Perhaps no pending bill in Congress is a better example of what critics say is the “stealthy” nature of the trial lawyers’ agenda than H.R. 4854, the False Claims Correction Act of 2007. Put forth as an incentive for well-intentioned “whistleblowers” to report fraud against the federal Treasury, it uses an unusual definition of four little words to open what opponents describe as a host of troubles.
Peter Hutt, a partner at Akin Gump who has specialized in False Claims Act litigation for almost 20 years (and now a lobbyist for the Chamber of Commerce on these issues), explains: “The concern is that the floodgates will open and that the flood will swamp non-profits, and small businesses too, I might add.”
It would do so by defining “government money or property” subject to false claims suits as being any money that “is to be spent on the government’s behalf or to advance a government program.” No matter how removed the alleged fraud (or honest mistake) is from the original government grant, then, the whistle-blower can subject him not just to ordinary suits in state court but, by the terms of the act, to a suit backed by the full weight of the federal government. The act entitles the government to collect damages for three times the original amount of the discrepancy, plus up to $11,000 for each individual “false claim.”
Hutt and other opponents say the proposed changes would threaten charities and mom-and-pop companies by making them subject to lawsuits filed by third parties, technically on behalf of the government, even if those charities or companies merely did small contract work with the original beneficiaries of government grants. What’s in it for the whistleblower (and his lawyer) is this: as much as 30 percent of whatever the government collects — plenty of incentive to allege deliberate wrongdoing at every opportunity. In effect, whistleblowers could be transformed from agents of good government to well-compensated snoops.
Imagine a mega-charity — something the size of the Salvation Army — that gets a government grant to help fight poverty in depressed communities. Then imagine a small, local nonprofit agency that in turn contracts with the Salvation Army to run a soup kitchen with part of the grant money. Somewhere along the line, in filling out all the government forms, the small outfit inadvertently overcharges the mega-charity. If a “whistleblower” hoping for a payday files suit on the government’s behalf, the little nonprofit might be driven to ruin by the legal defense costs — even if the suit is eventually dismissed.
This new act, Hutt said, could make a small charity or company “go out of business just for sloppy record keeping,” or for what “might not be more than a simple contract dispute dressed up as a fraud claim.”
