did not have actual 
                knowledge of the existence of an investigation 
                into such violation.
          (3) Assessment of costs.--A person violating 
        paragraph (1) shall, in addition to a penalty or 
        damages assessed under paragraph (1) or (2), be liable 
        to the United States Government for the costs of a 
        civil action brought to recover such penalty or 
        damages.
  (b) Definitions.--For purposes of this section--
          (1) the terms ``known'', ``knowing'', and 
        ``knowingly'' mean that a person, with respect to 
        information--
                  (A) has actual knowledge of the information,
                  (B) acts in deliberate ignorance of the truth 
                or falsity of the information, or
                  (C) acts in reckless disregard of the truth 
                or falsity of the information,
        and no proof of specific intent to defraud is required;
          (2) the term ``Government money or property'' means--
                  (A) money or property belonging to the United 
                States Government;
                  (B) money or property that--
                          (i) the United States Government 
                        provides or has provided to a 
                        contractor, grantee, agent, or other 
                        recipient, or for which the United 
                        States Government will reimburse a 
                        contractor, grantee, agent, or other 
                        recipient; and
                          (ii) is to be spent or used on the 
                        Government's behalf or to advance a 
                        Government program; and
                  (C) money or property that the United States 
                holds in trust or administers for any 
                administrative beneficiary;
          (3) the term ``claim'' includes any request or 
        demand, whether under a contract or otherwise, for 
        Government money or property; and
          (4) the term ``administrative beneficiary'' means any 
        entity, including any governmental or quasi-
        governmental entity, on whose behalf the United States 
        Government, alone or with others, serves as custodian 
        or trustee of money or property owned by that entity.
  (c) Statutory Cause of Action.--Liability under this section 
is a statutory cause of action all elements of which are set 
forth in this section. No proof of any additional element of 
common law fraud or other cause of action is implied or 
required for liability to exist for a violation of subsection 
(a).
  (d) Exemption From Disclosure.--Any information that a person 
provides pursuant to subparagraphs (A) through (C) of 
subsection (a)(2) shall be exempt from disclosure under section 
552 of title 5.
  (e) Exclusion.--This section does not apply to claims, 
records, or statements made under the Internal Revenue Code of 
1986.

Sec. 3730. Civil actions for false claims

  (a) * * *
  (b) Actions by Private Persons.--(1) A person may bring a 
civil action for a violation of section 3729 for the person and 
for the United States Government. The action shall be brought 
in the name of the Government. [The action may be dismissed 
only if the court and the Attorney General give written consent 
to the dismissal and their reasons for consenting.] The action 
may be dismissed only with the consent of the court and the 
Attorney General.
  (2) A copy of the complaint and written disclosure of 
substantially all material evidence and information the person 
possesses shall be served on the Government pursuant to Rule 
4(d)(4) of the Federal Rules of Civil Procedure. The complaint 
shall be filed in camera, shall remain under seal for at least 
60 days, and shall not be served on the defendant until the 
court so orders. In the absence of a showing of extraordinary 
need, the written disclosure of any material evidence and 
information, and any other attorney work product, that the 
person bringing the action provides to the Government shall not 
be subject to discovery. The Government may elect to intervene 
and proceed with the action within 60 days after it receives 
both the complaint and the material evidence and information.

           *       *       *       *       *       *       *

  (4) Before the expiration of the 60-day period or any 
extensions obtained under paragraph (3), the Government shall--
          (A) * * *
          [(B) notify the court that it declines to take over 
        the action, in which case the person bringing the 
        action shall have the right to conduct the action.]
          (B) notify the court that it declines to take over 
        the action, in which case the person bringing the 
        action shall have the right to conduct the action, and, 
        within 45 days after the Government provides such 
        notice, shall either--
                  (i) move to dismiss the action without 
                prejudice; or
                  (ii) notify the court of the person's 
                intention to proceed with the action and move 
                the court to unseal the complaint, and any 
                amendments thereto, so as to permit service on 
                the defendant and litigation of the action in a 
                public forum.
A person who elects to proceed with the action under 
subparagraph (B)(ii) shall serve the complaint within 120 days 
after the person's complaint is unsealed under such 
subparagraph.
  [(5) When a person brings an action under this subsection, no 
person other than the Government may intervene or bring a 
related action based on the facts underlying the pending 
action.]
  (5) When a person brings an action under this subsection, no 
person other than the Government may join or intervene in the 
action, except with the consent of the person who brought the 
action. In addition, when a person brings an action that is 
pled in accordance with this subsection and section 3731(e), no 
other person may bring a separate action under this subsection 
based on the facts underlying a cause of action in the pending 
action.
  (c) Rights of the Parties to Qui Tam Actions.--(1) * * *

