The History of False Claims Laws

Crowned in 1216 at the age of nine, King Henry III of England was an eminently forgettable monarch. When he was a youth, a council of aristocrats ruled his land. Later, he allied himself with the Vatican, which usurped his power and imposed exorbitant taxes on the kingdom. After that ruinous association, Henry’s power was wielded by his son, Edward.

During Henry’s five decades as a monarch, England was slowly emerging from the Dark Ages. Police forces were weak or non-existent. These factors led to the creation of a set of laws that allowed others to litigate on the king’s behalf. This practice was known in Latin as “qui tam pro domino rege quam pro se ipso in hac parte sequitur” or “who pursues this action on our Lord the King’s behalf as well as on his own.” The Qui Tam laws were nurtured over the next several centuries and were considered to be such a vital element of good governance that they were among the earliest laws enacted by the first U.S. Congress. But those laws were gradually weakened. By the time of the Civil War, fraud against the federal government was rampant. Shoddy goods of all types—uniforms, rifles, and food—were hamstringing Union troops. With no federal lawyers to pursue the fraudsters, at President Lincoln’s urging, Congress passed the False Claims Act in 1863, which gave financial incentives to private citizens who took action against companies or individuals whom they knew were defrauding the government. The measure became known as “Lincoln’s Law.”

While the statute was effective for a time, it did not stop fraud. During the Spanish-American War, meat that had been preserved with formaldehyde poisoned hundreds of American soldiers. Similar misdeeds occurred during World War II. By the 1980s, fraud against the Defense Department—in the form of $435 hammers and $7,000 coffee makers—was rampant. That fraud led to an unusual coalition: in 1986, Sen. Charles Grassley, a conservative Iowa Republican, teamed up with Rep. Howard Berman, a liberal California Democrat, to pass legislation that strengthened Lincoln’s Law. A key provision in the bill passed by Grassley and Berman was that it allowed the whistleblowers who launched Qui Tam litigation—known in legal parlance as “relators”—to get up to 25 or 30 percent of any money recovered by their lawsuit, depending on whether or not the government intervened.

The first Qui Tam case under the revised False Claims Act was filed in April of 1987, and, like many of the current cases being pursued nationwide, it involved health care. The whistleblower in the case was a doctor who’d been employed at the Scripps Clinic and Research Foundation in California. The doctor, an ophthalmologist named Paul Michelson, found that the clinic had been over-billing Medicare. The following year, Scripps settled the case by paying a relatively small amount, about $435,000. But the precedent was set. Within a decade, hundreds of claims under the federal law were being filed each year.

In his excellent book, Giant Killers: The Team and the Law That Help Whistle-blowers Recover America’s Stolen Billions, author Henry Scammell points out that health care fraud has been the most common area for lawyers using the Qui Tam laws. This is likely due to the overall size of the industry and because it receives so much federal money. Between 1987 and 2002, the federal government recovered some $5.2 billion from Qui Tam cases brought in the health care field. That’s more than three times the amount the government received from similar cases brought against defense contractors during that same period.