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42–973 PDF 2008

FALSE CLAIMS ACT CORRECTION ACT OF 2007 

JOINT HEARING 

BEFORE THE

SUBCOMMITTEE ON COURTS, THE INTERNET, 

AND INTELLECTUAL PROPERTY 

AND THE

SUBCOMMITTEE ON COMMERCIAL AND 

ADMINISTRATIVE LAW 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

ON

H.R. 4854 

JUNE 19, 2008 

Serial No. 110–137 

Printed for the use of the Committee on the Judiciary 

( 

Available via the World Wide Web: http://judiciary.house.gov 

(II) 

COMMITTEE ON THE JUDICIARY 

JOHN CONYERS, JR., Michigan, Chairman 

HOWARD L. BERMAN, California 

RICK BOUCHER, Virginia 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

WILLIAM D. DELAHUNT, Massachusetts 

ROBERT WEXLER, Florida 

LINDA T. SA ́ NCHEZ, California 

STEVE COHEN, Tennessee 

HANK JOHNSON, Georgia 

BETTY SUTTON, Ohio 

LUIS V. GUTIERREZ, Illinois 

BRAD SHERMAN, California 

TAMMY BALDWIN, Wisconsin 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

ARTUR DAVIS, Alabama 

DEBBIE WASSERMAN SCHULTZ, Florida 

KEITH ELLISON, Minnesota 

LAMAR SMITH, Texas 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

STEVE CHABOT, Ohio 

DANIEL E. LUNGREN, California 

CHRIS CANNON, Utah 

RIC KELLER, Florida 

DARRELL ISSA, California 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TOM FEENEY, Florida 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

PERRY APELBAUM, Staff Director and Chief Counsel 

SEAN MCLAUGHLIN, Minority Chief of Staff and General Counsel 

(III) 

SUBCOMMITTEE ON COURTS, THE INTERNET, AND INTELLECTUAL PROPERTY

HOWARD L. BERMAN, California, Chairman 

JOHN CONYERS, JR., Michigan 

RICK BOUCHER, Virginia 

ROBERT WEXLER, Florida 

MELVIN L. WATT, North Carolina 

SHEILA JACKSON LEE, Texas 

STEVE COHEN, Tennessee 

HANK JOHNSON, Georgia 

BRAD SHERMAN, California 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

ZOE LOFGREN, California 

BETTY SUTTON, Ohio 

HOWARD COBLE, North Carolina 

TOM FEENEY, Florida 

LAMAR SMITH, Texas 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

STEVE CHABOT, Ohio 

CHRIS CANNON, Utah 

RIC KELLER, Florida 

DARRELL ISSA, California 

MIKE PENCE, Indiana 

SHANNA WINTERS, Chief Counsel 

BLAINE MERRITT, Minority Counsel 

SUBCOMMITTEE ON COMMERCIAL AND ADMINISTRATIVE LAW

LINDA T. SA ́ NCHEZ, California, Chairwoman 

JOHN CONYERS, JR., Michigan 

HANK JOHNSON, Georgia 

ZOE LOFGREN, California 

WILLIAM D. DELAHUNT, Massachusetts 

MELVIN L. WATT, North Carolina 

STEVE COHEN, Tennessee 

CHRIS CANNON, Utah 

JIM JORDAN, Ohio 

RIC KELLER, Florida 

TOM FEENEY, Florida 

TRENT FRANKS, Arizona 

MICHONE JOHNSON, Chief Counsel 

DANIEL FLORES, Minority Counsel 

(V) 

C O N T E N T S 

JUNE 19, 2008 

Page 

TEXT OF THE BILL 

H.R. 4854, the ‘‘False Claims Act Correction Act of 2007’’ ................................... 11 

OPENING STATEMENTS 

The Honorable Howard L. Berman, a Representative in Congress from the 

State of California, and Chairman, Subcommittee on Courts, the Internet, 

and Intellectual Property .................................................................................... 9 

The Honorable Howard Coble, a Representative in Congress from the State 

of North Carolina, and Ranking Member, Subcommittee on Courts, the 

Internet, and Intellectual Property .................................................................... 18 

The Honorable Linda T. Sa ́nchez, a Representative in Congress from the 

State of California, and Chairwoman, Subcommittee on Commercial and 

Administrative Law ............................................................................................. 19 

The Honorable Lamar Smith, a Representative in Congress from the State 

of Texas, Ranking Member, Committee on the Judiciary, and Member, 

Subcommittee on Courts, the Internet, and Intellectual Property .................. 20 

The Honorable John Conyers, Jr., a Representative in Congress from the 

State of Michigan, Chairman, Committee on the Judiciary, Member, Subcommittee on Courts, the Internet, and Intellectual Property, and Member, 

Subcommittee on Commercial and Administrative Law .................................. 21 

WITNESSES 

Mr. Albert Campbell, Winter Springs, FL 

Oral Testimony ..................................................................................................... 25 

Prepared Statement ............................................................................................. 27 

Ms. Shelley R. Slade, Partner, Vogel, Slade & Goldstein, LLP, Washington, 

DC 

Oral Testimony ..................................................................................................... 33 

Prepared Statement ............................................................................................. 36 

Mr. Peter B. Hutt, II, Partner, Akin Gump Strauss Hauer & Feld, LLP, 

Washington, DC 

Oral Testimony ..................................................................................................... 65 

Prepared Statement ............................................................................................. 67 

Mr. James B. Helmer, Jr., President, Helmer, Martins, Rice & Popham Company, LPA, Cincinnati, OH 

Oral Testimony ..................................................................................................... 96 

Prepared Statement ............................................................................................. 98 

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Prepared Statement of the Honorable Chris Cannon, a Representative in 

Congress from the State of Utah, Member, Subcommittee on Courts, the 

Internet, and Intellectual Property, and Ranking Member, Subcommittee 

on Commercial and Administrative Law ........................................................... 2 

Prepared Statement of the Honorable Linda T. Sa ́nchez, a Representative 

in Congress from the State of California, and Chairwoman, Subcommittee 

on Commercial and Administrative Law ........................................................... 20 

Page

VI 

Prepared Statement of the Honorable John Conyers, Jr., a Representative 

in Congress from the State of Michigan, Chairman, Committee on the 

Judiciary, Member, Subcommittee on Courts, the Internet, and Intellectual 

Property, and Member, Subcommittee on Commercial and Administrative 

Law ........................................................................................................................ 22 

APPENDIX 

Material Submitted for the Hearing Record .......................................................... 131 

(1) 

FALSE CLAIMS ACT CORRECTION ACT 

OF 2007 

THURSDAY, JUNE 19, 2008 

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON COURTS,

THE INTERNET, AND

INTELLECTUAL PROPERTY, AND THE

SUBCOMMITTEE ON COMMERCIAL

AND ADMINISTRATIVE LAW, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Subcommittees met, pursuant to notice, at 10:05 a.m., in 

Room 2141, Rayburn House Office Building, the Honorable Howard 

L. Berman (Chairman of the Subcommittee on Courts, the Internet, 

and Intellectual Property) presiding. 

Present from the Subcommittee on Courts, the Internet, and Intellectual Property: Representatives Conyers, Berman, Boucher, 

Johnson, Coble, Sensenbrenner, Smith, Goodlatte, Cannon, and 

Issa. 

Present from the Subcommittee on Commercial and Administrative Law: Representatives Conyers, Sa ́nchez, Johnson, Cannon, and 

Feeney. 

Staff Present from the Subcommittee on Courts, the Internet, 

and Intellectual Property: Julia Massimino, Majority Counsel; 

Christal Sheppard, Majority Counsel; and Rosalind Jackson, Majority Professional Staff Member. 

Staff Present from the Subcommittee on Commercial and Administrative Law: Michone Johnson, Subcommittee Chief Counsel; and 

Blaine Merritt, Minority Counsel. 

Mr. BERMAN. I call to order the joint legislative hearing on H.R. 

4854, the ‘‘False Claims Act Correction Act of 2007,’’ held by the 

Subcommittees on Courts, Internet and Intellectual Property and 

the Subcommittee on Commercial and Administrative Law. 

Before I give my opening statement, I am going to yield to the 

Ranking Member of the Subcommittee on Commercial and Administrative Law for a unanimous consent request. 

Mr. CANNON. Thank you, Mr. Chairman. I appreciate your holding this hearing. I have a conflict right now so I would ask unanimous consent to have my opening statement inserted into the 

record. 

Mr. BERMAN. Without objection. 

[The prepared statement of Mr. Cannon follows:] 

2 

PREPARED STATEMENT OF THE HONORABLE CHRIS CANNON, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF UTAH, MEMBER, SUBCOMMITTEE ON COURTS, THE

INTERNET, AND INTELLECTUAL PROPERTY, AND RANKING MEMBER, SUBCOMMITTEE

ON COMMERCIAL AND ADMINISTRATIVE LAW


CC-1.eps
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CC-2.eps
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CC-4.eps
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Mr. CANNON. Thank you, Mr. Chairman. 

Mr. BERMAN. I will now yield to myself for an opening statement. 

The False Claims Act represents one of Congress’ great success 

stories. As fraud by defense contractors ran rampant during the 

Civil War, President Lincoln implored Congress to pass legislation 

that would recruit citizen soldiers to help uncover schemes that 

were harming the war effort. My recollection was the Union Army 

was buying barrels filled with what they thought were ammunition, and when they opened the barrels they were sawdust. 

In response to that, Congress passed the False Claims Act of 

1863. The Act created incentives for private individuals—referred 

to sometimes as relators—to report false claims and fraudulent activity. It also allows private parties to sue on behalf of the United 

States to recover money lost to fraud. If the Government investigates and finds merits to a relator’s allegations, it may join the 

action and take control of the lawsuit, bringing to bear the Government’s resources. 

The False Claims Act has been hugely successful since its passage, though not without some bumps along the road. Amendments 

made to the Act in the 1940’s gutted key parts of the law, making 

it virtually toothless. After 4 decades of relative dormancy in which 

the law was barely used, Senator Charles Grassley and I worked 

together to pass amendments that restored incentives for whistleblowers and clarified that the law was intended to reach all types 

of fraud on the Government regardless of the form of the transaction. 

The 1986 amendments provided a host of new tools for the Government and private citizens to utilize in order to make the law an 

effective tool against fraud once more. Since these changes were 

made, the False Claims Act has recovered over $20 billion of taxpayer money that otherwise would have been lost to fraud. Government funds spent on the pursuit of the False Claims Act cases have 

proven to be money well spent. 

A recent study found that for every dollar invested in healthcarerelated False Claims Act enforcement, the Federal Government receives $15 in return. I suspect that this is still a gross underestimate because though it is impossible to measure, the money saved 

through the deterrence as a result of this law is almost assuredly 

much greater. If construed to Congress’ original intent, the False 

Claims Act could be bringing in many billions of additional dollars 

in recoveries from those who have cheated at the expense of the 

taxpayer. 

Unfortunately, over the last several years, a series of judicial decisions have severely weakened key provisions of the False Claims 

Act and narrowed its application. These courts have misconstrued 

our intent even in clear language in the law and legislative history, 

in a manner that leaves entire categories of fraud outside the reach 

of the law. 

For example, courts have thrown out cases in which the Government has administered Government programs and expended its 

funds through contractors and other agents as opposed to direct expenditure. Many courts have barred suits by whistleblowers who 

are insiders with key details of fraudulent schemes because while 

they know the key details, they cannot plead specific details of the 

10 

billing documentation such as the dates and identification numbers 

of invoices—information ordinarily sought and obtained in discovery. 

Finally, due to procedural requirements and an oversight in our 

original drafting, the Department of Justice has not employed the 

civil investigative demand authority as hoped. 

The amendments proposed in this legislation will remove these 

debilitating qualifications and clarify that the Act is intended to 

reach all types of fraud, without qualification, leading to Government losses. The bill would apply these amendments to all future 

cases, as well as all cases that are pending in the courts on the 

date the amendments become law. 

The most critical provisions of the legislation will clarify that the 

Act covers fraud on Government programs even when the Government uses agents or other third parties to administer a program 

or contract. For example, when a third party administers a program like Medicare Part D, false claims against funds in that program are covered even though the claims may not be presented to 

a fiscal Government employee, but rather the intermediary. 

The bill will clarify that the Government’s new or amended complaint in a qui tam action relates back to the original qui tam complaint to the same extent it would relate back if the Government 

had filed the original complaint. This would ensure that when a 

case is filed near the end of the statute of limitations, the Government still can conduct a thorough evaluation of whether or not to 

join a relator’s case, and when they join, they join as though they 

filed with the relator on the first day of the case. 

We also clarify that plaintiffs do not need to have access to individual claims data or documents to bring a False Claims Act case. 

As I noted earlier, in many cases judges have required relators to 

provide things such as alleged false invoices or phony billing documents, information that is available only to a handful of employees 

in the company’s billing department and generally out of reach of 

most whistleblowers until the discovery process. 

