The Fraud Enforcement and Recovery Act of 2009 (FERA) was signed into law by President Obama on May 6, 2009. This law not only changed the False Claims Act (FCA), but also retroactively overturned a Supreme Court case. Likewise, Congress crafted FERA’s 31 U.S.C. § 3729(a)(1) amendment to have taken effect on June 7, 2008, the date the Supreme Court decided Allison Engine. By backdating the effective date of the FERA provision, Congresses rendered the unanimous Supreme Court decision worthless.
Before the FERA, a person was liable under the conspiracy provision of the FCA only if that person conspired to defraud the Government by getting a false or fraudulent claim allowed or paid. Looking to the language of the statute, the Supreme Court ruled in Allison Engine that 31 U.S.C. § 3729(a)(3) required proof that the Defendant intended the false statement to be material to the Government’s decision to pay or approve the claim. The Court came to that decision due to the phrase “by getting a false or fraudulent claim allowed or paid,” which is how the FCA read prior to FERA.
By removing the phrase “by getting a false or fraudulent claim allowed or paid” from 31 U.S.C. § 3729(a)(3), FERA significantly expanded liability under the conspiracy provision to include conspiracies to violate any provision of § 3729(a). Therefore, FERA greatly bolsters the FCA by allowing conspiracy claims to encompass not only regular false claims, but also reverse false claims.
A reverse false claim occurs when an entity defrauds the government in order to avoid an obligation to pay, as opposed to an entity defrauding the government in order to obtain some sort of payment. The former is known as a reverse false claim because the subject of the fraud flows opposite of the usual direction. After FERA, the court could hold one liable for conspiring to commit either type of fraud.
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