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Whistleblower Champion Chuck Grassley Pushes for Further Strengthening of False Claims Act (Again)

Posted  March 26, 2021

Senator Chuck Grassley (R-Iowa) already is celebrated as the modern-day champion of the False Claims Act.  This is the government’s main fraud-fighting tool, which empowers whistleblowers to act as private attorneys general and sue on the government’s behalf over fraud in government contracts and programs.  In successful cases, it rewards these whistleblowers with between 15% and 30% of the government’s recovery.

The statute was originally enacted by President Lincoln to go after widespread fraud by companies selling rotten food, sickly mules, and defective weapons to the Union Army during the Civil War.  But the law was largely ignored until a century later when in 1986 Senator Grassley pushed through several amendments to strengthen the act and make it more attractive to whistleblowers.  Since then, the government has recovered tens of billions of dollars under the statute with whistleblowers leading the way.

Also since then, Senator Grassley has continued to strengthen the False Claims Act.  Not only by spearheading additional amendments to tighten up the law and how it protects and encourages whistleblowers.  But also by ensuring the government does its job in enforcing the law as rigorously as possible.  Just last month, in fact, he wrote a strongly-worded letter as Ranking Member of the Senate Judiciary Committee to now-Attorney General Merrick Garland making clear his expectation the new Attorney General would work hard to aggressively enforce the statute.

And this past Monday, Senator Grassley took to the stage again, speaking directly to his Senate colleagues on the need to further strengthen the law.  This time, to put forward his plans to introduce bipartisan legislation to “patch” what he considers a “hole in the taxpayer’s pocket.”  According to the Good Senator, some courts have gone astray in assessing materiality under the statute, finding a fraud cannot be material to the government when it continues making the purchase in the face of the fraud.

As one of the primary architects of the modern-day False Claims Act, Senator Grassley stressed his view that this narrow view of materiality is not consistent with the law’s legislative design.  Even worse, it is interfering with the Justice Department’s effective enforcement of the statute, causing the agency to shy away from prosecuting some cases where the fraud and its materiality to the government are obvious.

He offered a very powerful example to demonstrate his concern.  It involved a Defense Department purchase of 20 cargo planes from the Italian manufacturer Alenia for $549 million.  The contract required the manufacturer to refurbish 20 retired aircraft and provide enough spare parts for ten years of maintenance.  As it turns out, four of the planes were never delivered and the sixteen that were delivered could not even fly.  As for the warehouse full of spare parts, they were for the wrong planes.

Despite this blatant fraud, Defense Department inspectors kept certifying the planes and the government kept making payments.  It is not clear why.  But within a few years, the government gave up on the planes, ultimately selling them for $40,000 worth of scrap metal.  In Senator Grassley’s words, as a result of this fraud, the government paid more than a half-billion dollars for “a literal pile of garbage.”  He showed a picture of the trash heap of metal to bring his point home.

Nevertheless, the Justice Department apparently is not pursuing this case because the government continued to pay despite knowing there was fraud.  And according to the Senator, we are seeing a repeated pattern of this artificially constrained enforcement approach because of the Justice Department’s concern of an overly-narrow read of the materiality standard.  With the new legislation he will soon be putting forward, Senator Grassley hopes to close the door on this misinterpretation of the False Claims Act.

He was clear in his underlying rationale:

[W]e can’t allow defendants to get away with scalping the taxpayers because some government bureaucrats failed to do their jobs.  . . .  That’s just kind of the way government, I’m sorry to say, operates.  The government also typically stops payments only when it has fully investigated and corroborated a claim of fraud.  And in my many years of investigating the Department of Defense, it has taught me that a Pentagon bureaucrat is rarely motivated to recognize fraud.  That’s because the money doesn’t come out of their pocket.

We may not all agree on the decisions Senator Grassley has made or the political direction he has steered over the long course of his Senate career.  But when it comes to combatting fraud and embracing the whistleblowers so critical to this task, one thing is for sure.  He has been the ultimate champion with a singular devotion to putting politics to the side and getting the job done.

If you would like more information on the False Claims Act or on what it means to be a whistleblower, or if you have any information on fraud in government contracts or programs and would like to speak to an experienced member of our whistleblower lawyer team, please do not hesitate to contact us.


Tagged in: Defense Contract Fraud, FCA Federal, FCA Materiality, Government Procurement Fraud, Government Programs Fraud, Whistleblower Rewards,