The bill would also amend the Act to return the public disclosure 

bar to its original intent—a shield for the Government, not a jurisdictional shield for defendants. The public disclosure bar is meant 

to keep the Government from losing a share of a False Claims Act 

recovery to a parasitic claim filed by a relator only with information that was available to the public. In other words, it is designed 

to stop the parasitic lawsuit, not to provide a basis for the defendant to escape without responsibility for the fraud that he or she 

has committed. 

We would also amend and clarify that Act to know how the Act’s 

chief investigative tool, the civil investigative demand, may be used 

to investigate violations of the Act. 

And finally, the bill clarifies how the Act applied to Federal employees who discover fraud during the course of their employment 

by providing the Government authority to move to dismiss the action of any Federal employee who brings a qui tam action without 

first having provided the Government fair notice and opportunity 

to pursue such wrongdoing through its own false claims action or 

other appropriate remedy. 

11 

I have heard concerns about this provision allowing Government 

employees to ‘‘enrich themselves by just doing their jobs.’’ That is 

not what this provision does. This provision is a safeguard, a backstop if you will, for situations in which a Government employee 

identifies fraud, tries to get his supervisor, the inspector general of 

his agency, or even the attorney general to act on it, and his concerns are ignored. Only then after meeting those standards may he 

file a qui tam suit on his own, and even then the Government may 

move to dismiss it. 

When Senator Grassley and I worked on the 1986 amendments, 

we were joined by legislators on both sides of the aisle. The 2 decades since have not changed much. The bill we are considering 

today was introduced with my friend and colleague, the gentleman 

from Wisconsin, and the former Chairman of the Judiciary Committee, and the Judiciary Committee in the other body has reported similar legislation introduced by Senators Grassley, Leahy, 

Durbin and Specter. 

These coalitions illustrate that the fight against fraud is neither 

a partisan nor political issue. It is about protecting taxpayer funds 

judiciously and protecting an approach to doing so that has proven 

very successful. 

I look forward to hearing the testimony of the witnesses. I apologize for the length of this opening statement, but I did want to at 

least run through the key procedural changes in this bill. 

[The text of the bill, H.R. 4854, follows:] 

I 

110TH CONGRESS 

1ST SESSION H. R. 4854 

To amend the provisions of title 31, United States Code, relating to false claims to 

clarify and make technical amendments to those provisions, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

DECEMBER 19, 2007 

Mr. BERMAN (for himself and Mr. SENSENBRENNER) introduced the following bill; 

which was referred to the Committee on the Judiciary 

A BILL 

To amend the provisions of title 31, United States Code, relating to false claims to 

clarify and make technical amendments to those provisions, and for other purposes. 

Be it enacted by the Senate and House of Representatives of the United States 

of America in Congress assembled, 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘False Claims Act Correction Act of 2007’’. 

SEC. 2. LIABILITY FOR FALSE CLAIMS. 

Section 3729 of title 31, United States Code, is amended to read as follows: 

12 

‘‘§ 3729. False claims 

‘‘(a) LIABILITY FOR CERTAIN ACTS.— ‘‘(1) IN GENERAL.—Any person who— 

‘‘(A) knowingly presents, or causes to be presented for payment or approval a false or fraudulent claim for Government money or property, 

‘‘(B) knowingly makes, uses, or causes to be made or used, a false 

record or statement to get a false or fraudulent claim for Government 

money or property paid or approved, 

‘‘(C) has possession, custody, or control of Government money or property and, intending to— 

‘‘(i) defraud the Government, 

‘‘(ii) retain a known overpayment, or 

‘‘(iii) knowingly convert the money or property, permanently or 

temporarily, to an unauthorized use, 

fails to deliver or return, or fails to cause the return or delivery of, the 

money or property, or delivers, returns, or causes to be delivered or returned less money or property than the amount due or owed, 

‘‘(D) authorized to make or deliver a document certifying receipt of 

property used, or to be used, by the Government and, intending to defraud 

the Government, makes or delivers the receipt without completely knowing 

that the information on the receipt is true, 

‘‘(E) knowingly buys, or receives as a pledge of an obligation or debt, 

public property from an officer or employee of the Government, or a member of the Armed Forces, who lawfully may not sell or pledge the property, 

‘‘(F) knowingly makes, uses, or causes to be made or used, a false 

record or statement to conceal, avoid, or decrease an obligation to pay or 

transmit money or property to the Government, or 

‘‘(G) conspires to commit any violation set forth in any of subparagraphs (A) through (F), 

is liable to the United States Government for a civil penalty of not less than 

$5,000 and not more than $10,000, plus 3 times the amount of damages which 

the Government or its administrative beneficiary sustains because of the act of 

that person, subject to paragraphs (2) and (3). 

‘‘(2) LESSER PENALTY IF DEFENDANT COOPERATES WITH INVESTIGATION.—In 

an action brought for a violation under paragraph (1), the court may assess not 

less than 2 times the amount of damages which the Government or its administrative beneficiary sustains because of the act of the person committing the violation if the court finds that— 

‘‘(A) such person provided to those officials of the United States who 

are responsible for investigating false claims violations, all information 

known to the person about the violation within 30 days after the date on 

which the person first obtained the information; 

‘‘(B) such person fully cooperated with any Government investigation of 

the violation; and 

‘‘(C) at the time such person provided to the United States the information about the violation under subparagraph (A), no criminal prosecution, 

civil action, or administrative action had commenced with respect to such 

violation, and the person did not have actual knowledge of the existence of 

an investigation into such violation. 

‘‘(3) ASSESSMENT OF COSTS.—A person violating paragraph (1) shall, in addition to a penalty or damages assessed under paragraph (1) or (2), be liable to 

the United States Government for the costs of a civil action brought to recover 

such penalty or damages. 

‘‘(b) DEFINITIONS.—For purposes of this section— 

‘‘(1) the terms ‘known’, ‘knowing’, and ‘knowingly’ mean that a person, with 

respect to information— 

‘‘(A) has actual knowledge of the information, 

‘‘(B) acts in deliberate ignorance of the truth or falsity of the information, or 

‘‘(C) acts in reckless disregard of the truth or falsity of the information, 

and no proof of specific intent to defraud is required; 

‘‘(2) the term ‘Government money or property’ means— 

‘‘(A) money or property belonging to the United States Government; 

‘‘(B) money or property that— 

‘‘(i) the United States Government provides or has provided to a 

contractor, grantee, agent, or other recipient, or for which the United 

States Government will reimburse a contractor, grantee, agent, or other 

recipient; and 

13 

‘‘(ii) is to be spent or used on the Government’s behalf or to advance a Government program; and 

‘‘(C) money or property that the United States holds in trust or administers for any administrative beneficiary; 

‘‘(3) the term ‘claim’ includes any request or demand, whether under a contract or otherwise, for Government money or property; and 

‘‘(4) the term ‘administrative beneficiary’ means any entity, including any 

governmental or quasi-governmental entity, on whose behalf the United States 

Government, alone or with others, serves as custodian or trustee of money or 

property owned by that entity. 

‘‘(c) STATUTORY CAUSE OF ACTION.—Liability under this section is a statutory 

cause of action all elements of which are set forth in this section. No proof of any 

additional element of common law fraud or other cause of action is implied or required for liability to exist for a violation of these provisions. 

‘‘(d) EXEMPTION FROM DISCLOSURE.—Any information that a person provides 

pursuant to subparagraphs (A) through (C) of subsection (a)(2) shall be exempt from 

disclosure under section 552 of title 5. 

‘‘(e) EXCLUSION.—This section does not apply to claims, records, or statements 

made under the Internal Revenue Code of 1986.’’. 

SEC. 3. CIVIL ACTIONS FOR FALSE CLAIMS. 

(a) ACTIONS BY PRIVATE PERSONS GENERALLY.—Section 3730(b) of title 31, 

United States Code, is amended— 

(1) in paragraph (1), by striking the last sentence and inserting the following: ‘‘The action may be dismissed only with the consent of the court and 

the Attorney General.’’; 

(2) in paragraph (2), by inserting after the second sentence the following: 

‘‘In the absence of a showing of extraordinary need, the written disclosure of 

any material evidence and information, and any other attorney work product, 

that the person bringing the action provides to the Government shall not be 

subject to discovery.’’; 

(3) in paragraph (4), by striking subparagraph (B) and inserting the following: 

‘‘(B) notify the court that it declines to take over the action, in which case 

the person bringing the action shall have the right to conduct the action, and, 

within 45 days after the Government provides such notice, shall either— 

‘‘(i) move to dismiss the action without prejudice, or 

‘‘(ii) notify the court of the person’s intention to proceed with the action 

and move the court to unseal the complaint, and any amendments thereto, 

so as to permit service on the defendant and litigation of the action in a 

public forum. 

A person who elects to proceed with the action under subparagraph (B)(ii) shall 

serve the complaint within 120 days after the person’s complaint is unsealed under 

such subparagraph.’’; and 

(4) by amending paragraph (5) to read as follows: 

‘‘(5) When a person brings an action under this subsection, no person other than 

the Government may join or intervene in the action, except with the consent of the 

person who brought the action. In addition, when a person brings an action that 

is pled in accordance with this subsection and section 3731(e), no other person may 

bring a separate action under this subsection based on the facts underlying a cause 

of action in the pending action.’’. 

(b) RIGHTS OF THE PARTIES TO QUI TAM ACTIONS.—Section 3730(c)(5) of title 31, 

United States Code, is amended by striking the second sentence and inserting the 

following: ‘‘An alternate remedy includes— 

‘‘(A) anything of value received by the Government from the defendant, 

whether funds, credits, or in-kind goods or services, in exchange for an agreement by the Government either to release claims brought in, or to decline to 

intervene in or investigate the action initiated under subsection (b); and 

‘‘(B) anything of value received by the Government based on the claims alleged by the person initiating the action, if that person subsequently prevails 

on the claims. 

If any such alternate remedy is pursued in another proceeding, the person initiating 

the action shall have the same rights in such proceeding as such person would have 

had if the action had continued under this section, except that the person initiating 

the action may not obtain an award calculated on more than the total amount of 

damages, plus any fines or penalties, that could be recovered by the United States 

under section 3729(a).’’. 

14 

(c) AWARD TO QUI TAM PLAINTIFF.—Section 3730(d) of title 31, United States 

Code, is amended— 

(1) in paragraph (1)— 

(A) in the first sentence, by inserting ‘‘an award of’’ after ‘‘receive’’; 

(B) by striking the second and third sentences and inserting the following: ‘‘Any payment to a person under this paragraph or under paragraph 

(2) or (3) shall be made from the proceeds, and shall accrue interest, at the 

underpayment rate under section 6621 of the Internal Revenue Code of 

1986, beginning 30 days after the date the proceeds are paid to the United 

States, and continuing until payment is made to the person by the United 

States.’’; and 

(C) in the last sentence, by striking ‘‘necessarily’’; 

(2) in paragraph (2)— 

(A) in the second sentence, by striking ‘‘and shall be paid out of such 

proceeds’’; and 

(B) in the third sentence, by striking ‘‘necessarily’’; and 

(3) by amending paragraph (3) to read as follows: 

‘‘(3)(A) Whether or not the Government proceeds with the action, if the court 

finds that the action was brought by a person who either— 

‘‘(i) planned and initiated the violation of section 3729 upon which the action was brought, or 

‘‘(ii) derived his or her knowledge of the action primarily from specific information relating to allegations or transactions (other than information provided 

by the person bringing the action) that the Government publicly disclosed, within the meaning of subsection (e)(4)(A), or that it disclosed privately to the person bringing the action in the course of its investigation into potential violations 

of section 3729, 

then the court may, to the extent the court considers appropriate, reduce the share 

of the proceeds of the action that the person would otherwise receive under paragraph (1) or (2) of this subsection, taking into account the role of that person in advancing the case to litigation and any relevant circumstances pertaining to the violation. The court shall direct the defendant to pay any such person an amount for 

reasonable expenses that the court finds to have been incurred, plus reasonable attorneys’ fees and costs. 

‘‘(B) If the person bringing the action is convicted of criminal conduct arising 

from his or her role in the violation of section 3729, that person shall be dismissed 

from the civil action and shall not receive any share of the proceeds of the action. 

Such dismissal shall not prejudice the right of the United States to continue the action, represented by the Department of Justice.’’. 

(d) CERTAIN ACTIONS BARRED.—Paragraph (4) of section 3730(e) of title 31, 

United States Code, is amended to read as follows: 

‘‘(4)(A) Upon timely motion of the Attorney General of the United States, a 

court shall dismiss an action or claim brought by a person under subsection (b) if 

the allegations relating to all essential elements of liability of the action or claim 

are based exclusively on the public disclosure of allegations or transactions in a Federal criminal, civil, or administrative hearing, in a congressional, Federal administrative, or Government Accountability Office report, hearing, audit, or investigation, 

or from the news media. 