           *       *       *       *       *       *       *

  (5) Notwithstanding subsection (b), the Government may elect 
to pursue its claim through any alternate remedy available to 
the Government, including any administrative proceeding to 
determine a civil money penalty. [If any such alternate remedy 
is pursued in another proceeding, the person initiating the 
action shall have the same rights in such proceeding as such 
person would have had if the action had continued under this 
section.] An alternate remedy includes--
          (A) anything of value received by the Government from 
        the defendant, whether funds, credits, or in-kind goods 
        or services, in exchange for an agreement by the 
        Government either to release claims brought in, or to 
        decline to intervene in or investigate, the action 
        initiated under subsection (b); and
          (B) anything of value received by the Government 
        based on the claims alleged by the person initiating 
        the action, if that person subsequently prevails on the 
        claims.
If any such alternate remedy is pursued in another proceeding, 
the person initiating the action shall have the same rights in 
such proceeding as such person would have had if the action had 
continued under this section, except that the person initiating 
the action may not obtain an award calculated on more than the 
total amount of damages, plus any fines or penalties, that 
could be recovered by the United States under section 3729(a). 
Any finding of fact or conclusion of law made in such other 
proceeding that has become final shall be conclusive on all 
parties to an action under this section. For purposes of the 
preceding sentence, a finding or conclusion is final if it has 
been finally determined on appeal to the appropriate court of 
the United States, if all time for filing such an appeal with 
respect to the finding or conclusion has expired, or if the 
finding or conclusion is not subject to judicial review.
  (d) Award to Qui Tam Plaintiff.--(1) If the Government 
proceeds with an action brought by a person under subsection 
(b), such person shall, subject to the second sentence of this 
paragraph, receive an award of at least 15 percent but not more 
than 25 percent of the proceeds of the action or settlement of 
the claim, depending upon the extent to which the person 
substantially contributed to the prosecution of the action. 
[Where the action is one which the court finds to be based 
primarily on disclosures of specific information (other than 
information provided by the person bringing the action) 
relating to allegations or transactions in a criminal, civil, 
or administrative hearing, in a congressional, administrative, 
or Government Accounting Office report, hearing, audit, or 
investigation, or from the news media, the court may award such 
sums as it considers appropriate, but in no case more than 10 
percent of the proceeds, taking into account the significance 
of the information and the role of the person bringing the 
action in advancing the case to litigation. Any payment to a 
person under the first or second sentence of this paragraph 
shall be made from the proceeds.] Any payment to a person under 
this paragraph or under paragraph (2) or (3) shall be made from 
the proceeds, and shall accrue interest, at the underpayment 
rate under section 6621 of the Internal Revenue Code of 1986, 
beginning 30 days after the date the proceeds are paid to the 
United States, and continuing until payment is made to the 
person by the United States. Any such person shall also receive 
an amount for reasonable expenses which the court finds to have 
been [necessarily] incurred, plus reasonable attorneys' fees 
and costs. All such expenses, fees, and costs shall be awarded 
against the defendant.
  (2) If the Government does not proceed with an action under 
this section, the person bringing the action or settling the 
claim shall receive an amount which the court decides is 
reasonable for collecting the civil penalty and damages. The 
amount shall be not less than 25 percent and not more than 30 
percent of the proceeds of the action or settlement [and shall 
be paid out of such proceeds]. Such person shall also receive 
an amount for reasonable expenses which the court finds to have 
been [necessarily] incurred, plus reasonable attorneys' fees 
and costs. All such expenses, fees, and costs shall be awarded 
against the defendant.
  [(3) Whether or not the Government proceeds with the action, 
if the court finds that the action was brought by a person who 
planned and initiated the violation of section 3729 upon which 
the action was brought, then the court may, to the extent the 
court considers appropriate, reduce the share of the proceeds 
of the action which the person would otherwise receive under 
paragraph (1) or (2) of this subsection, taking into account 
the role of that person in advancing the case to litigation and 
any relevant circumstances pertaining to the violation. If the 
person bringing the action is convicted of criminal conduct 
arising from his or her role in the violation of section 3729, 
that person shall be dismissed from the civil action and shall 
not receive any share of the proceeds of the action. Such 
dismissal shall not prejudice the right of the United States to 
continue the action, represented by the Department of Justice.]
  (3)(A) Whether or not the Government proceeds with the 
action, if the court finds that the action was brought by a 
person who either--
          (i) planned and initiated the violation of section 
        3729 upon which the action was brought, or
          (ii) derived his or her knowledge of the action 
        primarily from specific information relating to 
        allegations or transactions (other than information 
        provided by the person bringing the action) that the 
        Government publicly disclosed, within the meaning of 
        subsection (e)(4)(A), or that it disclosed privately to 
        the person bringing the action in the course of its 
        investigation into potential violations of section 
        3729,
then the court may, to the extent the court considers 
appropriate, reduce the share of the proceeds of the action 
that the person would otherwise receive under paragraph (1) or 
(2) of this subsection, taking into account the role of that 
person in advancing the case to litigation and any relevant 
circumstances pertaining to the violation. The court shall 
direct the defendant to pay any such person an amount for 
reasonable expenses that the court finds to have been incurred, 
plus reasonable attorneys' fees and costs.
  (B) If the person bringing the action is convicted of 
criminal conduct arising from his or her role in the violation 
of section 3729, that person shall be dismissed from the civil 
action and shall not receive any share of the proceeds of the 
action. Such dismissal shall not prejudice the right of the 
United States to continue the action, represented by the 
Department of Justice.

           *       *       *       *       *       *       *

  (e) Certain Actions Barred.--(1) * * *

           *       *       *       *       *       *       *

  [(4)(A) No court shall have jurisdiction over an action under 
this section based upon the public disclosure of allegations or 
transactions in a criminal, civil, or administrative hearing, 
in a congressional, administrative, or Government Accounting 
Office report, hearing, audit, or investigation, or from the 
news media, unless the action is brought by the Attorney 
General or the person bringing the action is an original source 
of the information.
  [(B) For purposes of this paragraph, ``original source'' 
means an individual who has direct and independent knowledge of 
the information on which the allegations are based and has 
voluntarily provided the information to the Government before 
filing an action under this section which is based on the 
information.]
  (4)(A) Upon timely motion of the Attorney General of the 
United States, a court shall dismiss an action or claim brought 
by a person under subsection (b) if the allegations relating to 
all essential elements of liability of the action or claim are 
based exclusively on the public disclosure of allegations or 
transactions in a Federal criminal, civil, or administrative 
hearing, in a congressional, Federal administrative, or 
Government Accountability Office report, hearing, audit, or 
investigation, or from the news media.
  (B) For purposes of this paragraph, a ``public disclosure'' 
includes only disclosures that are made on the public record or 
have otherwise been disseminated broadly to the general public. 
An action or claim is ``based on'' a public disclosure only if 
the person bringing the action derived the person's knowledge 
of all essential elements of liability of the action or claim 
alleged in the complaint from the public disclosure. The person 
bringing the action does not create a public disclosure by 
obtaining information from a request for information made under 
section 552 of title 5 or from exchanges of information with 
law enforcement and other Government employees if such 
information does not otherwise qualify as publicly disclosed 
under this paragraph.

