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Understanding the False Claims Act

Atlanta Whistleblower Lawyer – 20+ Years of Results

Under the False Claims Act, a contractor is liable to the Government for fraud and treble damages only if the contractor knowingly made false representations.

Lee Wallace is an attorney who represents whistleblowers, which means her law firm represents the “relator” or the person bringing the suit on behalf of the Government. This portion of her website is dedicated to helping whistleblowers and attorneys who are new to the field understand the basics of False Claims Act (“FCA”) cases. Lee has been litigating for more than 20 years, and has handled legal matters in 20 states. She graduated first in her class from Harvard Law School and has been named one of Georgia’s “Legal Elite” by Georgia Trend magazine.

If she can help you or your client with an FCA or qui tam case anywhere in the nation, please contact her today.

What Does “Intent to Defraud” Mean?

The False Claims Act only kicks in where a defendant “knowingly” made the false claims.

42 U.S.C. § 3729(a)(1) defines “knowingly” to mean that the person:

  • “(i) has actual knowledge of the information;
  • (ii) acts in deliberate ignorance of the truth or falsity of the information; or
  • (iii) acts in reckless disregard of the truth or falsity of the information.”

The Government and the relator do not have to provide “proof of specific intent to defraud.” 42 U.S.C. § 3729(b)(1).

Real Cases: How “Intent To Defraud” Has Been Used

In many cases, defendants argue that they did not “knowingly” make false representations to the Government. Where the defendant did not reveal what it was doing, courts are very unlikely to buy that argument. Courts are especially skeptical when the defendant took active steps to conceal what it was doing.

  • U.S. v. Aerodex, Inc. Aerodex contracted to provide P/N 171815 aircraft engine bearings to the Navy. The bearings on aircraft are very critical parts; if they fail, the aircraft has a complete engine failure.Instead of providing the bearings it had agreed to provide, Aerodex supplied P/N 117971 bearings. The 171815 bearings – the ones that were supposed to be provided — had a shell backing made of a harder, high carbon steel and an overlay lining inside the bearings that was made of lead and tin, instead of lead and indium. Aerodex apparently reworked the cheaper parts, inserting the correct overlay lining. The reworked bearings looked identical to the parts that were supposed to be provided, but were not made of the high carbon steel. The Government sued Aerodex under the False Claims Act. U.S. v. Aerodex, Inc., 469 F.2d 1003 (5th Circuit 1973).Aerodex argued that it did not have any intent to defraud the Government. The Fifth Circuit rejected the argument, pointing to the fact that the parts did not meet the specifications of the contract and furthermore had been deliberately mislabeled. “If defendants had, in fact, believed that the reworked P/N 117971 bearings were interchangeable with the P/N 171815 bearings that they had contracted to deliver, they could easily have requested permission from the Navy to deliver the substitute parts or, at least, could have disclosed to the Navy the manner in which they thought they could comply with the contract. The failure to do so indicates nothing less than an intention to deceive.”The U.S. obtained a judgment of $381,838.36.
  • United States v. National Wholesalers: National Wholesalers agreed to provide the Army with 6600 Delco-Remy generator regulators. It hired a Chinese company to make copies of the Delco-Remy brand generators, and then put fake Delco-Remy labels on the Chinese copies. Although National Wholesalers argued that it did not intend to defraud the Government, since the knockoffs performed just as well as the brand-name generators, the court was incredulous: “But with the crude and deliberate mislabeling here, there is only one reasonable conclusion that one may reach. What purpose other than to deceive could it have?” United States v. National Wholesalers, 236 F.2d 944 (9th Cir.1956), cert. denied, 353 U.S. 930, 77 S.Ct. 719, 1 L.Ed.2d 724 (1957).

In a case brought by a whistleblower/relator, the whistleblower is entitled to 15-30% of all of the money that the United States collects from the Defendant. If you have information about a company that is providing the U.S. military or any other U.S. agency with substitutes, instead of the original items it agreed to provide, contact a qui tam law firm. Lee Wallace of The Wallace Law Firm, LLC has been named one of the Top 100 Trial Lawyers in Georgia. She graduated first in her class at Vanderbilt University.

Talk to our whistleblower lawyer today for FREE: (888) 581-9132.