Requirement of Specific Intent

Prior to 2009, the False Claims Act (FCA) imposed liability on anyone who “knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government.”  In the 2008 case Allison Engine Co., Inc. v. United States ex rel. Sanders, the Supreme Court interpreted this language to require that a defendant specifically intend to defraud the government, and allowed defendants who submitted false claims without such a specific intent to escape liability.

Allison Engine Requires a Specific Intent to Defraud the Government

The Allison Engine case involved two contracts entered into by the United States Navy and two shipbuilding companies for the construction of a fleet of destroyers.  The shipbuilding companies then entered into a subcontract with Allison Engine, Inc. where Allison Engine was to build generator sets for the fleet.  A whistleblower working for Allison Engine brought an FCA case which alleged that the company had not followed contract specifications, and submitted fraudulent invoices to the shipbuilding companies in a violation of the FCA.  The question in this case was whether Allison Engine could be liable under the FCA when it had the intent to defraud the shipbuilding companies, but no specific intent to defraud the federal government.

The Supreme Court held that the language of the statute requires a specific intent to defraud the government, not another private party, before liability is imposed.  The Supreme Court stated that the language “to get a false or fraudulent claim paid or approved by the Government” guided their decision because the phrase “to get” denotes a purpose requirement.

FERA Overrules Allison Engine

On the same day the Supreme Court issued the Allison Engine decision, Senator Charles Grassley, a Republican from Iowa and major proponent of the FCA, criticized the decision as distorting the broad intent of the FCA.  Partly based on his efforts, Congressed passed the Fraud Enforcement and Recovery Act (FERA) of 2009 which in effect overrules the Supreme Court’s decision in Allison Engine regarding specific intent.  While the primary purpose of FERA was to expand the FCA in order to cover money given out under federal stimulus programs, it also incorporated significant amendments regarding the requisite intent in all FCA cases.  FERA amended the definition of “knowingly” as to require no proof of specific intent to defraud the government.  Since the passage of FERA, a false claim that causes the government to pay more than it should have to a private company is all that is required to impose liability under the FCA, regardless of a specific intent.

FERA also expands the definition of “claim” to mean not just something submitted to the government for payment, but to any “contractor, grantee, or other recipient if the money or property is to be spent or used on the Government’s behalf or to advance a Government program or interest.”  These amendments to the FCA have restored the broad purpose and application of the statute that Congress intended.

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