           *       *       *       *       *       *       *

  [(h) Any employee who is discharged, demoted, suspended, 
threatened, harassed, or in any other manner discriminated 
against in the terms and conditions of employment by his or her 
employer because of lawful acts done by the employee on behalf 
of the employee or others in furtherance of an action under 
this section, including investigation for, initiation of, 
testimony for, or assistance in an action filed or to be filed 
under this section, shall be entitled to all relief necessary 
to make the employee whole. Such relief shall include 
reinstatement with the same seniority status such employee 
would have had but for the discrimination, 2 times the amount 
of back pay, interest on the back pay, and compensation for any 
special damages sustained as a result of the discrimination, 
including litigation costs and reasonable attorneys' fees. An 
employee may bring an action in the appropriate district court 
of the United States for the relief provided in this 
subsection.]
  (h) Relief From Retaliatory Action.--Any person who is 
discharged, demoted, suspended, threatened, harassed, or in any 
other manner discriminated against in the terms or conditions 
of employment, or is materially hindered in obtaining new 
employment or other business opportunities, by any other person 
because of lawful acts done by the person discriminated against 
or others associated with that person--
          (1) in furtherance of an actual or potential action 
        under this section, including investigation for, 
        initiation of, testimony for, or assistance in an 
        action filed or to be filed under this section, or
          (2) in furtherance of other efforts to stop one or 
        more violations of section 3729,
shall be entitled to all relief, from the person who has 
engaged in the discrimination, that is necessary to make the 
person whole. Such relief shall include reinstatement with the 
same seniority status such person would have had but for the 
discrimination, 2 times the amount of back pay or business 
loss, interest on the back pay or business loss, and 
compensation for any special damages sustained as a result of 
the discrimination, including litigation costs and reasonable 
attorneys' fees. An action under this subsection may be brought 
in the appropriate district court of the United States for the 
relief provided in this subsection.
  (i) Damages Collected for Financial Losses Suffered by 
Administrative Beneficiaries.--
          (1) In general.--After paying any awards due one or 
        more persons who brought an action under subsection 
        (b), the Government shall pay from the proceeds of the 
        action to any administrative beneficiary, as defined in 
        section 3729(b), all amounts that the Government has 
        collected in the action for financial losses suffered 
        by such administrative beneficiary. Any remaining 
        proceeds collected by the Government shall be treated 
        in the same manner as proceeds collected by the 
        Government for direct losses the Government suffers 
        because of violations of section 3729.
          (2) Alternative remedies.--Nothing in section 3729 or 
        this section precludes administrative beneficiaries 
        from pursuing any alternate remedies available to them 
        for losses or other harm suffered by them that are not 
        pursued or recovered in an action under this section, 
        except that if proceedings for such alternate remedies 
        are initiated after a person has initiated an action 
        under subsection (b), such person shall be entitled to 
        have such alternative remedies considered in 
        determining any award in the action under subsection 
        (b) to the same extent that such person would be 
        entitled under subsection (c)(5) with respect to any 
        alternate remedy pursued by the Government.

Sec. 3731. False claims procedure

  [(a) A subpena] (a) Service of Subpoenas._A subpoena 
requiring the attendance of a witness at a trial or hearing 
conducted under section 3730 of this title may be served at any 
place in the United States.
  [(b) A civil action under section 3730 may not be brought--
          [(1) more than 6 years after the date on which the 
        violation of section 3729 is committed, or
          [(2) more than 3 years after the date when facts 
        material to the right of action are known or reasonably 
        should have been known by the official of the United 
        States charged with responsibility to act in the 
        circumstances, but in no event more than 10 years after 
        the date on which the violation is committed,
whichever occurs last.]
  (b) Statute of Limitations; Intervention by the Government.--
          (1) Statute of limitations.--A civil action under 
        section 3730 (a), (b), or (h) may not be brought more 
        than 8 years after the date on which the violation of 
        section 3729 or 3730(h) (as the case may be) is 
        committed.
          (2) Intervention.--If the Government elects to 
        intervene and proceed with an action brought under 
        section 3730(b), the Government may file its own 
        complaint, or amend the complaint of the person who 
        brought the action under section 3730(b), to clarify or 
        add detail to the claims in which it is intervening and 
        to add any additional claims with respect to which the 
        Government contends it is entitled to relief. For 
        purposes of paragraph (1), any such Government pleading 
        shall relate back to the filing date of the complaint 
        of the person who originally brought the action to the 
        extent that the Government's claim arises out of the 
        conduct, transactions, or occurrences set forth, or 
        attempted to be set forth, in the person's prior 
        complaint.
  [(c) In] (c) Standard of Proof._In any action brought under 
section 3730, the [United States] plaintiff shall be required 
to prove all essential elements of the cause of action, 
including damages, by a preponderance of the evidence.
  [(d) Notwithstanding] (d) Estoppel._Notwithstanding any other 
provision of law, the Federal Rules of Criminal Procedure, or 
the Federal Rules of Evidence, a final judgment rendered in 
favor of the United States in any criminal proceeding charging 
fraud or false statements, whether upon a verdict after trial 
or upon a plea of guilty or nolo contendere, shall estop the 
defendant from denying the essential elements of the offense in 
any action which involves the same transaction as in the 
criminal proceeding and which is brought under subsection (a) 
or (b) of section 3730.
  (e) Notice of Claims.--In pleading an action brought under 
section 3730(b), a person shall not be required to identify 
specific claims that result from an alleged course of 
misconduct if the facts alleged in the complaint, if ultimately 
proven true, would provide a reasonable indication that one or 
more violations of section 3729 are likely to have occurred, 
and if the allegations in the pleading provide adequate notice 
of the specific nature of the alleged misconduct to permit the 
Government effectively to investigate and defendants fairly to 
defend the allegations made.
  (f) Void Contract, Agreements, and Conditions of 
Employment.--
          (1) In general.--Any contract, private agreement, or 
        private term or condition of employment that has the 
        purpose or effect of limiting or circumventing the 
        rights of a person to take otherwise lawful steps to 
        initiate, prosecute, or support an action under section 
        3730, or to limit or circumvent the rights or remedies 
        provided to persons bringing actions under section 
        3730(b) and other cooperating persons under section 
        3729 shall be void to the full extent of such purpose 
        or effect.
          (2) Exception.--Paragraph (1) shall not preclude a 
        contract or private agreement that is entered into--
                  (A) with the United States and a person 
                bringing an action under section 3730(b) who 
                would be affected by such contract or agreement 
                specifically to settle claims of the United 
                States and the person under section 3730; or
                  (B) specifically to settle any discrimination 
                claim under section 3730(h) of a person 
                affected by such contract or agreement.

Sec. 3732. False claims jurisdiction

  (a) * * *

           *       *       *       *       *       *       *

  (c) Service on State or Local Authorities.--With respect to 
any State or local government that is named as a co-plaintiff 
with the United States in an action brought under subsection 
(b), a seal on the action ordered by the court under section 
3730(b) shall not preclude the Government or the person 
bringing the action from serving the complaint, any other 
pleadings, or the written disclosure of substantially all 
material evidence and information possessed by the person 
bringing the action on the law enforcement authorities that are 
authorized under the law of that State or local government to 
investigate and prosecute such actions on behalf of such 
governments.

