The False Claims Act: What It Is and How It Works
The False Claims Act, 31 U.S.C. § 3729, is the federal government’s primary civil law for recovering money lost to fraud. It applies when a person or company knowingly submits, causes the submission of, or benefits from false claims for government money or property. The law, 31 U.S.C. § 3730, also allows private whistleblowers, known as relators, to file qui tam lawsuits on behalf of the United States.
A False Claims Act case can involve Medicare fraud, Medicaid fraud, defense contractor fraud, grant fraud, pandemic-relief fraud, customs fraud, or any other scheme that causes the government to pay money it should not have paid. This page explains how the federal False Claims Act works, what conduct it prohibits, how whistleblower lawsuits are filed, what damages and penalties apply, and what protections exist for employees who report fraud.
For Nevada-specific state claims, see our guide to the Nevada False Claims Act.
A Brief History of the False Claims Act
Congress enacted the False Claims Act in 1863 during the Civil War. The statute is often called the “Lincoln Law” because it was passed during President Abraham Lincoln’s administration to address fraud by military suppliers. Civil War contractors were accused of selling the Union Army defective weapons, diseased animals, spoiled food, and other substandard goods. The government needed a way to recover public money and encourage people with inside knowledge to come forward. The original Act allowed private citizens to bring lawsuits on behalf of the United States. That qui tam structure remains one of the law’s defining features. A relator does not merely report fraud to the government; a relator files a sealed civil case and provides the government with evidence.
Congress weakened the statute in 1943 after concerns that relators were filing cases based on information already known to the government. The 1943 amendments reduced incentives for whistleblowers and made qui tam cases harder to pursue.
Congress revived the modern False Claims Act in 1986. Led by Senator Charles Grassley and Representative Howard Berman, the 1986 amendments strengthened whistleblower incentives, increased damages and penalties, and added meaningful protection against retaliation. Those amendments created the public-private enforcement model that drives modern qui tam litigation.
Congress later amended the Act again through the Fraud Enforcement and Recovery Act of 2009, often called FERA, and the Affordable Care Act amendments of 2010. Those changes expanded liability for certain false statements, strengthened reverse false claims liability, revised the public disclosure bar, and clarified retaliation protections.
What the False Claims Act Prohibits
The core liability provisions are found in 31 U.S.C. § 3729(a)(1). The statute covers several different ways fraud can cause government loss.
The most common theory is presentment. Under 31 U.S.C. § 3729(a)(1)(A), a person is liable if the person knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval. In plain English, this covers bills, invoices, reimbursement claims, payment requests, and other demands for government money that are false in a material way.
A second major theory involves false records or statements. Under 31 U.S.C. § 3729(a)(1)(B), a person is liable for knowingly making or using a false record or statement that is material to a false or fraudulent claim. That can include false certifications, fabricated documentation, manipulated cost reports, inaccurate medical records used to justify billing, or false compliance statements submitted with government payment requests.
The statute also prohibits conspiracy under 31 U.S.C. § 3729(a)(1)(C). This applies when two or more people agree to violate the False Claims Act, even if each participant played a different role in the scheme.
Reverse false claims are covered by 31 U.S.C. § 3729(a)(1)(G). A reverse false claim occurs when a person knowingly avoids or decreases an obligation to pay money to the government. Examples can include knowingly retaining overpayments, concealing customs duties, misclassifying imported goods to avoid tariffs, or failing to return government funds after discovering that the money was not owed.
Other subsections cover specific conduct involving government property, false receipts, and unlawful purchases from unauthorized sellers. The common thread is the same: the statute targets fraud that causes the government to lose money or property.
The “Knowing” Standard
The False Claims Act does not require proof that a defendant had specific intent to defraud the government. The statute defines “knowingly” to include actual knowledge, deliberate ignorance, and reckless disregard of the truth or falsity of information.
That matters because many cases do not involve an email saying, “we are committing fraud.” A case can be based on evidence that the defendant ignored obvious warning signs, used billing practices that could not be justified, or deliberately avoided learning whether its claims were false. An honest mistake or a good-faith disagreement about what the law required is different and generally will not support a False Claims Act case.
The Supreme Court’s decision in Universal Health Services, Inc. v. United States ex rel. Escobar, 579 U.S. 176 (2016), is important for implied false certification cases. Under that theory, a claim can be false when the defendant requests payment while failing to disclose serious noncompliance with material legal, contractual, or regulatory requirements. Escobar also emphasized that materiality is demanding. Not every regulatory violation becomes a False Claims Act case. The violation must matter to the government’s payment decision.
How a Qui Tam Lawsuit Works
A qui tam lawsuit is a whistleblower lawsuit filed under the False Claims Act. The relator files the case on behalf of the United States, but the government remains the real party in interest. The process is different from ordinary civil litigation.
First, the whistleblower identifies facts suggesting that false claims were submitted to a federal program. A suspicion alone is not enough. A viable case usually requires documents, billing records, emails, contracts, patient files, cost reports, internal communications, or other evidence showing how the fraud worked.
