Academic journal article Faulkner Law Review

Arbitration Disarms the U.S. Government of Its Greatest Weapon in the War against Fraud: The False Claims Act

Academic journal article Faulkner Law Review

Arbitration Disarms the U.S. Government of Its Greatest Weapon in the War against Fraud: The False Claims Act

Article excerpt

I. INTRODUCTION

During the Gettysburg Address, President Abraham Lincoln proclaimed our government to be "of the people, by the people, [and] for the people." (1) The Battle of Gettysburg marked the turning point of the Civil War and it was during this war that President Lincoln ratified the False Claims Act ("FCA"). (2) Now--over 150 years later--the FCA proves "to be the government's most effective civil tool to ferret out fraud and return billions to taxpayer-funded programs." (3) The FCA is able to uncover fraud because it permits private individuals to bring suits on behalf of the United States when those individuals have knowledge of a person or company defrauding the government. (4)

Punishing and deterring fraud against the government is vital in keeping federal tax-funded programs intact. The tax pool funds many essential programs such as our healthcare and national defense programs. Therefore, when individuals defraud the government, they are not just stealing from the government, but also stealing from the tax pool itself. For instance, money set aside to provide healthcare is being spent on procedures that either never occurred or were unnecessary; (5) funds meant to further our national defense and protect United States citizens are being spent on shoddy equipment or extended lunch breaks. (6) This not only harms those programs, but it causes those taxpayer-funded programs to lack the funds needed to operate effectively, thus resulting in the government having to raise taxes.

The FCA has proven to be a powerful weapon in the government's war against fraud. On December 3, 2015, the Department of Justice ("DOJ") announced that the Department recovered over $3.5 billion from FCA cases in Fiscal Year 2015 ("FY2015") alone, the majority of which were brought under the FCA's qui tam provision. (7) Meaning, in one year alone, $3.5 billion was added back to the tax pool. The DOJ also announced that, since January 2009 to the end of the FY2015, the government recovered $19.4 billion as a result of FCA cases. (8)

The FCA replenishes billions of dollars to the tax pool each year. As federal courts continue to compel whistleblowers to arbitrate their claims, arbitration threatens to disarm the government of this significant weapon in the war against fraud. The purpose of this Note is to provide an overview of the arbitrability of qui tam cases under the FCA. This Note argues that qui tam cases should not be subject to arbitration because compelling arbitration undermines the purposes of the FCA, harms the American public, and stifles the government from prosecuting an action because of an arbitration agreement signed by a third party.

In Part II., the Note addresses the FCA, including whistleblower laws that led to its formation, how the Act was formed, the purposes of the Act, and how the Act is being used today. Then, in Part III., the Note switches topics and addresses arbitration, specifically the Federal Arbitration Act, including what it is, its purpose, and the federal policy favoring arbitration. In Part IV., the Note addresses the arbitrability of cases brought under the FCA's qui tam provision. Next, in Part V, the Note addresses policy concerns with the direction precedent has taken in regard to the arbitrability of FCA cases. Part VI. proposes a solution for dealing with the arbitrability of FCA cases in the future, followed by a conclusion in Part VII.

II. THE FALSE CLAIMS ACT

Benjamin Franklin once said, "[t]here is no kind of dishonesty, into which otherwise good people more easily and frequently fall, than that of defrauding the government." (9) The FCA forces civil liability on "any person who knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval" to the federal government. (10) Moreover, the FCA provides an avenue for ordinary citizens to "blow the whistle" on fraud and bring a claim on behalf of the United States Government. …

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