Sec. 3733. Civil investigative demands

  (a) In General.--
          (1) Issuance and service.--Whenever the Attorney 
        General has reason to believe that any person may be in 
        possession, custody, or control of any documentary 
        material or information relevant to a false claims law 
        investigation, the Attorney General may, before 
        commencing a civil proceeding under section 3730 or 
        other false claims law, issue in writing and cause to 
        be served upon such person, a civil investigative 
        demand requiring such person--
                  (A) * * *

           *       *       *       *       *       *       *

                  (D) to furnish any combination of such 
                material, answers, or testimony.
        [The Attorney General may not delegate the authority to 
        issue civil investigative demands under this 
        subsection.] Whenever a civil investigative demand is 
        an express demand for any product of discovery, the 
        Attorney General[, the Deputy Attorney General, or an 
        Assistant Attorney General] shall cause to be served, 
        in any manner authorized by this section, a copy of 
        such demand upon the person from whom the discovery was 
        obtained and shall notify the person to whom such 
        demand is issued of the date on which such copy was 
        served. Any information obtained by the Attorney 
        General under this section may be shared with any a 
        person bringing an action under section 3730(b) if the 
        Attorney General determines that it is necessary as 
        part of any false claims law investigation.
          (2) Contents and deadlines.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (F) The date prescribed for the commencement 
                of oral testimony pursuant to a civil 
                investigative demand issued under this section 
                shall be a date which is not less than seven 
                days after the date on which demand is 
                received, unless the Attorney General [or an 
                Assistant Attorney General designated by the 
                Attorney General] determines that exceptional 
                circumstances are present which warrant the 
                commencement of such testimony within a lesser 
                period of time.
                  (G) The Attorney General shall not authorize 
                the issuance under this section of more than 
                one civil investigative demand for oral 
                testimony by the same person unless the person 
                requests otherwise or unless the Attorney 
                General, after investigation, notifies that 
                person in writing that an additional demand for 
                oral testimony is necessary. [The Attorney 
                General may not, notwithstanding section 510 of 
                title 28, authorize the performance, by any 
                other officer, employee, or agency, of any 
                function vested in the Attorney General under 
                this subparagraph.]

           *       *       *       *       *       *       *

  (h) Oral Examinations.--
          (1) * * *

           *       *       *       *       *       *       *

          (6) Furnishing or inspection of transcript by 
        witness.--Upon payment of reasonable charges therefor, 
        the false claims law investigator shall furnish a copy 
        of the transcript to the witness only, except that the 
        Attorney General[, the Deputy Attorney General, or an 
        Assistant Attorney General] may, for good cause, limit 
        such witness to inspection of the official transcript 
        of the witness' testimony.

           *       *       *       *       *       *       *

  (i) Custodians of Documents, Answers, and Transcripts.--
          (1) * * *

           *       *       *       *       *       *       *

          [(3) Use of material, answers, or transcripts in 
        other proceedings.--Whenever any attorney of the 
        Department of Justice has been designated to appear 
        before any court, grand jury, or Federal agency in any 
        case or proceeding, the custodian of any documentary 
        material, answers to interrogatories, or transcripts of 
        oral testimony received under this section may deliver 
        to such attorney such material, answers, or transcripts 
        for official use in connection with any such case or 
        proceeding as such attorney determines to be required. 
        Upon the completion of any such case or proceeding, 
        such attorney shall return to the custodian any such 
        material, answers, or transcripts so delivered which 
        have not passed into the control of such court, grand 
        jury, or agency through introduction into the record of 
        such case or proceeding.]
          (3) use of material, answers, or transcripts in false 
        claims actions and other proceedings.--Whenever any 
        attorney of the Department of Justice has been 
        designated to handle any false claims law investigation 
        or proceeding, or any other administrative, civil, or 
        criminal investigation, case, or proceeding, the 
        custodian of any documentary material, answers to 
        interrogatories, or transcripts of oral testimony 
        received under this section may deliver to such 
        attorney such material, answers, or transcripts for 
        official use in connection with any such investigation, 
        case, or proceeding as such attorney determines to be 
        required. Upon the completion of any such 
        investigation, case, or proceeding, such attorney shall 
        return to the custodian any such material, answers, or 
        transcripts so delivered that have not passed into the 
        control of a court, grand jury, or agency through 
        introduction into the record of such case or 
        proceeding.

           *       *       *       *       *       *       *

  (l) Definitions.--For purposes of this section--
          (1) * * *

           *       *       *       *       *       *       *

          (6) the term ``custodian'' means the custodian, or 
        any deputy custodian, designated by the Attorney 
        General under subsection (i)(1); [and]
          (7) the term ``product of discovery'' includes--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) any index or other manner of access to 
                any item listed in subparagraph (A)[.]; and
          (8) the term ``official use'' means all lawful, 
        reasonable uses in furtherance of an investigation, 
        case, or proceeding, such as disclosures in connection 
        with interviews of fact witnesses, settlement 
        discussions, coordination of an investigation with a 
        State Medicaid Fraud Control Unit or other government 
        personnel, consultation with experts, and use in court 
        pleadings and hearings.
  (m) Delegation.--The Attorney General may delegate any 
authority that the Attorney General has under this section.