‘‘(B) For purposes of this paragraph, a ‘public disclosure’ includes only disclosures that are made on the public record or have otherwise been disseminated 

broadly to the general public. An action or claim is ‘based on’ a public disclosure 

only if the person bringing the action derived the person’s knowledge of all essential 

elements of liability of the action or claim alleged in the complaint from the public 

disclosure. The person bringing the action does not create a public disclosure by obtaining information from a request for information made under section 552 of title 

5 or from exchanges of information with law enforcement and other Government 

employees if such information does not otherwise qualify as publicly disclosed under 

this paragraph.’’. 

(e) RELIEF FROM RETALIATORY ACTIONS.—Subsection (h) of section 3730 of title 

31, United States Code, is amended to read as follows: 

‘‘(h) RELIEF FROM RETALIATORY ACTION.—Any person who is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated 

against in the terms or conditions of employment, or is materially hindered in obtaining new employment or other business opportunities, by any other person because of lawful acts done by the person discriminated against or others associated 

with that person— 

15 

‘‘(1) in furtherance of an actual or potential action under this section, including investigation for, initiation of, testimony for, or assistance in an action 

filed or to be filed under this section, or 

‘‘(2) in furtherance of other efforts to stop one or more violations of section 

3729, 

shall be entitled to all relief necessary to make the person whole. Such relief shall 

include reinstatement with the same seniority status such person would have had 

but for the discrimination, 2 times the amount of back pay or business loss, interest 

on the back pay or business loss, and compensation for any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorneys’ fees. An action under this subsection may be brought in the appropriate district court of the United States for the relief provided in this subsection.’’. 

(f) RELIEF TO ADMINISTRATIVE BENEFICIARIES.—Section 3730 of title 31, United 

States Code, is amended by adding at the end the following new subsection: 

‘‘(i) DAMAGES COLLECTED FOR FINANCIAL LOSES SUFFERED BY ADMINISTRATIVE

BENEFICIARIES.—After paying any awards due one or more persons who brought an 

action under subsection (b), the Government shall pay from the proceeds of the action to any administrative beneficiary, as defined in section 3729(b), all amounts 

that the Government has collected in the action for financial losses suffered by such 

administrative beneficiary. Any remaining proceeds collected by the Government 

shall be treated in the same manner as proceeds collected by the Government for 

direct losses the Government suffers from violations of section 3729. Nothing in section 3729 or this section precludes administrative beneficiaries from pursuing any 

alternate remedies available to them for losses or other harm suffered for them that 

are not pursued or recovered in an action under this section, except that if such alternate remedy proceedings are initiated after a person has initiated an action 

under subsection (b), such person shall be entitled to have such alternative remedies 

considered in determining any award in the action under subsection (b) to the same 

extent that such person would be entitled under subsection (c)(5) with respect to any 

alternate remedy pursued by the Government.’’. 

SEC. 4. FALSE CLAIMS PROCEDURE. 

(a) STATUTE OF LIMITATIONS; INTERVENTION BY THE GOVERNMENT.—Subsection 

(b) of section 3731 of title 31, United States Code, is amended to read as follows: 

‘‘(b) STATUTE OF LIMITATIONS; INTERVENTION BY THE GOVERNMENT.— 

‘‘(1) STATUTE OF LIMITATIONS.—A civil action under section 3730 (a), (b), or 

(h) may not be brought more than 10 years after the date on which the violation 

of section 3729 or 3730(h) is committed. 

‘‘(2) INTERVENTION.—If the Government elects to intervene and proceed 

with the action under section 3730, the Government may file its own complaint, 

or amend the complaint of a person who brought the action under section 

3730(b), to clarify or add detail to the claims in which it is intervening and to 

add any additional claims with respect to which the Government contends it is 

entitled to relief. For purposes of paragraph (1), any such Government pleading 

shall relate back to the filing date of the complaint of the person who originally 

brought the action to the extent that the Government’s claim arises out of the 

conduct, transactions, or occurrences set forth, or attempted to be set forth, in 

the person’s prior complaint.’’. 

(b) STANDARD OF PROOF.—Section 3731(c) of title 31, United States Code, is 

amended— 

(1) by striking ‘‘(c) In’’ and inserting ‘‘(c) STANDARD OF PROOF.—In’’; and 

(2) by striking ‘‘United States’’ and inserting ‘‘plaintiff’’. 

(c) NOTICE OF CLAIMS; VOID CONTRACTS, AGREEMENTS, AND CONDITIONS OF EMPLOYMENT.—Section 3731 of title 31, United States Code, is amended by adding at 

the end the following new subsections: 

‘‘(e) NOTICE OF CLAIMS.—In pleading an action brought under section 3730(b), 

a person shall not be required to identify specific claims that result from an alleged 

course of misconduct if the facts alleged in the complaint, if ultimately proven true, 

would provide a reasonable indication that one or more violations of section 3729 

are likely to have occurred, and if the allegations in the pleading provide adequate 

notice of the specific nature of the alleged misconduct to permit the Government effectively to investigate and defendants fairly to defend the allegations made. 

‘‘(f) VOID CONTRACT, AGREEMENTS, AND CONDITIONS OF EMPLOYMENT.— 

‘‘(1) IN GENERAL.—Any contract, private agreement, or private term or condition of employment that has the purpose or effect of limiting or circumventing 

the rights of a person to take otherwise lawful steps to initiate, prosecute, or 

support an action under section 3730, or to limit or circumvent the rights or 

remedies provided to persons bringing actions under section 3730(b) and other 

16 

cooperating persons under section 3729 shall be void to the full extent of such 

purpose or effect. 

‘‘(2) EXCEPTION.—Paragraph (1) shall not preclude a contract or private 

agreement that is entered into— 

‘‘(A) with the United States and a person bringing an action under section 3730(b) who would be affected by such contract or agreement specifically to settle claims of the United States and the person under section 

3730; or 

‘‘(B) specifically to settle any discrimination claim under section 3730(h) 

of a person affected by such contract or agreement.’’. 

(d) CONFORMING AMENDMENTS.—Section 3731 of title 31, United States Code, 

is amended— 

(1) in subsection (a), by striking ‘‘(a) A subpena’’ and inserting ‘‘(a) SERVICE

OF SUBPOENAS.—A subpoena’’; and 

(2) in subsection (d), by striking ‘‘(d) Notwithstanding’’ and inserting ‘‘(d) 

ESTOPPEL.—Notwithstanding’’. 

SEC. 5. FALSE CLAIMS JURISDICTION. 

Section 3732 of title 31, United States Code, is amended by adding at the end 

the following new subsection: 

‘‘(c) SERVICE ON STATE OR LOCAL AUTHORITIES.—With respect to any State or 

local government that is named as a co-plaintiff with the United States in an action 

brought under subsection (b), a seal on the action ordered by the court under section 

3730(b) shall not preclude the Government or the person bringing the action from 

serving the complaint, any other pleadings, or the written disclosure of substantially 

all material evidence and information possessed by the person bringing the action 

on the law enforcement authorities that are authorized under the law of that State 

or local government to investigate and prosecute such actions on behalf of such governments.’’. 

SEC. 6. CIVIL INVESTIGATIVE DEMANDS. 

(a) CIVIL INVESTIGATIVE DEMANDS.—Section 3733(a)(1) of title 31, United State 

Code, is amended— 

(1) in the matter preceding subparagraph (A), by inserting ‘‘, or a designee 

(for the purposes of this section),’’ after ‘‘Whenever the Attorney General’’; and 

(2) in the matter following subparagraph (D), by— 

(A) striking ‘‘may not delegate’’ and inserting ‘‘may delegate’’; and 

(B) adding at the end the following: ‘‘Any information obtained by the 

Attorney General or a designee of the Attorney General under this section 

may be shared with any a person bringing an action under section 3730(b) 

if the Attorney General or the designee determines that it is necessary as 

part of any false claims law investigation.’’. 

(b) PROCEDURES.—Section 3733(i)(3) of title 31, United States Code, is amended 

to read as follows: 

‘‘(3) USE OF MATERIAL, ANSWERS, OR TRANSCRIPTS IN FALSE CLAIMS ACTIONS

AND OTHER PROCEEDINGS.—Whenever any attorney of the Department of Justice 

has been designated to handle any false claims law investigation or proceeding, 

or any other administrative, civil, or criminal investigation, case, or proceeding, 

the custodian of any documentary material, answers to interrogatories, or transcripts of oral testimony received under this section may deliver to such attorney such material, answers, or transcripts for official use in connection with any 

such investigation, case, or proceeding as such attorney determines to be required. Upon the completion of any such investigation, case, or proceeding, such 

attorney shall return to the custodian any such material, answers, or transcripts so delivered which have not passed into the control of a court, grand 

jury, or agency through introduction into the record of such case or proceeding.’’. 

(c) DEFINITIONS.—Section 3733(l) of title 31, United States Code, is amended— 

(1) in paragraph (6), by striking ‘‘and’’ after the semicolon; 

(2) in paragraph (7), by striking the period at the end and inserting ‘‘; and’’; 

and 

(3) by adding at the end the following: 

‘‘(8) the term ‘official use’ means all lawful, reasonable uses in furtherance 

of an investigation, case, or proceeding, such as disclosures in connection with 

interviews of fact witnesses, settlement discussions, coordination of an investigation with a State Medicaid Fraud Control Unit or other government personnel, consultation with experts, and use in court pleadings and hearings.’’. 

17 

SEC. 7. GOVERNMENT RIGHT TO DISMISS CERTAIN ACTIONS. 

Section 3730(b) of title 31, United States Code, is amended by adding at the 

end the following: 

‘‘(6)(A) Not later than 60 days after the date of service under paragraph (2), the 

Government may move to dismiss from the action the person bringing the action 

if the person is an employee of the Federal Government and— 

‘‘(i) all the necessary and specific material allegations contained in such action were derived from an open and active fraud investigation by the executive 

branch of the Government; or 

‘‘(ii) subject to subparagraph (B), the person bringing the action learned of 

the information that underlies the alleged violation of section 3729 that is the 

basis of the action in the course of the person’s employment by the United 

States. 

‘‘(B) In the case of a person to whom subparagraph (A)(ii) applies— 

‘‘(i) if the employing agency has an Inspector General and the person, before 

bringing the action— 

‘‘(I) disclosed in writing to the Inspector General substantially all material evidence and information that relates to the alleged violation that the 

person possessed, and 

‘‘(II) notified in writing the person’s supervisor and the Attorney General of the disclosure under subclause (I), or 

‘‘(ii) if the employing agency does not have an Inspector General and the 

person, before bringing the action— 

‘‘(I) disclosed in writing to the Attorney General substantially all material evidence and information that relates to the alleged violation that the 

person possessed, and 

‘‘(II) notified in writing the person’s supervisor of the disclosure under 

subclause (I), 

the motion under subparagraph (A) may be brought only after a period of 12 months 

(and any extension under subparagraph (C)) has elapsed since the disclosure of information and notification under clause (i) or (ii) was made, and only if the Attorney 

General has filed an action under this section based on such information. 

‘‘(C) Before the end of the 12-month period described under subparagraph (B), 

and upon notice to the person who has disclosed information and provided notice 

under subparagraph (B)(i) or (ii), the Attorney General may file a motion seeking 

an extension of that 12-month period. The court may extend that 12-month period 

for an additional period of not more than 12 months upon a showing by the Government that the additional period is necessary for the Government to decide whether 

or not to file an action under this section based on the information. Any such motion 

may be filed in camera and may be supported by affidavits or other submissions in 

camera. 

‘‘(D) For purposes of subparagraph (B), a person’s supervisor is the officer or 

employee who— 

‘‘(i) is in a position of the next highest classification to the position of such 

person; 

‘‘(ii) has supervisory authority over such person; and 

‘‘(iii) such person believes is not culpable of the violation upon which the 

action under this subsection is brought by such person. 

‘‘(E) A motion to dismiss under this paragraph shall set forth documentation of 

the allegations, evidence, and information in support of the motion. 

‘‘(F) Any person bringing an action under paragraph (1) shall be provided an 

opportunity to contest a motion to dismiss under this paragraph. The court may restrict access to the evidentiary materials filed in support of the motion to dismiss, 

as the interests of justice require. A motion to dismiss and papers filed in support 

or opposition of such motion may not be— 

‘‘(i) made public without the prior written consent of the person bringing 

the civil action; and 

‘‘(ii) subject to discovery by the defendant. 

‘‘(G) If the motion to dismiss under this paragraph is granted, the matter shall 

remain under seal. 

‘‘(H) Not later than 6 months after the date of the enactment of this paragraph, 

and every 6 months thereafter, the Attorney General shall submit to the Committee 

on the Judiciary of the Senate and the Committee on the Judiciary of the House 

of Representatives a report on— 

‘‘(i) the cases in which the Department of Justice has filed a motion to dismiss under this paragraph; 

‘‘(ii) the outcome of such motions; and 

‘‘(iii) the status of the civil actions in which such motions were filed.’’. 

18 

SEC. 8. EFFECTIVE DATE. 

