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What is a Reverse False Claim?

Litigation3

Most qui tam whistleblower lawsuits under the False Claims Act involve a Defendant who has made a fraudulent “claim” for money upon the government.  For example, when a hospital sends a bill to Medicare for a medical procedure that was never performed, the hospital has made a “claim” for money upon the government.  If the procedure was never performed, the claim is false.

Not all cases fall into this category. Some cases involve “reverse” false claims.

A reverse false claim arises when a Defendant knows that it owes money to the government, but knowingly conceals or avoids that obligation.

The classic case involves failure to pay import duties or tariffs.  Let’s say a company imports tires from China.  Under the law, importers must pay a hefty tariff to the U.S. Customs Service when importing Chinese tires.  In order to avoid this tariff and cheat the Government, many companies will lie about the goods they are importing.  They will say the cargo contains toys, or clothing, or tires from South Korea – anything, but tires from China.

This is a reverse false claim. The Defendant has knowingly lied to the Government in order to avoid its obligation to pay money to the Government.

Title 31, United States Code, Section 3729 defines a reverse false claims violation as anyone “who knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the United States, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the government.”

Reverse false claims cases are not limited to tariffs and import duties. They can arise anytime a Defendant is under an obligation to pay money to the government, this obligation might arise because of a contract, an overpayment of money, or some other means.

Reverse false claims violations carry the same penalties as normal false claims violations. The Defendant can be required to pay up to three times the total damages suffered by the Government.

If you know of a company that has knowingly avoided or concealed an obligation to pay money to any governmental entity, you may be able to report this conduct and claim a reward. Contact our offices for more information.

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