           *       *       *       *       *       *       *


                            Dissenting Views

                              INTRODUCTION

    Since the False Claims Act was last amended in 1986, it has 
become one of the Government's primary tools for recovering 
taxpayer dollars lost to waste, fraud, and abuse. As the 
Federal Government increases its spending through the stimulus 
bill and increased annual budgets, the importance of the FCA 
will increase as well. Congress thus has the responsibility to 
ensure that the FCA is functioning properly.
    Some of what is in H.R. 1788 will work toward that end. In 
particular, section 2 of the bill, which strengthens the Act's 
liability provisions, will help the Government to root out 
fraud wherever the Federal Government commits taxpayer dollars. 
In the roughly 22 years since the 1986 amendments, cases have 
arisen in which liability under the FCA has been held not to 
exist even though false claims may have ultimately resulted in 
a loss to the Federal Government.
    Although some of the provisions in this bill may be 
beneficial, other provisions are highly problematic. While 
section 2 may favorably address some issues that have arisen 
since the 1986 amendments related to liability, the remaining 
sections of the bill are generally aimed at helping private qui 
tam plaintiffs and the qui tam plaintiffs' bar without, in some 
instances, obvious benefits to the United States and the 
taxpayers.
    Certainly, suits brought by whistleblowers have been 
invaluable to the Federal Government's efforts under the FCA. 
Whistleblower assistance has allowed the Government to uncover 
more fraud and pursue a larger number of cases than it 
otherwise would have been able to. That said, the qui tam 
provisions of this bill may lead to a greater number of 
lawsuits by qui tam plaintiffs with questionable motives who 
advance baseless claims, inadvertently make bad law, and 
distract limited federal resources from meritorious claims to 
frivolous ones. The amendments made by this bill will only 
serve to displace the reasoned regime that governs 
relationships between the Federal Government and recipients of 
federal funds.
    What is more, it is entirely unclear that an increased 
number of qui tam cases will lead to increased recoveries under 
the FCA. The Federal Government investigates every qui tam 
filing and has consistently declined to intervene in about 80% 
of the cases filed by private plaintiffs. This selectivity is 
indicative of genuine discernment. Of the $21.5 billion in FCA 
recoveries since 1986, only three percent was recovered in qui 
tam cases in which the Department of Justice declined to 
intervene.
    Put differently, it is suspect that the qui tam provisions 
in this bill will increase the Federal Government's ability to 
recover taxpayer dollars. Rather, it is possible that these 
provisions will encourage private plaintiffs to file unfounded 
and parasitic lawsuits that benefit no one but the plaintiffs 
and their attorneys.
    By encouraging unfounded and parasitic qui tam suits, this 
bill will actually make it harder for the Government to recover 
funds under the FCA. These additional suits will add to the 
Justice Department's burden and detract from its ability to 
focus on meaningful cases. Simply put, the qui tam provisions 
in this bill may, in fact, be counterproductive.
    The False Claims Act, like so many other laws, is about 
striking the proper balance between competing interests. The 
interests here are between allowing the United States to 
recover as much fraudulently obtained money as possible and 
ensuring that innocent recipients of federal funds are not 
hauled into court to defend lawsuits that are based on an 
overly broad law. We believe the FCA currently strikes that 
balance well. Although there may be room to improve the FCA, we 
must be mindful in seeking to make improvements to continue to 
strike the proper balance. Unfortunately, the changes proposed 
in H.R. 1788, if enacted, might well throw that balance off.
    The costs of Government programs and Government contracts 
are already inflated by complex rules that are unknown in 
private business transactions. This legislation will likely 
generate additional costs for non-profits, hospitals, 
universities and businesses of all sizes; it will increase the 
burdens on the recipients of federal funds, remove safeguards 
against unfounded lawsuits brought by qui tam plaintiffs, and 
perhaps deter some from bidding on federal contracts, resulting 
in increased costs to the Government and the taxpayers. Thus, 
it appears that the benefits that its proponents argue H.R. 
1788 may bring are outweighed by the costs that it will impose.

                               BACKGROUND

    The FCA, 31 U.S.C. Sec. Sec. 3729-3733, is one of the 
Government's primary tools for combating fraud on federally 
funded programs. The statute imposes liability on persons who 
(1) knowingly present false or fraudulent claims to the United 
States, (2) knowingly make false records or statements to get 
false or fraudulent claims paid, or (3) conspire to defraud the 
Government by getting a false or fraudulent claim paid.\1\ The 
statute provides for treble damages plus penalties of $5,000 to 
$10,000 for each false claim.\2\
---------------------------------------------------------------------------
    \1\131 U.S.C. Sec. Sec. 3729(a)(1)N(3).
    \2\31 U.S.C. Sec. 3729(a).
---------------------------------------------------------------------------
    In addition to allowing the Government to bring its own 
lawsuits, the FCA also permits private citizens, known as qui 
tam plaintiffs or ``relators,'' to hire attorneys and file 
actions asserting violations of the FCA on behalf of the United 
States. Actions brought by relators are filed under seal, 
giving the Department of Justice the opportunity to investigate 
the actions and decide whether to intervene in the lawsuits and 
take the lead in prosecuting them. If the Government declines 
to intervene, relators and their attorneys can proceed with 
their actions. The incentive for relators and their attorneys 
is financial--if their actions are successful, the relators 
receive up to 30 percent of the proceeds awarded, and the 
remainder goes to the U.S. Treasury.\3\
---------------------------------------------------------------------------
    \3\See 31 U.S.C. Sec. 3730.
---------------------------------------------------------------------------
    The FCA was enacted in 1863 to combat ``the massive frauds 
perpetuated by large contractors during the Civil War.''\4\ It 
has since been amended several times, most recently in 1986. 
The 1986 amendments were intended in part ``to encourage more 
private enforcement suits.''\5\ Thus, since the 1986 
amendments, the FCA has sought to balance the twin goals of 
encouraging prompt whistleblowing while discouraging claims 
that do not help the Government protect the public fisc. So far 
these goals have been met: total recoveries under the FCA have 
exceeded $21.5 billion, $13.6 billion of which has come from 
suits initiated by qui tam plaintiffs.\6\
---------------------------------------------------------------------------
    \4\United States v. Bornstein, 423 U.S. 303, 309 (1976).
    \5\S. Rep. No. 99N345, at 23N24 (1986).
    \6\Of the $13.6 billion that has been recovered in lawsuits 
initiated by qui tam plaintiffs, only $432 million has come from cases 
in which the Government declined to intervene. Fraud Statistics 
1986N2008, available at http://www.usdoj.gov/opa/pr/2008/November/
fraud-statistics1986-2008.htm.
---------------------------------------------------------------------------

