by David W. Ogden
Chair, Government and Regulatory Litigation Practice Group
On July 30, 2014, I testified before the U.S. House Judiciary Committee’s Subcommittee on the Constitution and Civil Justice on behalf of the U.S. Chamber Institute for Legal Reform. In that hearing, I urged Members to consider relatively modest yet critical reforms to the Act.
The False Claims Act has been a focus of both my government service—as Deputy Attorney General and Assistant Attorney General for the Civil Division—and of my private practice over the last 15 years. So I know from direct experience that its unique provisions play a catalytic role in unearthing evidence of fraud and recovering moneys lost to fraud. I believe in the FCA, and in particular the key role that whistleblowers play. Any amendments to the Act should work to increase protections for whistleblowers. But I also know that the FCA has harmful and counterproductive effects, and I believe that there is a real opportunity to enhance the Act’s efficiency and fairness while using it to more effectively prevent fraud before it occurs.
I therefore respectfully suggested that Congress should consider a sensible way forward from here, one that aligns government and business alike to prioritize preventing fraud before it diverts federal dollars from their intended uses, truly making compliance rather than litigation the first line of defense. First and foremost, while maintaining strong enforcement and the whistleblower-suit mechanism, we should be encouraging and incentivizing all companies that work with the government to implement and maintain state-of-the-art compliance programs that promote the highest levels of corporate ethics and legal compliance, encourage and protect internal whistleblowers, and voluntarily report any violation promptly to government authorities.
Pursuant to this sensible way forward—outlined in Fixing the False Claims Act the core provisions of the Act would remain unchanged but certain rules would apply differently to entities that have been independently certified as maintaining state-of-art compliance programs, including the strongest protections for whistleblowers, consistent with standards approved by the government. As my fellow witness Dr. Patricia Harned of the Ethics Resource Center explained, we know that state-of-the-art compliance systems work to reduce fraud and protect whistleblowers, and we know how they should be structured. The incentives we propose would encourage and protect individual employees to report wrongdoing internally and companies to act quickly to identify and halt wrongdoing and report it to the authorities. The changes we propose are also designed to make the potential consequences of a violation more proportionate to the specific circumstances—including taking into account whether an entity has programs in place to prevent fraud—and to focus the powerful penalties of the FCA where they belong: on true fraud. The FCA should deter and punish true fraud and incentivize whistleblowers to report true fraud, not be used (as it sometimes is today) as a way to enforce every regulatory requirement in the book. Regulations should be enforced under the provisions and applying the penalties that pertain to them, not under a powerful and unique statute meant for fraud.
I think there is every reason to believe that the increased self-policing and voluntary disclosures that these reforms would encourage will lead to less fraud, less harm, and less need for lawsuits.