U.S. Supreme Court to Review Whistleblower Fraud Case. Effectiveness of False Claims Act at Stake.
The Sixth Circuit first rejected the “Totten” rule articulated by Chief Justice John Roberts. The rule created a massive loophole in the False Claims Act, potentially permitting corrupt contractors to escape civil liability for fraud.
WebWire Oct. 30, 2007
Washington, D.C. October 29, 2007. Today the U.S. Supreme Court granted certiorari in the False Claims Act/Whistleblower case of Allison Engine Company, Inc. et. al. v. United States ex rel Roger Sanders, Supreme Court Docket No. 07-214.
The Court granted a petition filed by the defendants, including the General Motors Corporation, and its former division Allison Engine Company, challenging the ability of the United States to potentially recover billions of dollars in damages as a result of government contractor fraud. The alleged fraud concerned subcontracts for building parts for the Navy’s Arleigh Burke-Class Guided Missile Destroyers. Each of the fifty destroyers in question cost the taxpayer approximately one billion dollars.
The Court granted the defendants’ motion to hear the case based on the “Totten” rule. This rule, first articulated by Chief Justice John Roberts (while serving as a member of the U.S. Court of Appeals for the D.C. Circuit), created a massive loophole in the False Claims Act, potentially permitting corrupt contractors to escape civil liability for fraud.
The loophole, known as the “presentment requirement” could permit subcontractors to escape liability if they were not the party who formally “presented” their claim to the government for payment.
The lower court (i.e. the U.S. Court of Appeals for the Sixth Circuit) supported the whistleblower claims and explicitly rejected the Totten rule. The Sixth Circuit reasoned that contractor liability should not depend on who made the technical presentment, but whether “government money was used to pay the false or fraudulent claim”
“The False Claims Act is under attack by unscrupulous contractors for a very simple reason — it has worked. Billions of dollars have been recovered by the taxpayer, and over the past five years the majority of civil fraud recoveries obtained by the United States were a result of whistleblower disclosures under the FCA” said Stephen M. Kohn, President of the National Whistleblower Center.
“This Supreme Court will decide whether subcontractors can rip off taxpayers and pocket their profits. Since the law was first enacted under Abraham Lincoln’s administration the only purpose of the False Claims act was to catch all the crooks. The idea was to hold not only the people who presented a bill to the government liable, but also anyone who caused such a false claim to be created to be liable to the government for their fraud.
We are hopeful that the United States Department of Justice will once again support this basic principle and file a brief in support of the whistleblower before the Supreme Court in this case” Kohn added.