Second, the whistleblower consults counsel before taking documents or making disclosures. Evidence handling matters. Some documents may be confidential, privileged, protected by HIPAA, or governed by employment agreements. For practical guidance, see our whistleblower tips.
Third, counsel investigates the case and prepares both a complaint and a written disclosure statement. The disclosure statement is not filed publicly. It is provided to the government and should explain the fraud, the evidence, the witnesses, the programs affected, and the estimated damages.
Fourth, the complaint is filed under seal in federal court. The defendant is not served while the case remains sealed. The relator also serves the complaint and written disclosure on the Department of Justice.
Fifth, the government investigates. The initial seal period is 60 days, but in substantial cases the government often asks the court for extensions. During that period, the government may interview witnesses, issue civil investigative demands, subpoena records, analyze claims data, consult agency experts, and ask the relator for additional information.
Sixth, the government decides whether to intervene. If the government intervenes, it takes primary responsibility for prosecuting the case. If the government declines, the relator may usually proceed with the case through private counsel, subject to the government’s continuing rights.
Seventh, the case is litigated or resolved. Many False Claims Act cases settle, but settlement is not automatic. Defendants often challenge the complaint through motions to dismiss, including arguments about Rule 9(b), materiality, causation, the public disclosure bar, and first-to-file issues.
For more on who typically files these cases, see our page on who can file a qui tam case.
Common False Claims Act Schemes
False Claims Act cases appear in many industries. The statute is not limited to healthcare, although healthcare remains the largest source of recoveries.
Healthcare cases often involve Medicare, Medicaid, TRICARE, or other federal health programs. Common theories include billing for services not provided, billing for medically unnecessary services, upcoding, unbundling, false diagnosis codes, improper risk-adjustment submissions, kickbacks, Stark Law violations, and false certifications of compliance.
Pharmaceutical and medical-device cases often involve kickbacks, speaker programs, sham consulting arrangements, off-label promotion, price reporting fraud, or false statements about medical necessity.
Defense and procurement cases often involve defective products, false testing records, inflated costs, nonconforming goods, cybersecurity misrepresentations, failure to meet domestic sourcing requirements, or billing for work not performed.
Grant and education cases can involve false eligibility certifications, misuse of federal grant funds, fabricated compliance records, or false statements made to obtain federally funded awards.
Pandemic-relief fraud remains an enforcement area. False statements in Paycheck Protection Program loan applications, Economic Injury Disaster Loan applications, payroll certifications, and loan-forgiveness submissions may create False Claims Act exposure when federal funds are involved.
Trade and customs cases frequently involve reverse false claims. A company may violate the Act by knowingly misclassifying imports, misrepresenting country of origin, undervaluing goods, or otherwise avoiding duties owed to the United States.
For industry-specific examples, see our page with real False Claims Act case examples.
Procedural Rules: First-to-File and the Public Disclosure Bar
False Claims Act cases are subject to procedural rules that can determine whether a relator is allowed to proceed.
The first-to-file rule is found in 31 U.S.C. § 3730(b)(5). Once a relator files a qui tam case, no other person may bring a related action based on the facts underlying the pending action. In practice, this means timing matters. The first relator to file a well-supported case may preserve the claim; later filers may be barred even if they also have useful information.
The public disclosure bar is found in 31 U.S.C. § 3730(e)(4). A court must dismiss certain cases if substantially the same allegations or transactions were already publicly disclosed in specified sources, unless the relator qualifies as an original source or the government opposes dismissal.
An original source generally must have independent knowledge that materially adds to the publicly disclosed information and must voluntarily provide that information to the government before filing or before the public disclosure, depending on the circumstances.
These rules are technical, but the practical lesson is straightforward: delay can create risk. A whistleblower who waits too long may find that another relator filed first or that the fraud became public through a lawsuit, audit, report, hearing, investigation, or news story.
Damages and Penalties
The False Claims Act has substantial remedies. A defendant found liable is generally responsible for three times the government’s actual damages, plus a civil monetary penalty for each false claim. Treble damages can make even a modest billing scheme significant. If the government paid $1 million because of false claims, the damages component can become $3 million before civil penalties are added. Civil penalties are assessed per false claim. Under 28 C.F.R. § 85.5, the current federal penalty range for False Claims Act violations is $14,308 to $28,619 per claim. These figures adjust annually for inflation.
The statute also allows recovery of costs. Successful relators are generally entitled to reasonable attorneys’ fees and expenses from the defendant, separate from the relator’s share of the government’s recovery. The number of false claims can matter as much as the dollar amount. A provider that submitted thousands of false bills may face a penalty analysis very different from a contractor that submitted one false invoice.
