Bloomberg Law
April 27, 2020, 8:01 AM

INSIGHT: FCA and Covid-19 Fraud—Time to Update Lincoln’s Law for Trump’s Administration

Brian D.  Feinstein
Brian D. Feinstein
The Wharton School of the University of Pennsylvania

“We’re at war,” President Donald Trump declared at a coronavirus press conference, “and we’re fighting an invisible enemy.”

Just as expanded government spending during military conflicts often attracts war profiteers, so too will Washington’s multi-trillion-dollar stimulus inevitably engender waste, fraud, and abuse. With funding for some loan programs likely to be exhausted in a matter of weeks, every dollar that is misspent is a dollar that could have assisted a shuttered business or furloughed worker.

To deter misuse of stimulus dollars, Congress should revitalize another law born in wartime, the False Claims Act, which was first enacted during the Civil War, and dubbed “Lincoln’s Law.”

The False Claims Act is particularly well-suited for combating fraud during a crisis. Because it relies on outside whistleblowers, the law can return misappropriated money to the public fisc and deter would-be fraudsters while using few government resources.

Nonetheless, in two respects the statute is a poor fit for the present moment.

First, if the government is aware of a false statement by someone applying for public funds and ignores it, that fact can be sufficient to defeat a false-claims lawsuit. At first glance, this standard may seem sensible. After all, if the government knows of a false statement and pays anyway, couldn’t that suggest that the statement is unimportant? Perhaps, but it also means that if an ill-intentioned official knowingly ignores a business’s fraudulent representation, courts may provide no redress.

Second, in recent years the Justice Department has encouraged its attorneys to dismiss—with minimal or no review from courts—some false claims lawsuits brought by whistleblowers. In so doing, the Justice Department often cites the costs of monitoring dockets and, occasionally, responding to discovery requests. It does not, however, provide estimates of these costs.

These justifications may be pretextual. As the head of the Justice Department’s Office of Legal Counsel in 1989, now-Attorney General William Barr argued that the False Claims Act “pose[s] a devasting threat” to the president’s powers. During his first stint as Attorney General, he declared in 1992 that whistleblower lawsuits “constitute a burden—and a severe burden we believe—on contractors who are defending them.” Nine years later, he called the law “an abomination.”

Congress Should Amend FCA

The Justice Department’s practice of seeking dismissal of false claims suits for vague reasons and Attorney General Barr’s decades-long opposition to the law call for a response. Congress should amend the False Claims Act to clarify that government officials’ knowledge of a false claim is on its own an insufficient defense.

Congress also should prohibit the Justice Department from dismissing lawsuits that aim to return money to the government. Instead, the department should be required to present to a court detailed estimates showing that the government’s expected costs exceed its likely recovery if the litigation proceeds—with the court being the arbiter of whether dismissal is warranted.

To be sure, Congress has already included in the stimulus legislation several other measures to guard against fraud: a stimulus-focused inspector general, a committee comprised of existing inspectors general, and a congressional oversight commission. These measures, however, do not meet the moment. President Trump evinces a willingness to remove inspectors general who exhibit independence, and congressional leaders’ efforts to staff their branch’s oversight commission are plodding.

The False Claims Act, by contrast, enables whistleblowers to bypass the executive and legislative branches in favor of the courthouse. But the law cannot function if executive officials knowingly turn a blind eye to fraud. Neither can it fulfill its promise when faced with an attorney general—with nearly unfettered discretion to dismiss cases—who views the law as abominable.

Congress is no stranger to updating the statute to meet contemporary challenges. It most recently did so a decade ago, to ensure that stimulus funds to redress the previous economic crisis were not wasted. It must do so again now.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Dr. Brian D. Feinstein is an assistant professor of legal studies and business ethics at the Wharton School of the University of Pennsylvania, and author of numerous publications on government oversight. He previously litigated False Claims Act cases at an international law firm.