                               DISCUSSION

    The tremendous success the FCA has had over the past 22 
years calls into question the need for reform--especially 
reform as sweeping as that encompassed in H.R. 1788. As stated 
above, certain parts of this legislation, especially section 2, 
will be beneficial to the Federal Government's fight against 
fraud and wasteful spending in Government contracts and 
programs, and we support these proposals. On the other hand, 
much of what is in this legislation will unnecessarily impose 
significant burdens, for the benefit of qui tam plaintiffs, on 
entities that received federal funds with few, if any, 
countervailing benefits. Moreover, the legislation will 
strengthen the hand of qui tam plaintiffs at the expense of the 
Government and defendants to baseless actions. Therefore, it is 
our considered view that any benefits this bill will provide to 
the Federal Government's efforts to combat fraud and waste in 
Government programs are outweighed by the costs and burdens of 
this legislation.
A. More Qui Tam Lawsuits May not Lead to More FCA Recoveries
    Despite supporters' claims that the FCA needs to be 
amended, there are several reasons to be skeptical of the need 
for amendment. First and foremost among those reasons is that 
the FCA has worked well in the 22 years since the 1986 
amendments. According to the Department of Justice, ``the FCA 
in its present form has worked well and we have seen no 
pressing need for major amendments.''\7\
---------------------------------------------------------------------------
    \7\Letter from Keith B. Nelson, Principal Deputy Attorney General, 
Office of Legislative Affairs, to John Conyers, Jr. (July 15, 2008) 
(``Justice Dept. Views Letter'').
---------------------------------------------------------------------------
    According to supporters of this legislation, reform is 
needed to ensure that relators can bring forth meritorious 
litigation. The amendments to the FCA contained in H.R. 1788 
thus are intended to and certainly will encourage the filing of 
more cases under the FCA, especially by qui tam plaintiffs. It 
is not altogether clear, however, that more filings will lead 
to more recoveries.
    This result may seem counterintuitive, but we are confident 
it is correct. We come to this conclusion because, as it 
stands, the Government investigates every qui tam filing and 
consistently over time has declined to intervene in about 80% 
of the cases filed by relators. As suggested above, this 
represents genuine discernment by the Government. More than 97% 
of the amounts received in settlements and judgments in qui tam 
cases have come in the 20% of the matters in which the 
Government has intervened. In other words, fewer than 3% of 
recoveries have been derived from the 80% of the total 
investigative pool that the Justice Department has rejected. 
Indeed, last year (through September 30, 2008), the Government 
recovered about $1.043 billion in qui tam FCA cases; of that 
total roughly $1.037 billion came from qui tam cases in which 
the Justice Department intervened and only about $5.9 million 
came from relators litigating declined cases. As two experts on 
the FCA put it in a recent article, ``when DOJ examines the 
case and decides not to intervene, the chances the relator 
actually has a meritorious case are very low.''\8\
---------------------------------------------------------------------------
    \8\Marcia G. Madsen & Cameron S. Hamrick, Proposed FCA Amendments: 
A Recipe for Government Gridlock (Part II), Federal Contracts Report 
(BNA) (April 21, 2009).
---------------------------------------------------------------------------
    Accordingly, encouraging the filing of more FCA cases by 
relators and allowing these cases to avoid dismissal under 
traditional mechanisms, as this legislation would do, is 
unlikely to confer any sizeable benefit on the Government's 
fraud fighting activities. Maximizing the filings of qui tam 
lawsuits, no matter how negligible the benefits, might be 
acceptable in the name of rooting out all fraud against the 
United States, except for the fact that unfounded and parasitic 
FCA suits impose burdens on the Government, increase the costs 
of Government programs and contracts, and negatively affect the 
recipients of federal funds.
B. Government Burden and Cost to Government
    As was discussed above, outside of the liability provisions 
contained in section 2 of this legislation, many of the other 
provisions are aimed at assisting qui tam plaintiffs. But, as 
is discussed throughout these views, many of these provisions 
will make it easier for qui tam plaintiffs to bring unfounded 
or parasitic actions. Unfounded FCA actions drain Government 
resources in at least four ways. First, they place a burden on 
agencies whose contracts or grants are at issue. Agencies are 
forced to expend resources--that would otherwise be available 
for agency programs--on document discovery and production of 
witnesses for depositions and trial. Thus, increasing the 
number of unfounded and parasitic FCA cases and making it more 
difficult for these cases to be dismissed will result in 
greater burdens on the agencies.
    Second, unfounded and parasitic qui tam cases take time and 
resources away from the Department of Justice, which has to 
review all qui tam filings regardless of their merit. One of 
the primary goals of the qui tam provisions is to help the 
Justice Department by supplementing its resources for 
recovering money fraudulently taken from the Federal 
Government. Accordingly, draining resources from the Department 
to deal with unfounded and parasitic qui tam cases runs counter 
to the purposes of the FCA.
    Third, unfounded and parasitic cases needlessly cost 
defendants money to litigate. The defendants in turn must pass 
this cost back to the taxpayer the next time they bid on a 
Government contract, request funding under a Government grant, 
or provide services that are paid for by a Government program.
    Fourth, unfounded and parasitic cases may have the effect 
of driving out of the market for federal services bidders that 
could do the work but fear the potential for litigation. This 
effect is most likely to be considered by small businesses, 
which are also disproportionately women- and minority-owned 
businesses.
C. FCA Liability for Temporary Accounting Overpayments Will Burden Non-
        profits, Hospitals, and Universities
    H.R. 1788 will impose liability on recipients of federal 
funds for inadvertent retention of overpayments of Government 
funds, even if the recipients did not ``knowingly'' retain the 
overpayment. This change in the law will negatively impact non-
profits, universities, and hospitals in particular.
    According to the Greater New York Hospital Association, 
``due to the nature of hospital payment systems and the 
complexity of the Government reimbursement operations, 
hospitals are constantly identifying and reconciling over- and 
underpayments in the course of normal business.''\9\ Recipients 
of federal grants, such as universities, face similar problems 
with regard to over- and underpayments: ``it is understood that 
during the term of a federally sponsored project there may at 
any given time be undercharges and overcharges, and university 
systems are designed to ensure that any incorrect charges are 
adjusted, through cost transfers or otherwise, when they are 
detected.''\10\ Put simply, non-profits, hospitals, and 
universities have processes in place to discover and to correct 
over- and underpayments.
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    \9\Memorandum from Kenneth E. Raske, President, Greater New York 
Hospital Association.
    \10\Letter from Robert M. Berdahl, President, Association of 
American Universities, to John Conyers, Jr., Chairman, U.S. House 
Committee on the Judiciary (July 15, 2008).
---------------------------------------------------------------------------
    However, H.R. 1788 will allow relators to disrupt these 
systems with qui tam lawsuits based on what amount to temporary 
overpayments. And, because H.R. 1788 does not have a specific 
knowledge requirement with regard to its overpayment provision, 
these entities will be liable under the FCA even if the 
overpayments were inadvertent rather than the result of a 
conscious attempt to retain Government funds fraudulently. 
Hospitals, universities, and non-profits should be subject to 
the FCA just like any other recipient of federal funds; they 
should not, though, be subject to liability for temporary 
overcharges that are subject to correction through a 
reconciliation process. Moreover, these entities should not 
face treble damages and civil penalties for conduct that was 
merely negligent rather than ``knowingly'' undertaken.
D. Evisceration of the Public Disclosure Bar Will Lead to Parasitic 
        Lawsuits
    The FCA bars qui tam actions that are ``based upon the 
public disclosure of allegations or transactions . . ., unless 
. . . the person bringing the action is an original source of 
the information.''\11\ Congress designed the public disclosure 
bar to achieve the ``golden mean between adequate incentives 
for whistle-blowing insiders with genuinely valuable 
information and discouragement of opportunistic plaintiffs who 
have no significant information to contribute of their 
own.''\12\ Thus, the public disclosure bar has ensured that the 
incentive given to qui tam plaintiffs (a share of any recovery) 
only goes to those plaintiffs that are truly deserving-
whistleblowers who bring information regarding fraud to light.
---------------------------------------------------------------------------
    \11\31 U.S.C. Sec. 3730(e)(4)(A).
    \12\United States ex rel. Springfield Terminal Rwy. Co. v. Quinn, 
14 F.3d 645, 649 (D.C. Cir. 1994).
---------------------------------------------------------------------------
    Despite the fact that the public disclosure bar has worked 
well since the 1986 amendments were adopted, H.R. 1788 would 
eviscerate the bar. According to the Justice Department, the 
bill ``severely restricts the circumstances where the bar would 
apply in a way that would reward relators with no first hand 
knowledge and who do not add information beyond what is in the 
public domain, as well as relators in a broad range of cases 
where the Government already is taking action.''\13\ 
Furthermore, the Department believes that ``[i]f these changes 
were implemented, a relator could file suit and reduce the 
taxpayers' recovery even though he or she has not contributed 
anything new to the Government's case.''\14\
---------------------------------------------------------------------------
    \13\Justice Dept. Views Letter Appendix at 9.
    \14\Id.
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    The likely effect of the changes the legislation makes to 
the public disclosure bar will be to kill the bar. While it is 
true that the Justice Department would still theoretically be 
able to seek dismissal of parasitic qui tam actions, according 
to testimony before the committee ``in practice it does not 
have the resources or inclination to do so, particularly in 
light of the far more restrictive language in [H.R. 
1788].''\15\ Accordingly, ``[r]elators and their attorneys will 
have no reason to fear dismissal, and, as the history of the 
qui tam provisions teaches, there will be a flood of cases 
asserting claims based largely, and sometimes exclusively, on 
information already known to the government.''\16\ As the D.C. 
Circuit has noted, ``overly generous qui tam provisions present 
the danger of parasitic exploitation of the public coffers, as 
exemplified by the notorious plaintiff who copied the 
information on which his qui tam suit was based from the 
government's own criminal indictment.''\17\
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    \15\H.R. 4854, the ``False Claims Act Correction Act'': Hearing 
Before the H. Comm. on the Judiciary, 110th Cong. (2008) (testimony of 
Peter B. Hutt, II, Partner, Akin Gump Strauss Hauer & Feld LLP).
    \16\Id.
    \17\Quinn, 14 F.3d at 649.
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    Compounding the problem, in addition to eviscerating the 
bar, the legislation goes a step further. The FCA currently 
caps a qui tam plaintiff's share of any recovery at 10% if the 
lawsuit is based on certain public disclosures. H.R. 1788, 
however, will remove this cap, permitting parasitic 
whistleblowers to recover more than a 10% share even where 
their case is based on public information.
    In short, this legislation will defeat the purpose of the 
public disclosure bar--defending the U.S. Treasury against 
parasitic qui tam actions brought by whistleblowers with 
nothing new to offer.
E. Elimination of Pleading Requirements Under Rule 9(b) Will Lead to 
        Unfounded Qui Tam Lawsuits
    H.R. 1788 exempts qui tam plaintiffs--but not the 
Department of Justice--from the requirement of Rule 9(b) of the 
Federal Rules of Civil Procedure that all persons asserting 
fraud actions in federal court must plead the elements of fraud 
with particularity. There is no basis for holding qui tam 
plaintiffs in FCA actions to a lower pleading standard than 
every other federal litigant.
    Rule 9(b) provides that ``[i]n alleging fraud or mistake, a 
party must state with particularity the circumstances 
constituting fraud or mistake.'' Rule 9(b) has four purposes:

        First, the rule ensures that the defendant has 
        sufficient information to formulate a defense by 
        putting it on notice of the conduct complained of. 
        Second, Rule 9(b) exists to protect defendants from 
        frivolous suits. A third reason for the rule is to 
        eliminate fraud actions in which all the facts are 
        learned after discovery. Finally, Rule 9(b) protects 
        defendants from harm to their goodwill and 
        reputation.\18\
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    \18\Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 784 
(4th Cir. 1999) (quoting United States ex rel. Stinson, Lyons, Gerlin & 
Bustamante, P.A. v. Blue Cross Blue Shield, Inc., 755 F. Supp. 1055, 
1056N57 (S.D. Ga. 1990)).

    In place of the Rule 9(b) standard, H.R. 1788 would allow 
qui tam plaintiffs to plead facts that merely demonstrate a 
``reasonable indication'' that a violation of the FCA is 
``likely to have occurred.'' The Committee received testimony 
that eliminating the Rule 9(b) standard for qui tam actions 
will encourage relators ``to plead shallow speculative claims, 
knowing that the potential exists to obtain more information if 
the case can survive the discovery stage.''\19\ Indeed, as the 
Fifth Circuit has written, ``[a] special relaxing of Rule 9(b) 
is a qui tam plaintiff's ticket to the discovery process.''\20\
---------------------------------------------------------------------------
    \19\Proposals to Fight Fraud and Protect Taxpayers: Hearing Before 
the H. Comm. on the Judiciary, 111th Cong. (2009) (testimony of Marcia 
G. Madsen, Partner, Mayer Brown).
    \20\United States ex rel. Russell v. Epic Healthcare Mgmt. Group, 
193 F.3d 304, 309 (5th Cir. 1999).
---------------------------------------------------------------------------
    Thus, the result of the legislation's relaxation of the 
Rule 9(b) standard will be to unleash a flood of unfounded and 
speculative qui tam cases--cases that otherwise would be 
dismissed for failure to plead with particularity--in hopes 
that fraud will be uncovered during discovery. This is contrary 
to the purposes of the qui tam provisions of the FCA, which 
grant ``a right of action to private citizens only if they have 
independently obtained knowledge of fraud.''\21\
---------------------------------------------------------------------------
    \21\Id.
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F. Alternative Remedy Provision Will Require U.S. Treasury to Fund 
        Relators Even When the Recovery was not Based on the FCA
    This legislation will also allow qui tam plaintiffs an 
expanded relator's share in ``alternative remedies'' the 
Government recovers from non-FCA actions, such as contract 
actions, other non-fraud actions, and even criminal 
proceedings--though the relator is not a party, and the 
proceeding does not involve liability for false claims. The 
Act's current alternative remedy provision provides the United 
States with the ability to pursue false claims against a 
recipient of federal funds administratively rather than under 
the FCA, while simultaneously ensuring that the relator is 
entitled to any recovery for the FCA claims. The Department of 
Justice is concerned, however, that this ``legislation's 
proposed changes would unduly expand the scope of the 
alternative remedy provision, and permit a relator to recover 
in too many situations and in situations not contemplated by 
the FCA.''\22\
---------------------------------------------------------------------------
    \22\Justice Dept. Views Letter Appendix at 6.
---------------------------------------------------------------------------
    The Department has opined that because a relator can 
continue his qui tam action even if the Government receives 
compensation on a non-fraud basis, ``there is no need to pay a 
share of the Government's non-fraud recoveries as a means of 
furnishing relators with appropriate incentives to disclose 
allegations of fraud.''\23\ If the Government determines the 
conduct was not fraudulent and is repaid administratively, the 
purposes of the FCA are not furthered by requiring the 
Government to compensate the relator out of those 
administrative recoveries. As the Department has explained,
---------------------------------------------------------------------------
    \23\Id.

