This Week in Whistleblower History: House Resolution on July 8, 1861 Led to the Original False Claims Act
This week marks an important event in whistleblower history. On July 8, 1861, Congressman Charles H. Van Wyck of New York submitted a resolution to the U.S. House of Representatives to create a special committee of five members appointed by the Speaker of the House to investigate fraud and profiteering in military contracts during the Civil War. The committee’s investigations ultimately led to the enactment of the original False Claims Act.
The Investigative Work of the 1861 House Special Committee
The House approved the resolution and the Committee quickly got to work. By December 1861, it had held numerous hearings and examined hundreds of witnesses throughout the North, including in Washington, New York, Massachusetts, Illinois, and Pennsylvania. The Committee’s first report was submitted on December 17, 1861 and totaled more than 1100 pages. But the work of Charles Van Wyck and the other members was just getting started.
The Importance of the Winder Building to FCA History
Many of the transactions investigated by Congressman Van Wyck’s committee passed through or involved personnel at the Winder Building, shown in the above photo, located at 17th and F streets, NW, in downtown Washington, D.C., just one block from the White House. Completed in 1848, it is named after its original owner, William H. Winder, Jr., and when constructed was the tallest and largest office building in Washington.
Today, the Winder Building houses the Office of the U.S. Trade Representative. But during the Civil War, it was the headquarters of various agencies connected to the Union war effort, including the Navy Bureau of Ordnance, the Army Corps of Engineers, the Army Ordnance Department, and the Quartermaster General. Lincoln was known to visit. In 1865, the U.S. Signal Corps constructed a station on the roof to send messages by flag and lights to troops in the fortifications around Washington. More about that in a moment.
The False Claims Act: During the Civil War and Today
As the Civil War raged on, Congressman Van Wyck’s investigations into war profiteering forged ahead, eventually leading, on March 2, 1863, to the enactment of the original False Claims Act. Or, as it was known at the time, “An Act to prevent and punish Frauds upon the Government of the United States.”
An interesting feature of the original False Claims Act is the extent to which it took aim at fraud involving members of the military. The first section of the new statute focused on the role of military service-members in fraudulent or sham contracts with the government. A violation of the False Claims Act was a criminal offense, subjecting service-members to court martial. Individuals not in the military were also criminally liable under the False Claims Act. They were subject to between one and five years in prison for each offense, a penalty of $2,000, plus an amount equal to double the damages that the United States sustained.
Today, the criminal provisions in the original False Claims Act have been carved out and codified elsewhere. Fraud involving members of the Armed Forces, although still encompassed within the law, is no longer primary. The False Claims Act is now a purely civil enforcement statute, with defendants subject to treble damages plus penalties for each false claim.
One feature of the False Claims Act, however, has remained constant: the qui tam provision that permits private individuals with knowledge of fraud to bring a lawsuit on behalf of the United States to recoup government money. Congressman Van Wyck’s original legislation to form the Special Committee to investigate military contracting fraud was titled “A bill to reduce the expenses of government.”
Use of the False Claims Act to Protect Military Communications
Today, the False Claims Act is still saving the government money. For example, last July, Cisco Systems Inc. paid the government $8.6 million to resolve FCA allegations brought by a whistleblower, James Glenn, who worked in Europe for a Cisco partner. Constantine Cannon represented Mr. Glenn in the litigation. He alleged that Cisco had knowingly sold defective video surveillance software to state and federal government agencies, including the U.S. Army, Navy, Air Force, and Marine Corps. The defects exposed government systems to the risk of unauthorized access and the manipulation of vital information. Mr. Glenn had reported critical security vulnerabilities in the software to Cisco, but Cisco had continued to sell the technology to government entities, despite the fact that the software failed to comply with FAR procurement standards that require basic cybersecurity controls. It was the first ever FCA litigation involving cybersecurity fraud.
Back in 1865, it was vital that the messages sent by the Union Signal Corp from the roof of the Winder Building to soldiers in the field not be intercepted or manipulated by the Confederacy. Today, as the Cisco case shows, it is important that software purchased by government agencies for surveillance purposes not be vulnerable to hacking by outside agents.
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