The False Claims Act (FCA) was passed by Congress during the Civil War to punish defense contractors for fraud. Under the FCA, a government contractor who submits fraudulent invoices or induces the government to grant a contract through fraud may face substantial monetary damages.
The FCA poses a challenge for businesses that perform work or supply goods to the U.S. government. These government contractors must implement internal controls and conduct periodic investigations to identify potential fraudulent claims. This obligation, of course, increases both the cost and risk of acting as a government contractor.
Acts Prohibited by the False Claims Act
When a firm becomes a government contractor, it faces a host of regulations. From labor standards to environmental rules, government contractors step into a virtual minefield of legislation, many of which are designed to carry a potential penalty if they are not upheld.
The FCA prohibits a contractor from “knowingly” committing a prohibited act. Under the act, “knowingly” means that the contractor:
Knew the claim was false;
- Deliberately remained ignorant of the claim’s falsehood; or
- Recklessly disregarded the truth or falsehood of the claim
The actions prohibited by the FCA can include:
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