        The purpose of the FCA was to induce those with 
        knowledge of fraud . . . to disclose that wrongdoing. 
        Such an inducement is unnecessary where a company may 
        owe money to the United States, but has done nothing to 
        hide that fact (for example, the defendant has not 
        knowingly submitted a false claim or knowingly retained 
        an overpayment). The law should encourage employees of 
        such a company to report the overpayment to their 
        employer in the first instance, and should not 
        encourage them to file a qui tam action against a 
        company that has not engaged in fraud.\24\
---------------------------------------------------------------------------
    \24\Id. (citations omitted).

    The alternative remedy provision in H.R. 1788, however, 
will encourage employees to file qui tam actions even if they 
know their company did nothing wrong, because they will be 
ensured a share of the administrative recovery. This backstop 
will, of course, encourage the filing of unfounded qui tam 
actions under the FCA. Simply put, the Government should not 
pay relators at taxpayer expense in situations where no 
violation of the FCA has occurred. Yet, that is precisely what 
the alternative remedy provision of H.R. 1788 would do for the 
benefit of relators over the taxpayers.
G. The Interests of the Broad Array of Entities that Receive Federal 
        Funds
    In considering the wisdom of the changes H.R. 1788 will 
make to the FCA, it is important to take into account the input 
this Committee has received from those entities that will incur 
the costs of any frivolous, unfounded and/or parasitic qui tam 
suits that result from this legislation. Opposition to this 
legislation has been raised by associations representing a 
diverse group of entities. Among other groups, the following 
have come out against H.R. 1788: Association of American 
Universities, American Counsel of Engineering Companies, 
American Hospital Association, American Tort Reform 
Association, Association of American Medical Colleges, Greater 
New York Hospital Association, National Association of 
Manufacturers, Property Casualty Insurers Association of 
America, and the U.S. Chamber of Commerce.
    In a letter to members of the Judiciary Committee, the 
Association of American Universities, which represents 60 
leading U.S. research universities that together perform 60 
percent of all federally funded university-based research, 
expressed ``strong reservations about the pending bill's 
unintended consequences.''\25\ The association further 
explained that ``H.R. 1788, as currently drafted, will 
frustrate our members' efforts to monitor their financial 
relationships with the Government through strong internal 
controls and well-established and rigorous compliance, audit 
and reconciliation processes.''\26\
---------------------------------------------------------------------------
    \25\Letter from Robert M. Berdahl, President, Association of 
American Universities, to John Conyers, Jr., Chairman, U.S. House 
Committee on the Judiciary (April 20, 2009).
    \26\Id.
---------------------------------------------------------------------------
    Moreover, the Greater New York Hospital Association noted 
that ``[a]s written, the bill would allow qui tam plaintiffs 
and their lawyers to profit at the expense of the Federal 
Treasury, the United States Department of Justice, and 
economically struggling hospitals in New York and around the 
country.''\27\ Additionally, organizations such as the American 
Hospital Association, the American Health Care Association, and 
the U.S. Chamber of Commerce informed members of the Committee 
that they believe that this legislation ``would expand the 
scope of liability under the statute, increase its financial 
penalties, and remove safeguards against unfounded qui tam 
lawsuits.''\28\ These entities further explained that they 
``believe these amendments are unnecessary and will impose 
enormous burdens on non-profits, universities, hospitals, and 
small businesses.''\29\
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    \27\Memorandum from Kenneth E. Raske, President, Greater New York 
Hospital Association.
    \28\Letter from Multi-industry Coalition Opposed to H.R. 1788 to 
John Conyers, Jr. and Lamar Smith, U.S. House Committee on the 
Judiciary (April 21, 2009).
    \29\Id.
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                         REPUBLICAN AMENDMENTS

    Mr. Issa offered three amendments to H.R. 1788 at mark up; 
none of Mr. Issa's amendments was adopted.

         LRequiring employee disclosure. This amendment 
        provided that employees had first to report suspected 
        FCA violations to their employer's compliance officer 
        before filing a qui tam action under the FCA. If the 
        employer did not take corrective action within 90 days, 
        the employee would be free to file an FCA lawsuit.

         LInevitable Discovery. This amendment provided 
        that qui tam plaintiffs would not be entitled to a 
        relator's share if the Attorney General determined that 
        the United States would have inevitably discovered the 
        false claims that were the basis for the qui tam suit. 
        This amendment would have protected taxpayer dollars 
        from unnecessary relator share payouts where the 
        relator simply beat the Department of Justice to the 
        courthouse.

         LAvoidance of Prosecution. The amendment 
        provided explicit guidance to the courts that in cases 
        in which the relator had initiated or furthered the 
        fraud that was the basis for the qui tam action, the 
        court could reduce the relator's share of any recovery 
        by the value of the avoidance of prosecution.

                               CONCLUSION

    The proposed ``corrections'' to the False Claims Act 
contained in H.R. 1788 are a virtual rewrite of many provisions 
of the FCA. The result of this rewrite will be not only to 
extend the Act's liability provisions to allow the Government 
to ensure that the FCA covers all Government spending, a change 
we support, but to allow qui tam plaintiffs and their attorneys 
unnecessarily to attempt to recover more money at the expense 
of the federal Treasury and the taxpayers. The bill's qui tam 
provisions will needlessly divert resources from the Treasury 
and impose huge burdens on businesses of all sizes, hospitals, 
universities, and non-profits.
    H.R. 1788 includes many provisions that would help relators 
to increase their recoveries under the FCA, even though there 
is no evidence that Congress needs to provide additional 
incentives for relators. Instead, these provisions simply 
provide more money to relators at the expense of U.S. taxpayers 
and strengthen the hand of relators at the expense of the 
Justice Department. In sum, the benefits this legislation would 
provide to the Federal Government's efforts at combating waste, 
fraud, and abuse by extending the Act's liability provisions, 
will be outweighed by the burdens and costs the qui tam 
provisions in this bill will impose on the Federal Government 
itself and entities such as non-profits, hospitals, 
universities, and small businesses that receive federal funds.

                                   Lamar Smith.
                                   Darrell E. Issa.
                                   Jim Jordan.

                                  
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