Remarks by U.S. Senator Chuck Grassley of Iowa
Highlights the Importance
of the False Claims Act
Monday, March 22,
want to talk today about the most recent limitations the courts have imposed on
the False Claims Act.
False Claims Act was signed into law
by President Abraham Lincoln in 1863, to fight fraud against the Union Army
during the Civil War.
it is the government’s most powerful anti-fraud statute.
because amendments that I authored in 1986 empowered whistleblowers to sue
fraudsters on the government’s behalf.
then, we’ve recovered more than $64 billion in taxpayer money lost to fraud.
when we talk about anti-fraud statutes like the False Claims Act, we use the term “materiality.”
False Claims Act defines materiality
as “having a natural tendency to influence or be capable of influencing the
payment or receipt of money or property.”
if the government could have withheld payment, then it was likely material.
based on a 2016 Supreme Court opinion, the federal courts are trying to reshape
the Act’s materiality requirement.
In the Supreme Court’s opinion in the Escobar case: “[I]f the Government pays
a particular claim in full despite its actual knowledge that certain
requirements were violated, that is very strong evidence that those
requirements are not material.”
this language, courts have made the government’s payment decision in these
cases a deciding factor.
the Justice Department shies away from prosecuting them.
when the fraud is obvious, and obviously material.
the Office of the Special Inspector General for Afghanistan Reconstruction briefed
me on a report about a botched Defense Department effort to quickly buy cargo
planes from an Italian manufacturer called Alenia.
2009, the DoD bought 20 cargo planes from Alenia for $549 million.
planes were intended to move goods and train Afghan pilots.
contract required the manufacturer to refurbish 20 retired aircraft and provide
enough spare parts for ten years of maintenance.
seal the deal, the company even took DoD personnel on several warehouse tours
to prove they had all these spare parts.
the planes arrived in Afghanistan, mechanics quickly noted the planes were very
they couldn’t actually fly.
poor state of the planes and the hazards of the Afghan elements made that
also lied about their maintenance commitments.
warehouses full of spare parts? They were for the wrong planes.
this blatant fraud, DoD inspectors kept certifying the planes and the
government kept making payments.
here’s the catch.
inspectors later admitted that many of the documents and manuals they reviewed were
of them spoke Italian.
final count: Out of 20 aircrafts, 4 never even made it to Afghanistan.
unclear why DoD continued making payments despite such flagrant violations.
by 2013 it became clear that continuing this program was unfeasible, and the
government tried to sell the remaining 16 planes.
the Obama/Biden administration sold them for scrap metal.
recap: The government bought 20 airplanes for $549 million and in less than five
years sold them for $40,257 worth of scrap metal.
photos next to me show what we bought, compared to what it was actually worth –
a literal pile of garbage.
clear that the actual condition of planes and lack of parts were very material components
of this contract.
thanks to DoD’s poor judgment, and the courts’ new standard, the Justice
Department won’t bring False Claims Act charges
against the company.
is important to protect against parasitic lawsuits.
we can’t allow defendants to get away with scalping the taxpayer because some
government bureaucrats failed to do their jobs.
bureaucrats are highly segmented and often unable to make key decisions for
government also typically stops payment only when it has fully investigated and
corroborated a claim of fraud.
my many years investigating the DoD has taught me that a Pentagon bureaucrat is
rarely motivated to stop fraud.
because the money doesn’t come out of their pocket.
example highlights how the courts’ narrow interpretation of materiality fails
to take into account how the government really works.
the False Claims Act was originally
passed, one fraudster boasted, “You can sell anything to the government at
almost any price if you’ve got the guts to ask.”
that was true in this case.
have already made it public that I am working to patch this hole in the
example perfectly illustrates the need for changes.
plan to introduce legislation to address this issue. I’m in the final stages of
negotiating and look forward to putting forward a bipartisan bill in the coming