Government Knowledge Defense Against Whistleblowers

The False Claims Act allows private persons, known as “relators” or whistleblowers, to bring suit on behalf of the government and share in any recovery obtained.

The FCA often generates multimillion dollar recoveries. In fiscal year 2012, federal and state governments took in over $9 billion under the False Claims Act and state counterparts. The law’s liability provisions encompass not only those who have actual knowledge of false claims, but those who act in “deliberate” or “reckless” disregard of the truth or falsity of information underlying a false claim.

Before 1986, the FCA contained a complete “government knowledge” defense. The 1986 amendments eliminated that, but government knowledge remains germane to demonstrating that a defendant did not act with an offending state of mind when submitting the false claim. Culpability under the FCA does not require intent to defraud, but there must be some element of gross negligence or willful blindness. The government knowledge defense can show that this state of mind did not exist.

The typical example of the successful application of the government knowledge defense is where government contracting officers are aware of, and approve, a defendant’s alleged deviations from the terms of the contract. According to the authors, keeping the government informed is essential to laying the groundwork for this defense. This costs the company little or nothing, and it may help forestall the penalties, damages, and legal fees that False Claims Act charges often bring.