The amendments made by this Act shall take effect on the date of the enactment of this Act and shall apply to any case pending on, or filed on or after, that 

date. 

Æ 

Mr. BERMAN. I recognize the Ranking Member, Mr. Coble, for his 

opening statement. 

Mr. COBLE. Thank you, Mr. Chairman. 

Mr. Chairman, about 600 years ago the British admitted the qui 

tam action in which citizens were encouraged to expose fraudulent 

acts perpetrated at the expense of the crown In return for their assistance, the participating citizens were rewarded. The rationale 

behind this arrangement was that the crown could not police every 

attempt to defraud it of money. Compensation paid to whistleblowers was more than offset by recovered revenue, fines and a deterrence factor that might dissuade future graft or greed. 

This fundamental attribute of the qui tam action survives in our 

legal system today. Its use has waxed and waned for more than 

200 years of American jurisprudence, but the qui tam concept remains a prominent feature of the False Claims Act. Written in 

1863, the FCA is still used to prosecute theft of Federal resources. 

The Act was amended, as you pointed out, Mr. Chairman, in 

1986 in response to defense contractor fraud that was prevalent at 

the time. Mr. Berman, the distinguished Chairman of this Subcommittee, wrote the House bill and he is the author of the legislation that is the subject of our hearing this morning. 

None of us is indifferent to the theft of public resources. Food 

stamps, defense, Medicare, Medicaid, education and more—no area 

of Federal spending is immune to theft. We must be vigilant and 

we must give the Department of Justice the resources it needs to 

combat fraud. 

But there is always a flip-side to every legislative coin. Well-intentioned critics of H.R. 4854 and a bill pending in the other body 

believe that we may be overreaching. These critics argue that the 

Government, not the whistleblowers, is largely responsible for recovery of public resources that are fraudulently obtained. 

Moreover, some believe that the FCA as written is too often used 

as a bludgeon against small businesses and other entities that deal 

with the Federal Government. Opponents of these qui tam actions—and by the way, Mr. Chairman, am I pronouncing that correctly? Is it qui tam or qui tam? 

Mr. BERMAN. Qui tam. 

Mr. COBLE. Qui tam. I don’t want to violate the rules of grammar 

here. 

Opponents of these actions say these organizations do business 

in an above-board manner. They are guilty of committing innocent 

paperwork mistakes, it is alleged. That, or they simply lack the resources to defend themselves against questionable qui tam actions, 

resulting in forced settlements. 

In conclusion, Mr. Chairman, I approach today’s hearing with an 

open mind. If criminals are defrauding the Federal Government 

with greater frequency and the FCA is in need of an update, let’s 

19 

figure out how to change the law to increase legitimate prosecutions. I think we ought to be careful in doing so, Mr. Chairman, 

so that it does not dispense collateral damage. 

I thank you, Mr. Chairman, for having called this hearing. I am 

looking forward to the testimony. I yield back. 

Mr. BERMAN. Thank you, Mr. Coble. I look forward to working 

with you on the concerns that you expressed. 

I now am pleased to recognize the Chair of the Commercial and 

Administrative Law Subcommittee, one of the two Subcommittees 

holding this hearing, the gentlelady from California, Ms. Sa ́nchez. 

Ms. SA ́ NCHEZ. Thank you, Mr. Chairman. 

We are here today to hear testimony from several witnesses on 

H.R. 4854, the ‘‘False Claims Act Corrections Act of 2007.’’ This 

legislation introduced by Chairman Berman and Representative 

Sensenbrenner would amend the False Claims Act, which was enacted in response to complaints about fraud and corruption against 

the United States government during the Civil War. 

The central purpose of the False Claims Act has been to enlist 

private citizens in combating fraud against the United States. The 

Act’s qui tam provision provides a clear process to assist and encourage private citizens not only to report fraud against the United 

States, but also to participate in investigating and prosecuting 

those who steal from the Federal Government. 

Since 1986, filings under the False Claims Act have led to recov- ery for the United States government of over $20 billion in taxpayer funds. Such a success should be commended. However, over 

the course of the Act’s history, court decisions have led to conflicting interpretations that have limited the reach of the Act, discouraged qui tam relators from filing suits under the Act, and left 

billions of dollars vulnerable to fraud. 

The various interpretations, in fact, were noted earlier this year 

when an Arkansas Federal court invited Congress to take legislative action to clarify the False Claims Act, stating ‘‘the court sympathizes with anyone litigating under the False Claims Act. Perhaps Congress will elect at some point to give legislative attention 

to the FCA to resolve some of the still-unresolved questions about 

the Act’s application.’’ 

H.R. 4854 is a legislative response to the court’s plea for clarification of many issues and resolves the split among the Federal 

circuits. The bill provides that False Claims Act liability protects 

all Federal funds. Among other things, the legislation defines what 

are recoverable damages and strengthens anti-retaliation protections. 

Finally, H.R. 4854 establishes a statute of limitations period and 

revitalizes the Government’s investigative powers under the Act. 

At a time when billions of American taxpayer dollars are being 

poured into the hands of contractors in Iraq, this legislation is particularly timely. Often, fraud cannot be discovered unless a whistleblower comes forward, and this bill makes sure that whistleblowers 

have better tools to hold fraudulent individuals and companies accountable. 

Accordingly, I thank Chairman Berman and Representative Sensenbrenner for their leadership on this issue, and I look forward to 

hearing the testimony from our witnesses today. 

20 

With that, I yield back the balance of my time. 

[The prepared statement of Ms. Sa ́nchez follows:] 

PREPARED STATEMENT OF THE HONORABLE LINDA T. SA ́ NCHEZ, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF CALIFORNIA, AND CHAIRWOMAN, SUBCOMMITTEE ON

COMMERCIAL AND ADMINISTRATIVE LAW

We are here today to hear testimony from several witnesses on H.R. 4854, the 

‘‘False Claims Act Corrections Act of 2007.’’ This legislation, introduced by Chairman Berman and Representative Sensenbrenner, would amend the False Claims 

Act, which was enacted in response to complaints about fraud and corruption 

against the United States government during the Civil War. 

The central purpose of the False Claims Act has been to enlist private citizens 

in combating fraud against the United States. The Act’s qui tam provisions provide 

a clear process to assist and encourage private citizens not only to report fraud 

against the United States, but also to participate in investigating and prosecuting 

those who steal from the Federal Government. 

Since 1986, filings under the False Claims Act have led to recovery for the United 

States Government of over $20 billion in taxpayer funds. Such a success should be 

commended. 

However, over the course of the Act’s history, court decisions have led to conflicting interpretations that have limited the reach of the Act, discouraged qui tam 

relators from filing suits under the Act, and left billions of dollars vulnerable to 

fraud. The various interpretations, in fact, were noted earlier this year, when an 

Arkansas federal court invited Congress to take legislative action to clarify the 

False Claims Act, stating: ‘‘The Court sympathizes with anyone litigating under the 

False Claims Act. Perhaps Congress will elect at some point to give legislative attention to the FCA to resolve some of the still unresolved questions about the Act’s 

application.’’ 

H.R. 4854 is a legislative response to the court’s plea for clarification of many 

issues and resolves the splits among the federal circuits. The bill provides that False 

Claims Act liability protects all federal funds. Among other things, the legislation 

defines what are recoverable damages and strengthens anti-retaliation protections. 

Finally, H.R. 4854 establishes a statute of limitations period and revitalizes the 

Government’s investigative powers under the Act. 

At a time when billions of American tax-payer dollars are being poured into the 

hands of contractors in Iraq, this legislation is particularly timely. Often, fraud cannot be caught unless a whistleblower comes forward, and this bill makes sure that 

whistleblowers have better tools to hold fraudulent individuals and companies accountable. 

I thank Chairman Berman and Representative Sensenbrenner for their leadership 

on this issue and look forward to hearing the testimony from our witnesses. 

Mr. BERMAN. I thank the gentlelady. 

I am now pleased to recognize the Ranking Member of the full 

Judiciary Committee, Lamar Smith, the gentleman from Texas, for 

his opening statement. 

Mr. SMITH. Thank you, Mr. Chairman. 

False claims actions have a distinguished legal pedigree. They 

evolved in England during the 13th century as a way to help the 

crown prosecute fraud perpetrated against the government. Like its 

modern-day American equivalent, these actions of old empowered 

an ordinary citizen to sue a transgressor on behalf of the government and himself. If a transgressor was penalized for his misconduct, the whistleblowing citizen kept a portion of the fine. 

During the Civil War, many companies supplying the Union 

Army with goods and services indulged in fraudulent conduct. This 

compelled Congress to create the first False Claims Act in 1863. 

Defense fraud motivated Congress to revisit the False Claims Act 

again in 1986. Amendments adopted that year encouraged greater 

use of the law. Since then, the Government has recovered more 

than $20 billion under the Act. 

21 

The bill before us, H.R. 4854, represents the largest potential 

change to the Act in more than 20 years. It eliminates the requirement that a false claim be presented directly to a member of the 

Government. It revises the ban against retaliatory measures by including material hindering of a complainant in obtaining new employment. And it expands the Act’s statute of limitations from 6 

years to 10 years. 

Why should we amend the False Claims Act once more? While 

the statute applies to a broad spectrum of industry fraud in housing, defense and food stamp programs, many proponents argue that 

healthcare fraud has become a major problem. Most recently, the 

Washington Post reported that healthcare fraud cost Americans 

$60 billion annually. 

Are stories such as these a reflection of a trend, or are they anecdotal? That is one of the main issues we need to explore today. Are 

fraudulent claims on the rise? If so, are the provisions of H.R. 4854 

necessary to combat this upsurge in commercial crime? Some critics of the House and Senate bills believe the legislation constitutes 

an overreaction. They maintain the Government is better suited to 

policing misconduct and bringing transgressors to justice. 

To these critics, the False Claims Act is counterproductive and 

has devolved into a lottery for plaintiffs attorneys who can’t resist 

the lure of a big payoff. If the Department of Justice intervenes in 

only 20 percent of false claims cases, as The Wall Street Journal 

points out, doesn’t that suggest the other 80 percent might be 

meritless? And why since 1986 have these cases in which the Government did not participate generated less than 2 percent of all recoveries under the Act? 

Other detractors argue that the majority of defendants in false 

claims cases do not fit the stereotype of a venal corporation. Rather, they are small businesses, local governments and nonprofit institutions. Strapped for legal resources, they settle questionable 

cases rather than risk bankruptcy. 

Similarly, many individuals who do business with the Government believe that advocates of the False Claims Act confuse fraud 

with honest mistakes. For example, if a contractor checks a box attesting to his familiarity with the rules and regulations of the 

Medicare program, which reportedly exceed 100,000 pages, but subsequently fails to comply with one of these rules, has he really committed fraud? 

Mr. Chairman, I support whistleblower laws that help the Government uncover fraud. If there is a demonstrable need to pass 

H.R. 4854, we should support it. But we should not support legislation that does little to combat fraud, while placing additional burdens on the backs of businesses, local governments and nonprofit 

institutions. These are the issues that I think this Committee and 

other Committees should explore. 

With that, Mr. Chairman, I yield back the balance of my time. 

Mr. BERMAN. I thank the gentleman. 

Now, I am pleased to yield to the Chairman of the Judiciary 

Committee, my friend Mr. Conyers. 

Mr. CONYERS. Thank you, Mr. Chairman. 

I am going to just put my statement in the record. As usual, you 

remind me of my professors at Wayne University. 

22 

Mr. BERMAN. Who does? 

Mr. CONYERS. You do, because you cover everything in such detail that there is nothing left for me to add, except that I am glad 

we cleared up the Latin pronunciation. 

Mr. BERMAN. Are those the ones you thought of as pedantic and 

boring? [Laughter.] 

Mr. CONYERS. Well, I will save those descriptions for some other 

part of your opening statement. 

But I did take a Latin course that if it didn’t do anything else, 

it helped me pronounce words that began with ‘‘qui’’ in Latin. 

This is an important hearing because we are really talking about 

whistleblowers. Of course, when we get disturbed about people 

cheating the Government, the focus becomes some poor little bloke 

that is getting unemployment compensation for a few weeks more 

than he was eligible, or something like that. But this is the beginning of a subject that goes into a far deeper and more important 

dimension of the Government being treated fairly, which is really 

all of us being treated fairly as citizens and taxpayers. 

So today, we are looking at the big guys. I have another area 

that we will be talking with the Department of Justice about when 

the attorney general comes next month. One of the issues are these 

deferred prosecution practices in which we have huge settlements 

that are being arrived at to avoid prosecution. There is a lot to 

learn from this practice. By the way, I say to my good friend, the 

Ranking Member of the full Committee, Lamar, guess who some of 

the biggest violators are? They are people in the healthcare industry, the pharmaceuticals—Tenet, $900 million; HCA, $731 million; 

Serono, $567 million; TAP Pharmaceuticals, $559 million; Schering-Plough; and Abbott Labs. 

