What is a Reverse False Claims Lawsuit?

A reverse False Claims Act lawsuit alleges a wrongdoer has prevented the collection of money owed to the government. For example, failure to return an overpayment or unused funding to the government.

Other examples include applying for a lease, loan, or permit but intentionally making incorrect statements on the application, underpayment of royalties per the contractual agreement with the government or making false declarations on customs forms or in other agreements.

Whistleblowers with information about a potential reverse false claim should come forward with information and help the U.S. government recover taxpayer’s funds. Whistleblower rewards may be available for those eligible under the False Claims Act and qui tam provisions.

Congress passed amendments to the False Claims Act in 1986. These amendments contained significant reforms to the FCA.

Congress further strengthened reverse false claims cases in 2009 when Congress passed the Fraud Enhancement and Recovery Act (FERA). The Act expanded liability under the False Claims Act. Before this, a relator had to prove that a wrongdoer created a false statement or record. Under the new 2009 amendment, however, a person is now liable for the action and for knowingly concealing and improperly avoiding an obligation to pay or transmit money to the U.S. Government. FERA also broadened and clarified this definition of “obligation” as:

“An established duty, whether or not fixed, arising from an express or implied contractual, grantor-grantee, or licensor-licensee relationship, from a fee-based relationship or similar relationship, from statute or regulation, or from the retention of any overpayment.”

Whistleblowers with information about a reverse false claim can follow the same procedure as in filing a False Claims Act qui tam lawsuit. Successful relators are entitled to an award of between 15% and 30% of the total recovery paid to the U.S.

There are many ways a fraudster can bring about reverse false claims. Below are a few common types in which the government has intervened:

• Customs Violations – fraudsters may create false customs declarations to avoid paying additional duties, such as anti-dumping and countervailing duties.
• Non-Return of Overpayment – fraudsters may decide not to return unused funding to the government in hopes of not getting caught.
• Not Paying Royalties – fraudsters may decide not to pay royalties to the government, such as in cases involving federal mining leases.
• False Statements – fraudsters may try to make incorrect statements on loan, permit, or lease applications to deceive the government.

Keep in mind; customs fees are the second highest source of income for the United States, behind only the IRS! Whistleblowers who know of such violations can save taxpayers millions of dollars and help restore confidence in the U.S. economy.