True Benefit in Self-Disclosure of a Potential False Claims Act Liability

If a private relator initiates a False Claims Act (“FCA”) suit, the complaint is initially filed under seal and served only on the United States, accompanied by a “written disclosure of substantially all material evidence and information the [relator] possesses.”  31 U.S.C. §3730(b)(2).  Prior to the expiration of the sealing period, the United States reviews the disclosed materials and elects whether to intervene and prosecute the action or to decline and allow the relator to proceed with the suit.  31 U.S.C. §3730(b)(4).  The sole function of a disclosure statement under the False Claims Act is to provide the Government with a basis for commencing an investigation of Relator’s allegations. 

The public disclosure bar prevents federal court jurisdiction over qui tam suits if the basis of the suit is known by the government.  It is well settled that the Federal government’s knowledge of an alleged ‘false’ claim contradicts a defendant’s intent to knowingly submit[] a false claim.”  Englund, 2006 WL 3097941, at 12; U.S. ex rel. Butler v. Hughes Helicopters, Inc., 71 F.3d 321, 327 (9th Cir. 1995) (“the extent and the nature of government knowledge may show that the defendant did not ‘knowingly’ submit a false claim and so did not have the intent required by the . . . FCA”); United States v. Southland Mgmt. Corp., 326 F.3d 669, 682 n.8 (5th Cir. 2003) (Jones, J., concurring) (the so-called “government knowledge defense” is a means by which defendant can rebut an assertion of falsity and knowledge). 

This defense, loosely known as the “‘government knowledge defense,’” “holds that the ‘knowing’ submission of a false claim is logically impossible when responsible government officials have been fully apprised of all relevant information.”  Englund, 2006 WL 3097941, at 12; Southland Mgmt. Corp., 326 F.3d at 682 (Jones, J., concurring) (this doctrine “captures the understanding that the FCA reaches only the ‘knowing presentation of what is known to be false’”) (citations omitted). “Since the crux of an FCA violation is intentionally deceiving the government, no violation exists where the government has not been deceived.”  Englund, 2006 WL 3097941, at 12. 

To further indicate the prohibitive affect self-disclosure has on qui tam lawsuits, even after a Relator makes the requisite disclosure and files suit, the court may reduce the amount of damages.  The statue provides that if the person committing the alleged fraud furnishes government officials responsible for investigating the allegations with all information known about them within 30 days after the date on which the person first obtained the information, and the person fully cooperates with any Government investigation; and at the time such person furnished the government with the information, no criminal prosecution, civil action, or administrative action had commenced with respect to the allegations, and the person did not have actual knowledge of the existence of an investigation into such violation, the court may assess not less than 2 times the amount of damages which the Government sustains because of the act of that person.