For all of us, we are worried about the healthcare problem, and 

these are the greatest—between oil and the pharmaceuticals— 

areas where most of the largest profit-taking in this capitalist system of ours is taking place. And look who the biggest violators are? 

So, this raises some very interesting questions. I close with the 

IRS. We are not collecting from the big people anymore. I mean, 

IRS reviews of the big people’s returns, all the time we are lowering their taxes over the last 2 decades. And so if I sound slightly 

disturbed about it, you got that right. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Conyers follows:] 

PREPARED STATEMENT OF THE HONORABLE JOHN CONYERS, JR., A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF MICHIGAN, CHAIRMAN, COMMITTEE ON THE JUDICIARY, MEMBER, SUBCOMMITTEE ON COURTS, THE INTERNET, AND INTELLECTUAL

PROPERTY, AND MEMBER, SUBCOMMITTEE ON COMMERCIAL AND ADMINISTRATIVE

LAW

Thank you Mr. and Ms. Chairman for this joint hearing today. 

This bill takes, head on, the issue of fraud against the government. The proposed 

changes to the False Claims Act would provide a better mechanism for the public 

to stand up and speak out when they see fraud against the government. 

It would provide better incentives and remove substantial disincentives such as 

the fear of retaliation. 

The aim of these amendments to the False Claim Act are the same as when the 

law was first enacted in 1863 to enable citizens to help in the fight against the misappropriation of government fund provided through the taxpayer. 

23 

I fully support my friends Mr. Berman and Mr. Sensenbrenner in spearheading 

this effort to strengthen the national ability to fight fraud and recover damages particularly in the subcontractor context. 

The Rockwell, Totten, and Custer Battles cases created a situation which discouraged citizens from coming forward, effectively exempted a whole range of subcontractors and allowed defendants to overuse the public disclosure bar as a defense. It’s time to revisit this issue. 

The criminals who commit this type of fraud are not just cheating the government, they are cheating each and every one of us—taking money out of the pockets 

of taxpayers. 

More over, by redirecting government funds, this impacts so many good programs 

and priories that get shortchanged financially because of limited resources. The 

False Claims Act has rooted out $20 billion in fraud since 1986, including $5 billion 

since 2005. 

In a time such as now, we have to be more vigilant than ever that every dollar 

is used efficiently and effectively for the purpose in which it was intended. 

This nation is in the midst of a double punch, no, a triple punch, the housing crisis, astronomical gas prices which have led to high food prices and a general economic slump. We have to make the taxpayers dollars go farther and do more. We 

can not tolerate theft, not now or ever. This bill puts more eyes and ears toward 

ferreting out and shining the light on taxpayer money that would have been lost 

to fraud. 

I am dedicated to making sure that in attacking fraud, we do not unintentionally 

harm our nations universities and research institutions or our hospitals. 

The research institutions have legitimate concerns that I will be working with my 

colleagues on to find a compromise that targets the intended parties and not innocent intermediaries. I am also dedicate to ensuring that this bill does not encourage 

unfounded claims in its loosening of the standards for instituting and maintaining 

lawsuits and that retroactivity of the provision is done in a equitable manner for 

pending cases currently under seal. 

I look forward to hearing from our witnesses today as we consider this important 

step toward better fraud control and deterrence. 

Mr. BERMAN. Thank you, Chairman Conyers. 

Now, I will introduce our distinguished panel of witnesses. 

Our first witness today is Mr. Albert Campbell, who is with us 

from Winter Springs, FL. From 1973 to 1976, Mr. Campbell served 

as a crew chief on CH-47 Chinook helicopters as part of the 101st 

Airborne Division. He earned a bachelor of science in business administration from Austin Peay in Clarksville, Tennessee. 

In 1978, Mr. Campbell began a 21-year career in the defense industry as a financial analyst for the Honeywell Corporation, working on programs that produced cryptic communications equipment. 

In 1981, Mr. Campbell started work as a financial analyst for the 

Martin Marietta Corporation, which later became Lockheed Martin. There, he served as a senior analyst for the Patriot missile 

launcher programs, supervisor of cost control for the Apache helicopter TADS/PNVS program, and chief of cost control for the 

LANTIRN program, the latter of which was the subject of a False 

Claims Act action filed in 1995. 

Mr. Campbell now serves on the board of directors of Taxpayers 

Against Fraud and runs a family real estate business with his wife, 

Kimberly, in Central Florida. 

Shelley Slade is a partner at Vogel, Slade and Goldstein in 

Washington, DC, where she maintains a nationwide practice representing qui tam plaintiffs under the False Claims Act. She 

earned her undergraduate degree at Princeton University and her 

J.D. from Stanford. 

From 1990 to 1997, Ms. Slade investigated and litigated fraud 

matters in the Civil Fraud Section of the Commercial Litigation 

Branch of the Justice Department, the office which handles the 

24 

most significant and large-scale False Claims Act cases in the country. 

As a trial lawyer attorney in the Commercial Litigation Branch, 

Ms. Slade specialized in matters involving fraud on the U.S. Department of Defense and fraud involving state and foreign government entities. 

Prior to entering private practice in 2000, Ms. Slade was the senior counsel for healthcare fraud in the Civil Division at DOJ, where 

she coordinated the healthcare fraud enforcement efforts, handled 

related policy and legislative matters, and instructed Department 

of Justice attorneys and investigators on the investigation and 

prosecution of False Claims Act matters. 

She speaks regularly at key legal conferences on the False 

Claims Act and has published a number of articles in the area. 

Peter Hutt is a partner at Akin Gump Strauss Hauer and Feld 

in Washington, DC. He advises clients on a broad range of Federal 

Government contract issues and has litigated more than a dozen 

False Claims Act cases, including many qui tam matters. He has 

also litigated cases in Federal courts ranging from securities fraud 

to constitutional issues, and has conducted numerous internal investigations. 

Mr. Hutt is a former chair of the Procurement Fraud Committee 

of the ABA Section of Public Contract Law and he writes frequently on the False Claims Act. He earned his B.A. from Yale College in 1984 and his J.D. in 1989 from Stanford Law School, where 

he was the senior articles editor of the Stanford Law Review. 

He was a law clerk for Judges William Schwarzer and Vaughn 

Walker of the U.S. District Court for the Northern District of California. 

James Helmer, Jr., is a senior partner and president of Helmer, 

Martins, Rice and Popham in Cincinnati. Approximately half of his 

practice involves the representation of employees blowing the whistle on fraudulent Government contractors. He has been trial counsel in over 200 published legal decisions. 

Most recently, Mr. Helmer was the lead relator’s counsel in Allison Engine Company v. United States, and argued the case for the 

plaintiff at the 6th Circuit and at the Supreme Court. Mr. Helmer 

testified before this Committee over 20 years ago, the last time we 

were considering amendments to the False Claims Act, and I am 

pleased to see him back again today. His False Claims Act cases 

have returned over $700 million to the taxpayers and have resulted 

in 13 criminal indictments. 

He has written extensively on the False Claims Act and the practice of qui tam litigation, including the text False Claims Act Whistleblower Litigation. Mr. Helmer earned his undergraduate degree 

from Dennison University, law degree from Cincinnati College of 

Law, where he was editor-in-chief of the Cincinnati Law Review. 

He began his legal career as a law clerk for the chief judge of the 

United States District Court for the Southern District of Ohio. 

We appreciate all of you being here today. Your entire written 

statements will be made part of the record. I ask each of you to 

summarize your testimony in 5 minutes or less. To help stay within that timeframe, there is a light in front of you. When 1 minute 

25 

remains on your time, the light will switch from green to yellow, 

and then red when the 5 minutes are up. 

We are glad to have you here, and look forward to hearing your 

testimony. 

Mr. Campbell, why don’t you begin? 

TESTIMONY OF ALBERT CAMPBELL, WINTER SPRINGS, FL 

Mr. CAMPBELL. Good morning, Mr. Chairman, and good morning 

to the other Members of this Committee. 

My name is Al Campbell, and as you know, I am a whistleblower. Now, my task is to help you understand what it is like to 

be a whistleblower under the False Claims Act, and I am supposed 

to do it in less than 5 minutes. My previous attempts to do this 

have taken me about 1 hour, so here we go. 

I thought that I would speak metaphorically to you, and that it 

might help you understand what it is. A whistleblower uses the 

False Claims Act not as a sword. What a whistleblower uses as a 

sword is his or her truth. What they use as a shield is their conviction of what they believe. 

What we use the False Claims Act for is as a coat of armor. The 

way that coat of armor is constructed is the Congress of the United 

States and Senate of the United States passed the False Claims 

Act, and that False Claims Act was to protect us if we stepped forward and did what we thought was the right thing. As you have 

pointed out, going all the way back to the Civil War, we have been 

encouraged to do it. 

Now, if you encourage someone to go out into battle and you 

promise to provide them with the armor they need to be protected, 

shouldn’t that armor be as complete and as defensive as it possibly 

can? If you have a suit of armor and you knew there was a chink 

in it, would you suit me up and send me into battle with that 

chink? Or would you work to try to correct it? 

Keep in mind that the Department of Justice does not initiate a 

False Claims Act, a relator does. The relator is the person who puts 

himself or herself out on the line initially. Relators do not have 

deep pockets. Relators for the most part are not lawyers. But relators end up engaged in a battle with companies, whether they are 

SBAs or whether they are multinational, multi-billion dollar corporations. They have lawyers and they have funds. The Department of Justice has funds. The relator only has the truth that he 

or she believes. 

When I was going through my litigation with a defense contractor, the first thing the defense contractor did was attack my 

character because that is normally the first thing that they do. The 

second thing the defense contractor does is seek to prove that if 

there was any wrongdoing done, I somehow was the person who 

did it. So our character is continually under attack. 

I was one of those relators who ended up having to use the antiretaliation clause of the False Claims Act because I was retaliated 

against not by the contractor that I filed the lawsuit against, but 

I was retaliated by a subsequent contractor because of the fact that 

that provision, the way it was interpreted by the Federal courts in 

our district, it said that any subcontractor or any contractor who 

did anything to retaliate against me was subject to the law. 

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Now, if it had been ruled a different way, that contractor would 

have gotten away with having violated the intent of the law by 

using a loophole. Those loopholes that exist in the False Claims Act 

are chinks and holes in the armor that you give a whistleblower 

to fight the battles for you, to fight the battles for the people of the 

United States, to fight the battle for themselves. 

It is not about windfall lotteries. It is about a fight to make sure 

that the right thing is done. Regardless of how you question a 

whistleblower’s motives or his or her beliefs, at the end of the day 

what we are trying to do is make sure that if there was in fact a 

violation, that the violation is corrected. Not that the violation fell 

through a loophole, not that the whistleblower, who has put on 

hold his life and his family’s life and has risked his reputation to 

do what he thinks is right and what he believes in—that is not the 

ultimate goal. The ultimate goal is to correct what is wrong. 

So if we close the loopholes, if we fix the armor, the relators will 

be much better served through this process. If you don’t fix the 

holes in it, you will not only lose the relators who step forward and 

get shot down, but you will lose those other people who considered 

becoming a relator, but said, I am not going to step into that with 

armor that has those kinds of holes in it. 

So all I ask you to do is consider the whistleblower. Consider 

closing the loopholes so that the whistleblower can do what you 

have asked him to do, and that is help you fight fraud. 

Thank you. 

[The prepared statement of Mr. Campbell follows:] 

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PREPARED STATEMENT OF ALBERT D. CAMPBELL


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Mr. BERMAN. Thank you very much, Mr. Campbell. 

Ms. Slade? 

TESTIMONY OF SHELLEY R. SLADE, PARTNER, 

VOGEL, SLADE & GOLDSTEIN, LLP, WASHINGTON, DC 

Ms. SLADE. Mr. Chairman of the Committee, Mr. Chairman, 

Madam Chairwoman, and Members of the Subcommittees, thank 

you for inviting me to testify on H.R. 4854, the ‘‘False Claims Correction Act of 2007.’’ I have handled False Claims Act cases on behalf of the qui tam plaintiffs in the United States for 18 years— 

8 years with a private firm and 10 years with the Department of 

Justice in Washington, DC. 

The qui tam bar wholeheartedly supports H.R. 4854. The bill’s 

proposed corrections are badly needed to ensure that the law remains fully effective in an era in which so many Government functions have been outsourced to Government contractors and grantees. 

According to 2008 testimony by the U.S. Controller General, the 

Government is relying on contractors to fill roles previously held by 

Government employees and to perform many functions that closely 

support inherently governmental functions such as contracting support, intelligence analysis, program management, and engineering 

and technical support for program offices. 

A handful of large companies are now effectively serving as a 

shadow government that awards and oversees contracts, disburses 

Federal funds, and attempts to detect fraud in Government contracting. We must do all we can to make sure that the False 

Claims Act covers false claims submitted to this shadow government of Government contractors. 

