Amicus Brief Outlines Congress’s Original Intent for Liability Under the False Claims Act

On February 23, Kohn, Kohn & Colapinto (KKC), on behalf of the National Whistleblower Center (NWC), filed an amicus curiae brief in the Supreme Court case U.S. ex rel. Schutte v. SuperValu Inc. Referencing historical materials pulled from the National Archive, the brief argues that the Congressional intent behind the False Claims Act was to hold fraudsters liable based on the subjective intent to commit fraud, regardless of statutory or contractual ambiguity.

“The Supervalu case should be named as the ‘fraudster Green Light case,’” said KKC founding partner Stephen M. Kohn. “Medicare will go bankrupt if fraudsters can knowingly defraud the government and escape liability. That is what’s at stake in this case.”

“If the Court adopts the rule advocated by the Chamber of Commerce and their Big Business funders the False Claims Act will be a dead letter. It will be open season on taxpayer monies,” continued Kohn, who also serves as Chairman of the Board of NWC. “As incredible as it sounds, these billionaire government contractors are actually urging the Supreme Court to ignore direct evidence of fraud, and instead permit drug companies to overbill Medicare with impunity.”

In U.S. ex rel. Schutte v. SuperValu Inc., and the case it was consolidated with U.S. ex rel. Proctor v. Safeway, the Supreme Court will consider whether a company “knowingly” submitted false claims if it acted based upon a reasonable, though incorrect, interpretation of the law. The Seventh Circuit ruled in both cases that pharmacy operators did not commit fraud when they overbilled the government because they operated under an “objectively reasonable” interpretation of the law. According to the Seventh Circuit, it does not matter whether the operators believed the interpretation or intended to defraud the government.

In order to fully understand the legislative intent behind the False Claims Act, KKC conducted original research in the National Archives concerning the materials the Select Committee on Government Contracts relied upon in its review of contracting abuses during the Civil War.

According to KKC’s brief, “a review of the contracts and vouchers paid by the U.S. Congress when drafting the False Claims Act demonstrates, incontrovertibly, that liability for defrauding the government was meant to be based on subjective bad faith regardless of any ambiguities that existed in a statute, regulation, contract, or agreement.”

“The U.S. Court of Appeals for the Seventh Circuit incorrectly interpreted the False Claims Act’s scienter requirement,” the brief continues. “If the Seventh Circuit majority’s interpretation of the role of subjective intent in demonstrating that a contractor acted ‘knowingly’ is affirmed, the plain meaning and original intent of the False Claims Act will be completely undermined and whistleblowers, who have driven the success of the False Claims Act, will be discouraged from taking the great risks they face when reporting fraud.”