Whistleblower Retaliation Protections
The False Claims Act also protects whistleblowers from retaliation. Under 31 U.S.C. § 3730(h), an employee, contractor, or agent may have a retaliation claim if they were discharged, demoted, suspended, threatened, harassed, or otherwise discriminated against because of lawful acts in furtherance of a False Claims Act case or other efforts to stop False Claims Act violations. Protected conduct can include investigating fraud, refusing to participate in false billing, reporting concerns internally, preserving evidence, or communicating with counsel or the government. The facts matter. Ordinary workplace disputes do not automatically become False Claims Act retaliation claims; the conduct must be connected to suspected fraud against the government.
Available remedies include reinstatement, double back pay, interest, special damages, litigation costs, and reasonable attorneys’ fees. Retaliation claims have a separate three-year statute of limitations. For a deeper discussion, see our page on retaliation protections under § 3730(h).
Statute of Limitations
The False Claims Act statute of limitations is found in 31 U.S.C. § 3731(b). A civil action must be filed within the later of two periods. The first is six years after the date of the violation. This is the baseline rule. The second is three years after the date when facts material to the right of action are known or reasonably should have been known by the responsible government official, but not more than ten years after the violation. The Supreme Court addressed this provision in Cochise Consultancy, Inc. v. United States ex rel. Hunt, 139 S. Ct. 1507 (2019). The Court held that relators in declined cases may rely on the three-year discovery rule, subject to the ten-year outside limit.
The limitations analysis can become complicated when a fraud scheme spans years, when claims were submitted at different times, or when government knowledge is disputed. Filing promptly protects the relator’s position and reduces avoidable procedural risk.
State False Claims Acts
Many states have their own false claims acts. State statutes are often modeled on the federal False Claims Act but differ in important ways, including covered programs, filing procedures, relator share percentages, intervention rights, penalties, and retaliation remedies.
Nevada has the Submission of False Claims to State or Local Government Act, commonly called the Nevada False Claims Act. It applies to false claims involving Nevada state or local government money, including Nevada Medicaid. New Mexico has the Fraud Against Taxpayers Act, NMSA §§ 44-9-1 to 44-9-14, and a separate Medicaid False Claims Act, NMSA §§ 27-14-1 to 27-14-15. Other states, like Arizona, do not have a separate state qui tam false claims act closely paralleling the federal False Claims Act, so Arizona whistleblower cases generally proceed under the federal False Claims Act when federal money is involved.
State-law claims often overlap with federal claims. A healthcare case involving Medicaid may implicate both federal and state funds. A government-contracting case may involve federal funds, state funds, local funds, or a combination.
Recent False Claims Act Recoveries
The Department of Justice reported more than $6.8 billion in False Claims Act settlements and judgments for fiscal year 2025, the highest single-year total in the statute’s history. DOJ also reported 1,297 qui tam filings, another record, and more than $5.3 billion in settlements and judgments from qui tam matters.
Healthcare remained the dominant enforcement area. DOJ’s fiscal year 2025 statistics reported approximately $5.7 billion in Health and Human Services-related False Claims Act settlements and judgments, which is roughly 84% of total fiscal year 2025 False Claims Act recoveries.
Recent DOJ examples include cases involving pandemic-relief fraud, Medicare and Medicaid billing, defense procurement, cybersecurity, trade duties, and kickbacks. Read the full press release here.
Frequently Asked Questions
What is the False Claims Act in simple terms?
The False Claims Act is a federal law that allows the government to recover money from people or companies that knowingly submit false claims for government payment. It also allows private whistleblowers to file qui tam lawsuits on the government’s behalf.
What is a qui tam lawsuit?
A qui tam lawsuit is a case filed by a private whistleblower for the government. The whistleblower is called a relator. If the case succeeds, the relator may receive a share of the government’s recovery.
Who can file a False Claims Act case?
A person or entity with nonpublic information about fraud against the government may be able to file a qui tam case. Employees, former employees, contractors, competitors, and industry insiders are common relators, but standing and procedural bars must be analyzed carefully.
How much money do whistleblowers receive?
Under the federal False Claims Act, a relator generally receives 15% to 25% of the recovery if the government intervenes, and 25% to 30% if the government declines and the relator successfully pursues the case. The exact amount depends on the statute and the facts. See our page on how whistleblower rewards are calculated.
What is the statute of limitations on a False Claims Act case?
The general rule is the later of six years after the violation or three years after the responsible government official knew or should have known the material facts, with an outside limit of ten years after the violation.
Can an employer fire a whistleblower?
An employer may not lawfully fire, demote, suspend, threaten, harass, or otherwise discriminate against an employee, contractor, or agent because of protected False Claims Act activity. Retaliation claims are separate from the underlying fraud claim.
Does Nevada have its own false claims act?
Yes. Nevada has the Submission of False Claims to State or Local Government Act, codified in NRS Chapter 357. It applies to false claims involving Nevada state or local government funds, including Nevada Medicaid.
If you have evidence of fraud against a federal or state government program, the qui tam attorneys at Gallagher & Lipshutz can evaluate your case. Call (702) 381-3770 for a free, confidential consultation. We represent whistleblowers throughout Nevada, New Mexico, and nationwide. You can also contact Gallagher & Lipshutz online.