As we all know, the qui tam provisions in the False Claims Act 

as amended in 1986 have been a resounding success, returning 

over $20 billion to the treasury since 1986. This law is one of the 

most brilliant on the books and qui tam plaintiffs are key to its 

success. In most cases, only an informant from the inside will 

produce a smoking gun that conclusively establishes liability. 

Moreover, time and time again, it has been the relentless, zealous pursuit of qui tam litigation by qui tam plaintiffs and their 

counsel that has played a major role in the large FCA recoveries 

that we read about in the papers. I will provide you this morning 

with just one example, although I would be happy to provide many 

more upon request. 

In 1989, two Northrop Grumman employees filed a qui tam case. 

They alleged that Northrop Grumman was overcharging the Government for radar-jamming devices installed on Air Force jets. 

After a 3-year investigation, the Department of Justice declined to 

intervene in this case. Convinced of the fraud, the relators and 

their counsel litigated the case for 9 years on their own. 

Finally, in 2002, 12 years after the original case was filed, the 

former Northrop Grumman employees were able to convince the 

U.S. of the merits of the case, and the DOJ then did intervene. In 

2006, the case finally settled for $134 million. 

Now, I would like to emphasize a very important point here. This 

case I just described to you, in which the qui tam relators litigated 

on their own, going into their own resources for 9 years, this is in 

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the DOJ statistics as an intervened case. The DOJ did intervene 

in this case a couple years prior to the settlement. There are many, 

many other cases like that in that category called intervened cases. 

So you need to examine closely what is in those stats. Upon request, I could provide you a paper with many such examples. 

The fact that the Act has worked in many ways as planned does 

not mean that we should sit on our laurels, however. There are deficiencies in the current operation of the law, many created by judicial misinterpretations of the statute and others created by the unintended consequences of certain of the provisions in the Act. 

Here are four examples of how H.R. 4854 fixes these problems. 

Number one, for the first time the Act would impose liability on 

healthcare providers who identify overpayments they have received 

through their mistaken billing, and then make the deliberate decision to avoid reporting the overpayment so as to fraudulently secure the overpayment for their own use. 

Under Medicare’s rules, providers are liable to repay such overpayments that they have identified. Moreover, the nondisclosure 

runs afoul of a criminal statute. There should be a civil fraud remedy here, too. In my judgment, this provision should generate hundreds of millions of dollars more in additional recoveries to the U.S. 

government each year. 

In the mid-1990’s, HHS Inspector General June Gibbs Brown 

looked into the level of overpayments in the Medicare program and 

concluded that $23.2 billion or 14 percent of total program costs 

were lost each year due to fraud, waste and abuse. This number 

undoubtedly has only grown larger with the aging of our population, the increased cost of healthcare, and the addition of Medicare Part D, the new pharmaceutical benefit for seniors. 

Second, H.R. 4854 clarifies that the Act imposes liability on those 

who submit false claims to Government contractors and grantees to 

get Government money. Under the Allison Engine Supreme Court 

decision that came out just last week, and under a 2005 decision 

by the D.C. Court of Appeals, the Act is being interpreted to cover 

only those situations in which false claims are submitted to an employee or official of the U.S. 

This change in the bill, which focuses on the nature of the funding rather than the entity paying the claim, is fully consistent with 

the original intent behind the 1986 amendments and reflective of 

the fact that our Government has outsourced even the contracting 

function to private companies. 

Importantly, this change would not get rid of the nexus between 

the Federal interest and the claim. For one thing, there would only 

be recovery permitted when the damages were damages to the 

United States. Secondly, the funds would have to be ones that were 

being held by the contractor or grantee to be spent on behalf of the 

Government or for a Government program. 

Third, as has been referenced by some of the congressmen, the 

bill makes clear that a qui tam plaintiff can proceed with his case 

even if he can’t get his hands on the actual invoices submitted to 

the Government. In a large business, information is compartmentalized. The engineer who sees his bosses intentionally taking 

shortcuts that result in defective military products won’t have access to the billing department’s files. 

35 

Conversely, the billing department employees are unlikely to 

know that the engineers are submitting false information to the 

billers about the work that they have performed. Unless we fix this 

problem that the courts are creating, we will find that qui tam 

plaintiffs will not be able to bring cases against large businesses 

with compartmentalized functions. 

Fourth, the bill takes out of the defendant’s hands the ability to 

move to dismiss qui tam cases on the ground that they are based 

on a public disclosure. The public disclosure bar is designed to protect the Government from copycat pleadings by qui tam plaintiffs. 

It is not designed to protect any interest of the defendants. It is 

the Government that should properly assess whether the plaintiff’s 

pleading is parasitic of a matter in the public domain. 

Yet, the defendants these days are filing motions to dismiss 

under this provision time and time again to delay adjudication on 

the merits and wear down their opposition. In many of the cases 

in which defendants make these motions, there is no active Government investigation that had been generated by the arguable 

public disclosure. If there had been, the Government would have 

been concerned enough to file a motion on its own. 

Thank you very much. 

[The prepared statement of Ms. Slade follows:] 

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PREPARED STATEMENT OF SHELLEY R. SLADE


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Mr. BERMAN. Thank you. 

Mr. Hutt? 

TESTIMONY OF PETER B. HUTT, II, PARTNER, AKIN GUMP 

STRAUSS HAUER & FELD, LLP, WASHINGTON, DC 

Mr. HUTT. Chairman Berman, Chairwoman Sa ́nchez, and Members of the Committee, I thank you for inviting me to testify here 

today. 

I am here on behalf of the United States Chamber of Commerce 

and the U.S. Chamber Institute for Legal Reform in opposition to 

H.R. 4854. For 20 years, I have analyzed and written on the False 

Claims Act and its qui tam provisions. I have also defended individuals and companies both small and large and other entities that 

were sued by qui tam plaintiffs under the statute. 

The Chamber, let there be no doubt, fully supports the Department of Justice in its ongoing efforts to root out and eliminate instances of fraud against the Federal fisc. The Chamber recognizes 

that the False Claims Act has provided the Government with an 

effective tool to combat fraud against the Federal treasury. The $20 billion that has been returned to the Federal treasury 

over the last 2 decades is a testament to the reach of the statute, 

and the hundreds of qui tam actions that are filed each year show 

that the statute already provides sufficient incentives for whistleblowers to come forward. Accordingly, the Chamber strongly believes that no amendment to the statute is necessary or desirable. 

The current proposed amendments would not assist the Department of Justice in its efforts to protect the Federal treasury. Rather, they would encourage qui tam plaintiffs to file baseless and derivative actions that are not in the interests of the United States 

government or its taxpayers. 

At the outset, I would like to dispel any misconception that the 

Supreme Court’s recent decision in the Allison Engine case has 

weakened the statute or compels any legislative change. To the 

contrary, that decision illustrates precisely why no amendments to 

the current legislation are needed. 

The Supreme Court reversed the Totten decision that the bill before you today was in part designed to reverse. The Supreme Court 

unanimously agreed with the Department of Justice that a false 

statement of record is actionable even if no claim is directly presented to the United States. There is no need, therefore, for the 

provisions in the current bill that would eliminate presentment as 

a requirement under the statute. 

Moreover, the Allison Engine decision left untouched sections 

a(1) and a(3) of the statute and imposed only modest, if any, limitations in the liability provisions of section a(2). More broadly, the Allison Engine case exemplifies that the current legislative undertaking is unnecessary. It is far better, we urge, to let the courts 

continue to apply and interpret the current statute which has 

worked so well. 

I will now briefly touch on some of the more objectionable features of H.R. 4854. First, the bill contains expansive new definitions of Government money or property, and administrative beneficiary that would expand the liability provisions of the statute to 

situations that are currently covered by state contract laws and 

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tort laws. The unanimous Supreme Court in the Allison Engine 

case concluded that expanding the False Claims Act to encompass 

all claims submitted to private entities where the claimant never 

intended to seek Government funds would threaten to transform 

the False Claims Act into an all-purpose anti-fraud statute. 

Second, H.R. 4854 would destroy the logical structure of the public disclosure provision of the current law. Since 1986, the Act has 

effectively encouraged true whistleblowers to come forward, but 

deputized the defendants to seek dismissal where the action was 

based on publicly disclosed information. By stripping defendants of 

the ability to raise this defense, parasitic lawsuits that bring no 

new or useful information to the Government will routinely go forward. 

Third, the proposed legislation would unfairly exempt qui tam 

plaintiffs, but not the Department of Justice, from the requirements of Federal rule of civil procedure 9(b) that all persons asserting fraud actions in Federal court must plead the elements of fraud 

with particularity. The sensible purpose of rule 9(b) is to prevent 

abusive plaintiffs from using conclusory allegations of fraud to embroil defendants in litigation and to give defendants sufficient information to prepare their defense. There is no basis whatsoever 

for holding qui tam plaintiffs to a lower standard than all other 

litigants in Federal court, and certainly no basis for holding them 

to a lower standard than the Department of Justice in False 

Claims Act cases. 

Fourth, the bill would encourage Government employees to file 

qui tam lawsuits based on information they learned on the job. The 

Chamber agrees with the Department of Justice that this represents a terrible policy that would lead to conflicts of interest 

within the Government workforce and would regularly undermine 

public trust in the integrity and the impartiality of Government 

personnel. 

Finally, the package of amendments in H.R. 4854 if enacted 

would disproportionately fall on nonprofits, educational institutions, hospitals, and small businesses. The legislation would encourage a spate of unfounded and parasitic lawsuits. Without the 

gate-keeping device of rule 9(b) and without the defense of the existing public disclosure bar, these nonprofits, universities, and 

small businesses will bear the enormous costs of litigating cases 

that the Department of Justice has declined to prosecute. The costs 

of doing business with the Government and participating in vital 

Federal programs will go up. The Government will lose the benefit 

of working with some of its most valuable partners or will pay 

more for their services. 

In sum, the Chamber submits that it is only the qui tam plaintiffs and their attorneys who will benefit from the amendments 

proposed today. The Government, the American taxpayer, and nonprofits, universities, hospitals and small businesses will all be the 

losers. 

[The prepared statement of Mr. Hutt follows:] 

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PREPARED STATEMENT OF PETER B. HUTT, II 


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Mr. BERMAN. Thank you very much, Mr. Hutt. 

Mr. Helmer? 

TESTIMONY OF JAMES B. HELMER, JR., PRESIDENT, HELMER, 

MARTINS, RICE & POPHAM COMPANY, LPA, CINCINNATI, OH 

Mr. HELMER. Thank you, Mr. Chairman. 

In the mid-1980’s, many people in this country became alarmed by reports of $400 hammers and $6,000 coffee pots being purchased 

by the Department of Defense. This body also became alarmed and 

took action as a result of those reports. In February 1986, I testified before this Subcommittee concerning amending the Civil Warera False Claims Act because I had the only pending qui tam case 

in the United States at that time. 

With Chairman Berman’s leadership, this House passed the 

False Claims Act amendments in 1986 and President Reagan 

signed them into law in October of that year. Now, prior to that, 

prior to 1986, the entire Department of Justice, with all of its lawyers and jet airplanes and resources, recovered $26 million for 

fraud. Since 1986, and the amendments that were made at that 

time, the average now is close to $1 billion a year year after year 

after year. 

The False Claims Act has 3,000 words in it. I thought in 1986 

that the concept was simple enough: go out and enlist citizens to 

assist their Government in fighting those who would abuse the 

public trust and steal tax dollars, and at the same time encourage 

those citizens and protect them. I thought that was a simple 

enough concept. 

But I have now spent 25 years litigating under this statute, the 

False Claims Act. I have done that all over the United States. I 

have been involved in cases involving Medicare theft, violation of 

the environmental protection laws, cheating on Federal oil and gas 

leases, and on trade duties. But I have spent most of my time prosecuting this country’s major defense contractors, and these are not 

small businesses. These are not universities. These are the largest 

corporations known to Western civilization. 

What I have learned in those 25 years of using this statute is set 

out in a 1,600-page book I wrote, now five times—it has been written five times on this subject—and what I have learned is that 

nearly all of those 3,000 words in the False Claims Act have been 

challenged and are being challenged by those who represent the 

minority of Government contractors who are unscrupulous. 

As a result, several courts have lost sight of what this body was 

intending to accomplish, and this magnificent public-private partnership, the device of using the qui tam cases is in my opinion 

doomed to become the toothless tiger that it was after 1944 when 

Congress at that time legislated the ability to use qui tam cases 

out of existence. 

Every provision of the False Claims Act Corrections Act of 2007, 

H.R. 4854, is designed to clarify parts of the False Claims Act 

which have been tortured by various judicial decisions over those 

22 years since 1986. The Allison Engine case, which was referred 

to, I have worked on that case for 14 years. The next paycheck I 

get on that case will be the first one in those 14 years. It is not 

a get-rich-quick scheme to bring a qui tam case against a major deVerDate Aug 31 2005 12:38 Nov 25, 2008 Jkt 000000 PO 00000 Frm 00102 Fmt 6633 Sfmt 6601 H:\WORK\COURTS\061908\42973.000 HJUD1 PsN: 42973
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fense contractor—in that case, four major defense contractors. You 

might even end up having your case go to the United States Supreme Court after 14 years. 

While Mr. Hutt is correct that the Supreme Court determined 

that presentment no longer exists in a(2) or a(3), although some 

judges had seen it there—it is not in my copy of the statute, and 

Chairman Berman, it is not in your copy of the statute either—but 

some courts have found it there. He is incorrect to say that is inconsequential, because what the Supreme Court did add last week 

was four new elements that you will find nowhere in the 1986 

version of the statute or the 1863 version of the statute. Intent, 

materiality, reliance, and even damages—none of those are in the 

False Claims Act. All of those can be found in the Supreme Court’s 

Allison Engine decision. 

I urge your Subcommittees, just as I did in 1986, to give full consideration to passing this bill out of Committee and joining with 

your colleagues in the Senate in getting these amendments made 

so that citizens like Mr. Campbell, who is a real patriot in my opinion, can continue to play a vital and necessary role in helping their 

Government to protect the billions and billions of tax dollars that 

remain at risk. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Helmer follows:] 

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Mr. BERMAN. Thank you all very much. 

I yield myself 5 minutes for the first round of questions. 

Mr. Hutt, I appreciated your comments and support for the existing law. I don’t know if you are aware that 22 years ago your client 

didn’t like the bill that was proposed or the law that had just 

passed. Your client felt like it would unfairly drive up the costs of 

doing business with the Federal Government and therefore make 

contracts more expensive; that it would disproportionately fall on 

the backs of small businesses and nonprofits; and felt that the law 

you now so strongly defend would do all the things you predict 

these new amendments to the law would do. Is there any irony in 

that? 

Mr. HUTT. Well, I would just say in response to that that the 

statute as drafted is not perfect, but certainly the Chamber, and 

I think everyone who litigates under the statute recognizes that 

over the past 20 years it has provided the Department of Justice 

with a very effective tool in enforcing fraud. Primarily when it has 

been used by the Department of Justice, it has been an effective 

tool in bringing recoveries back to the Federal treasury. 

But I will say that I do feel strongly that it is very difficult for 

small businesses and smaller entities, not the large defense contractors, to defend themselves against allegations of fraud, especially ones asserted by qui tam plaintiffs under the statute which 

tend in many, many circumstances not to have substantial or sometimes any merit. That is really the reason for the continued opposition to any expansion of the False Claims Act or the reduction of 

available defenses. 

Mr. BERMAN. Would the Chamber change its position on this bill 

if we simply added an amendment that said these amendments 

don’t apply to companies doing less than a certain amount of business a year, or below a certain net worth? Would that cause the 

Chamber to be supportive of this legislation? 

Mr. HUTT. I think it would be difficult to craft any line that could 

be workable in practice. The statute has always been a statute of 

broad applicability and I think that is the best way to frame the 

statute. 

Mr. BERMAN. The public disclosure issue—we wanted to then and 

we want now to stop parasitic lawsuits. It is the Federal Government and the taxpayers that this is supposed to be protecting, and 

we in Congress, don’t want to see private parties grabbing a significant part of a recovery for actions that the Federal Government 

was about to move on in any event, and that is an important consideration. 

Why should that be an issue a defendant raises, rather than the 

Department of Justice, or rather than the Government? Why 

should the defendants have this as a jurisdictional shield to dismiss a case where, and for the sake of this question let’s assume, 

they had committed the fraud and in fact were appropriately liable? Why should they get out of their liability when the Justice Department, which has a high interest in being sure that the taxpayers recover all the damages contemplated, chooses not to file 

the motion? 

In other words, all this does is give the party who has the real 

interest in preventing the parasitic lawsuit the power to stop the 

121 

lawsuit where there has been clear public disclosure of the fraud 

already, and the whistleblower is adding nothing to it in that situation? I am not sure why we should consider continuing to allow defendants to have the tool to raise this issue when their goal in raising that issue is to avoid their liability. 

Mr. HUTT. I think that in a nutshell the reason that it makes 

sense to continue to allow defendants to raise the public disclosure 

bar is best answered by looking at the overall purpose and structure of the statute as it exists since 1986. Since 1986, the structure 

of the statute has worked very well at weeding out parasitic lawsuits and allowing only true whistleblowers to go forward. Essentially, what the statute does is deputizes whistleblowers like Mr. 

Campbell to come forward with allegations of fraud. It does that by 

providing significant financial incentives for them to come forward, 

a share in a potential recovery. 

At the same time, from the very outset in 1986, Mr. Berman, you 

and others were concerned that there could be the possibility for 

more parasitic actions. Therefore, the public disclosure bar was put 

in the statute. The way the statute has worked, because this was 

a jurisdictional provision, since 1986 defendants have been able to 

raise this defense. 

The statute essentially deputizes defendants to do the Department of Justice’s work for it. Defendants have the ability and the 

incentive to determine which of the whistleblowers or qui tam 

plaintiffs who come forward in fact have true, fresh new information of fraud, and which ones are merely parasites or echoing information already in the public domain or already known to the Government. 

It simply makes sense to allow the public disclosure provision of 

the statute to be policed effectively by defendants who have the 

tools of discovery and other tools available to them to determine 

which whistleblowers really are bringing the kind of information 

forward that the Congress has said they want to reward. 

Mr. BERMAN. My time has expired. 

And now, the gentleman from North Carolina, Mr. Coble. 

Mr. COBLE. Thank you, Mr. Chairman. 

I thank the witnesses for the testimony. 

Mr. Hutt, since you are in the witness box, I will visit with you 

again, and relate to your testimony regarding the pleadings with 

particularity. Now, the Government still has that burden, as I understand it. The bill would relieve the whistleblower of that responsibility. Am I reading it correctly? 

Mr. HUTT. Yes, that is the way H.R. 4854 is worded. 

Mr. COBLE. And some might allege that this results inequitably 

to named defendants. What do you say to that? 

Mr. HUTT. I would concur wholeheartedly. It makes simply no 

sense to allow anyone to come into Federal court and fail to identify in an action sounding in fraud, all elements of the fraud with 

particularity. The goal of 9(b) is very simple. Courts have recognized uniformly that the purpose of 9(b) is really two-fold. First of 

all, to ensure that litigants coming into Federal court making serious accusations that sound in fraud have to have the goods. They 

have to have specific information about all elements of the fraud. 

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And then second, they need to put defendants on notice of these 

very serious accusations against them. 

Mr. COBLE. All right. Let me insert Mr. Helmer into the witness 

box, and let’s hear from him regarding my question. 

Mr. HELMER. Fraud is a different animal, the type of fraud that 

Mr. Hutt is talking about, sir. In this area, fraud is disfavored by 

the courts throughout the country in common law fraud. It is a 

disfavored tort. As a result of that, 9(b) was constructed to add an 

additional level or additional hurdle that litigants had to get over 

before they had their ticket to the courtroom. 

The False Claims Act is not disfavored. In fact, this body has 

spoken very clearly and very eloquently that the False Claims Act, 

the qui tam provisions, are to be encouraged, that citizens like Mr. 

Campbell and others are to be encouraged to come forward with 

their information. 

What has happened is that 9(b) has been engrafted onto the 

False Claims Act. I don’t think it should ever have been engrafted 

there to start with. This is a statutory cause of action, not a common law cause of action where the elements are set by this body. 

But be that as it may, 9(b) now having been the landscape, the 

whistleblowers like Mr. Campbell see a portion of the elephant. 

They see where the part for the Chinook is not being made pursuant to the regulations and the contract requirements. They see that 

fraud going on, but they don’t see the claim process that is being 

made by the contractor to the United States Army. That is being 

done in the billing department. 

What Mr. Hutt and his colleagues want is that the whistleblower 

has to have the entire picture of the elephant when he comes into 

court. He has to not only know the fraud that occurred, but he has 

to know the claim process and where the claim is and why that 

claim is false, and tie it back to the allegations and what Mr. 

Campbell saw on the shop-room floor. 

Mr. COBLE. Thank you, Mr. Helmer. 

Before my time expires, Ms. Slade, you wanted to insert your oar 

into these waters? 

Ms. SLADE. Sure. The statute as it would be amended by this bill 

does not get rid of rule 9(b). That is a misperception. There is nothing in the statute that says that rule 9(b) no longer applies. All it 

says is that the qui tam plaintiff when he first goes to court in his 

opening pleading doesn’t need the specifics of the billing documentation. 

I think an important distinction is in your common law fraud 

case, the two parties in the case are the two parties to the transaction, who presumably do have access to the documents reflecting 

the transaction. When the qui tam plaintiff comes in, he comes in 

on behalf of the United States. 

Mr. COBLE. My time is about to expire. The red light is about to 

illuminate. 

Mr. Hutt, let me ask you this, what happens to a whistleblower 

now who brings a frivolous claim? 

Mr. HUTT. There are two principal safeguards that a defendant 

has in an un-intervened qui tam action. First is rule 9(b). Many 

frivolous actions are thrown out because of the staunch conclusions 

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of the courts I think uniformly that rule 9(b) applies. That weeds 

out many cases. 

The second principal tool that defendants have to weed out frivolous qui tam cases is the public disclosure provision. Many cases 

that are frivolous in fact are based upon public disclosures. 

Mr. COBLE. Should we include new penalties in this bill? 

Mr. HUTT. I am sorry? 

Mr. COBLE. Should new penalties be included in the bill before 

us? 

Mr. HUTT. No. There is no reason to impose any additional penalties. The existing statute is, as I have said before and as everyone has recognized, has returned $20 billion to the Federal treasury. There is no reason for any additional penalties to be imposed 

by this legislation. 

Mr. COBLE. I see the red light. Mr. Chairman, I yield back. 

Mr. BERMAN. I thank the gentleman. 

The gentlelady from California, Ms. Sa ́nchez. 

Ms. SA ́ NCHEZ. I am going to pick up where Mr. Coble left off. I 

am going to ask our witness, Ms. Slade, to perhaps comment on the 

response that Mr. Hutt just gave. 

Ms. SLADE. Regarding the issue of penalties? 

Ms. SA ́ NCHEZ. Yes. 

Ms. SLADE. The damage provision in the Act remains the same. 

And then if there is a frivolous unsubstantiated case, there already 

is a provision in the law, as I recall, for the defendant to be able 

to recover its costs. 

Ms. SA ́ NCHEZ. Attorney fees and the like? 

Ms. SLADE. Yes. 

Ms. SA ́ NCHEZ. Thank you. 

Mr. Helmer, based on your experience and expertise, why do you 

think the Government has increasingly relied on qui tam relators 

and their counsel to locate and investigate Federal claims allegations? In addition, how do you think that those public and private 

partnerships have grown over the last 22 years? 

Mr. HELMER. If I could give a real-life example, I was involved 

in litigation against the 17 major oil companies in Texas who were 

cheating the taxpayers on leases for oil and gas revenues. In that 

case, the size of the defendants and the size of the defendants’ 

counsel, this room would not be large enough to hold them all. In 

fact, we had to move the proceedings into a different facility so that 

all the defense counsel could attend the hearings in the case. 

What happened was the Department of Justice was very interested in the case and assigned a very top-notch lawyer to it. But 

the size of the case was just so overwhelming that eventually the 

Government allowed the relator’s counsel to prosecute most of 

those oil companies. We recovered $432 million for the taxpayers. 

On the day that the settlements were reached and the cases were 

dismissed, the United States Department of Justice intervened in 

those cases. You will not find that $432 million listed in the department’s statistics for a non-intervened case because they did intervene at the 11th hour. 

Ms. SA ́ NCHEZ. At the 11th hour. So it is a question of resources, 

to some degree? 

124 

Mr. HELMER. Yes. And what I was going to add, in that case we 

hired 80 additional lawyers—‘‘we’’ being the private counsel representing the relators in Texas—at a cost of in excess of $10 million. The entire Civil Fraud Division of the Department of Justice 

does not have 80 lawyers in it. We supplemented the resources of 

the department in prosecuting that case, and in carrying out the 

intent of this body. 

That is one of the things that I think Congressman Berman and 

his colleagues back in 1986 were interested in, not just people coming forward and bringing information to Government, but in coming forward and putting their neck on the line and helping the 

Government prosecute these cases so that there can be a recovery 

for the taxpayers. That is exactly what happened. 

The public-private partnership is working very well. But the bottom-line answer to your question is, the Department of Justice 

could use additional resources, and until they have those resources, 

they need the qui tam relators and the qui tam relators’ bar, small 

as it is, to complement their abilities. 

Ms. SA ́ NCHEZ. Thank you. 

Mr. Campbell, I just wanted to thank you for your testimony. I 

had an opportunity to read your written testimony, and I think 

that your oral testimony with the metaphor about the armor was 

on point. So I want to thank you for your courage in coming today 

to tell your story. 

Mr. Hutt, when Congress was considering amendments to the 

False Claims Act over 2 decades ago, witnesses testified that they 

didn’t blow the whistle on fraud because there was no anti-retaliation protection. So Congress included the protection in the 1986 

amendments to the Act, and since then court decisions have weakened that protection. H.R. 4854, the bill that we are discussing 

today, would seemingly restore that protection that the courts have 

undermined in their decisions. 

I would like for you to perhaps explain briefly why in your written testimony you suggest that this legislation would unnecessarily 

and confusingly expand the anti-retaliation provisions. I would 

think, and I would hope that you would think and hope, that we 

would want to protect employees like Mr. Campbell, future employees and others, from retaliation for basically blowing the whistle on 

fraud. 

Mr. HUTT. Yes, certainly, I don’t think anyone would take position in favor of retaliation against someone who is trying to blow 

the whistle on fraud. Certainly, I would not take that position. Our 

position is simply that the proposed changes are largely unnecessary. I would respectfully disagree with the characterization that 

the courts have somehow cut back on protections which are available under the anti-retaliation provision. 

In my experience, many qui tam plaintiffs assert claims under 

the 3730(h) provision and are successful in doing so. I view that 

provision as having worked quite well. Right now, the way that 

provision has been crafted is understood. The courts have addressed that provision. The rules of the road, if you will, are fairly 

well understood. 

A large part of the concerns that we have with the current provision is that it is confusingly drafted. It seems to have new terms 

125 

which are unclear, such as making an effort to stop the violation 

of the False Claims Act. The kind of language embedded in H.R. 

4854 we urge is unclear and will lead to a great deal of litigation 

over the years as the courts have to work through what the language might mean. 

Mr. BERMAN. Time of the gentlelady has expired. 

The gentleman from Florida, Mr. Feeney, is recognized for 5 minutes. 

Mr. FEENEY. Thank you, Mr. Chairman. 

I wasn’t here when the original Act was passed, so this has been 

a good education about the nuances of this important area of the 

law. I think that even Mr. Hutt, whose organization apparently opposed the original legislation, agrees that when there is general intentional wrongdoers who defraud taxpayers, there ought to be a 

way to protect those people. 

I think Mr. Campbell’s testimony points out that there is a lot 

of pressure not to come forward in normal circumstances. You have 

colleagues who are going to be mad at you, coworkers, not to mention your bosses or the wrongdoers. And then there is always the 

concern about loss of job, so retaliation. 

On the other hand, it is important to find a way to balance those 

interests that taxpayers have with the higher costs associated with 

total risk avoidance, not to mention lawsuits or frivolous claims, 

which are a huge burden on the American economy and one of the 

reasons that increasingly international companies, or even American companies, are moving offshore because of the civil litigation 

abuse here. 

So finding some balance I think is what all of us want to do to 

one extent or another. All of the witnesses have talked about some 

positive experiences with the Act. We want to create a shield and 

an incentive for people to come forward, without giving a sword 

and sort of a lottery mentality that there is nothing to lose. So 

some of my concerns, and maybe it is just because I don’t understand enough of it—— 

Mr. Hutt, you talked about the 9(b) problem. Right now in most 

cases, whether they are common law or in this case statutory, and 

I suppose we could do away with virtually anything as long as it 

wasn’t unconstitutional in terms of a defense, but one of the typical 

claims that a defendant has is that you have to state a full cause 

of action. You have to plead your entire case. 

I guess my initial question is, supposing that I am an employee 

and I am aware that a contractor I work for is guilty of a specific 

case or incidence of fraud in a contract. But supposing during the 

discovery period, or if the Government intervenes during their discovery, that it becomes apparent that it is not just the widgets we 

produce, but it is the paper clips and it is whatever else we sell 

to the Government, and this is routine. 

Is my potential share of the proceeds for bringing this initial 

claim, am I just subject to the fact that I knew about the widget 

problem, but not about a dozen other problems? Or am I eligible 

to share in the benefits that the taxpayer receives from everything 

that is discovered as a consequence of my bringing the case forward? 

126 

Mr. HUTT. I would answer that question this way. It seems to me 

that the statute is seeking to reward individuals who come forward 

with concrete knowledge, particularized knowledge of fraud. That 

is the benefit to the United States taxpayer that is rewarded 

through the qui tam provisions. 

If a relator comes forward with specific instances of fraud and 

only those instances, let’s call it X, then the relator should be rewarded only for a share of the X that he brings forward. If the 

United States government using its own resources uncovers additional fraud, Y, let’s say, I would urge that it is inappropriate to 

allow the relator a recovery of a share of that Y, when it was the 

Department of Justice and its resources that led to recovery for Y. 

Mr. FEENEY. But let me ask this, suppose that I hire Mr. Helmer 

or Ms. Slade and during our discovery period, we discover that it 

is not just X, but it is A, B, and C. Can we amend our complaint? 

Mr. HUTT. Complaints can always be amended, yes. Qui tam 

plaintiffs, if they bring a case, are permitted I think fairly routinely 

to amend complaints. But there is a real question you raise as to 

whether it is appropriate to allow a recovery for something the relator has not brought forward. 

Mr. FEENEY. But does anybody disagree that if I amend my complaint because of something I have discovered, to add specifics, that 

I would be eligible? 

Ms. Slade? 

Ms. SLADE. I believe that under the current law, many courts 

would rule that, no, you would not be eligible because it was a public disclosure that generated your new knowledge. Many courts 

would rule that way at the current time. 

Mr. HUTT. I would just add this, that the facts you posit are fairly close to what I believe happened in the Stone case, where a relator came forward with information as to fraud and he was wrong. 

The Department of Justice then investigated and found out the real 

fraud. The Supreme Court decided that in those circumstances, it 

was not appropriate to afford a recovery to the qui tam plaintiff because he had not brought forward new, fresh, accurate information 

of fraud. 

Mr. FEENEY. Well, let me just finally say, and if there is time left 

perhaps we can get a couple of comments. The fact that a defendant cannot move to dismiss based on public disclosure is a huge 

concern for two reasons for me. Number one, philosophically I 

think those motions ought to be available to a defendant, and a 

judge ought to decide based on the requirements of the statute. 

But even Mr. Helmer acknowledge that this division of the Justice Department I think you said has less than 80 attorneys in it, 

so that they are probably disinclined to be out there defending hundreds of contractors that may be subject to these sorts of after-thefact lawsuits from employees. Number one, they are disinclined. 

And number two, they don’t have the resources. So it seems to me 

that seems to be an unfair part of this proposal. 

With that, I will yield back the balance of my time. 

Mr. BERMAN. I thank the gentleman. 

I would love to get more into this, but Mr. Johnson, I would like 

to be able to yield to him his 5 minutes, notwithstanding the fact 

127 

that there are about 50 things I would love to pursue with you, I 

think we will do it informally. 

Mr. Johnson is recognized for 5 minutes. 

Mr. JOHNSON. Thank you, Mr. Chairman. 

Mr. Hutt, the Federal Claims Act was first enacted in 1863 in 

response to widespread fraud in defense contracting during the 

U.S. Civil War. It is ironic that we are in the midst of two wars 

and we are dealing with this False Claims Correction Act at this 

point. 

But now, given the fact that the original Act is over 100 years 

old, and I suppose that the Federal rules of civil procedure are not 

quite that old. How was it that the Federal rule of civil procedure 

9(b) has been found to apply to Federal Claims Act cases? Was it 

statutory or was it the result of, say, judicial activism? 

Mr. HUTT. I would say that every court except two that I am 

aware of over the last 20 years has concluded that a case asserted 

under the False Claims Act sounds in fraud. Rule 9(b) is simply a 

general rule of pleading embedded in the Federal rules that says 

that if you are going to plead an action asserting fraud or mistake, 

then you need to allege all the elements of the fraud or mistake 

with particularity. 

Mr. JOHNSON. Courts have even ruled that particularity in the 

case of fraud with respect to billing would require that the relator 

produce the billing records and attach them to the complaint. 

Mr. HUTT. Not attach them to the complaint, but what courts 

have generally—— 

Mr. JOHNSON. Or actually refer to them in the complaint. 

Mr. HUTT. Refer to them in the complaint. Many courts have 

said—— 

Mr. JOHNSON. Which is the same as pretty much being able to 

produce them. 

Mr. HUTT. I would answer it this way. Many courts have said 

that it is not enough to allege a general, inchoate, non-particular 

scheme of fraud unconnected to specific claims for payment. The 

claims for payment, keep in mind this is the False Claims Act. The 

claims are at the heart of the fraud. As a defense counsel, I will 

tell you the first thing you need to prepare a defense is to find the 

claims, find the documents that are associated with the claims. 

Mr. JOHNSON. I understand. But now, if a complaint specifically 

is reasonable with no documentation, an individual who was in Mr. 

Campbell’s position would not be able to produce records. I mean, 

if you can make the allegations, colorable allegations which puts 

you on specific notice, but you don’t have the specific billings 

records, courts are using 9(b) to exclude those kinds of claims. 

Now, Mr. Helmer, did Congress intend that Federal Claims Act 

cases would be subject to the strict pleading provisions of rule 9(b)? 

Mr. HELMER. Congressman Johnson, it is my opinion that they 

did not, and the reason for that is they didn’t call this the Fraud 

Claims Act. It is the False Claims Act. The Fraud Claims Act is 

something that has been overlaid onto this statute by some very 

well-paid, very competent defense counsel, and bought by a number 

of courts around the country. 

The problem with that is it adds additional elements of proof 

that both the Government and the relators have to get over to esVerDate Aug 31 2005 12:38 Nov 25, 2008 Jkt 000000 PO 00000 Frm 00133 Fmt 6633 Sfmt 6601 H:\WORK\COURTS\061908\42973.000 HJUD1 PsN: 42973
128 

tablish their case, additional elements of proof that this body never 

intended to put in there. 

Mr. JOHNSON. What is that conclusion based on? 

Mr. HELMER. The False Claims Act is a statutory cause of action 

that has very specific elements. Fraud is not one of the elements 

of the False Claims Act. Okay? Fraud conjures up terms of materiality. 

Mr. JOHNSON. So this is a False Claims Act, that is a species of 

case—— 

Mr. HELMER. Yes. 

Mr. JOHNSON [continuing]. As opposed to fraud, which is a species of case, but not a False Claims Act case. 

Mr. HELMER. That is right. When you think of fraud, there are 

two people, one lies and the other they know what the statement 

is and what the causation is and the materiality. They know those 

elements. When you have an action involving a crime against the 

sovereign, which is what this statute is designed for—— 

Mr. JOHNSON. Very distinctive. 

Mr. HELMER. Those individuals are not going to have access to 

that type of information. 

Mr. JOHNSON. Okay. 

Mr. HUTT. I would have to disagree strongly. Rule 9(b) speaks of 

fraud or mistake. Most cases asserted under the False Claims Act 

allege fraud, outright fraud, or false claims, but usually fraud in 

addition to false claims. In any event, an allegation of a false claim 

very much is like an action for mistake. By its very terms, rule 9(b) 

is intended to apply broadly to all actions sounding in fraud or mistake. Certainly, the False Claims Act sounds either in fraud or mistake. 

I would also note there are many other Federal actions which are 

statutory involving fraud, such as securities fraud, all of which 

have been held to my understanding to require compliance with 

rule 9(b). 

Mr. JOHNSON. All right. Thank you. 

Ms. Slade, any comment, briefly? 

Mr. BERMAN. Well, all right, we have about 3 minutes and 52 

seconds to get our vote. 

Ms. SLADE. These amendments do not take away the applicability of rule 9(b). In fact, to the contrary, they require a qui tam 

plaintiff to allege facts that provide a reasonable indication that 

one or more violations are likely to have occurred, to provide adequate notice of the specific nature of the alleged misconduct. 

This language tracks one of the court rulings that did apply rule 

9(b), but felt that in the False Claims Act case, that was the way 

rule 9(b) should apply. In other words, you do need to allege your 

fraud or your false claims with particularity, but that doesn’t necessarily mean that you need to have the invoices. 

Mr. JOHNSON. Thank you. 

Mr. BERMAN. The time of the gentleman has expired. 

We have a vote. While I would love to pursue this further, I 

think the story of Mr. Campbell and how the successor employer 

retaliated and under what circumstances would be very interesting, 

but time is not going to let us do this. 

129 

I thank all of you for being here and sharing your insights with 

us. 

Without objection, Members will have 5 legislative days to submit any additional written questions for you, which we will forward 

and ask that you answer as promptly as you can, to be made part 

of the record. Without objection, the record will remain open for 5 

legislative days for the submission of any other materials. 

Once again, with our thanks for your being here and your testimony, the hearing is adjourned. 

[Whereupon, at 11:31 a.m., the Subcommittees were adjourned.] 

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A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD

PREPARED STATEMENT OF THE HONORABLE SHEILA JACKSON LEE, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF TEXAS, AND MEMBER, SUBCOMMITTEE ON

COURTS, THE INTERNET, AND INTELLECTUAL PROPERTY


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