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CONGRESS had the right idea in 1986 when it amended the False Claims Act to encourage ``whistleblower'' lawsuits by private citizens. But Congress must further improve the False Claims Act if it is to be a really effective weapon in the war against fraud in government contracting. After nearly two years of hearings on the widespread problem of fraud in government programs and procurement, Congress decided fraud detection would be strengthened if private citizens were encouraged to take action without fear of retaliation. So Congress enacted the False Claims Reform Act of 1986.

Born amid ``gross waste and squandering of public funds'' by suppliers of the Union Army during the Civil War, the False Claims Act contains a provision borrowed from ancient English common law enabling private citizens to bring actions on behalf of the government. These cases are called qui tam actions, from the Latin phrase meaning ``who brings the action as well as for the king as for himself.'' For bringing a successful qui tam case, private citizens were awarded part of the government's recovery.

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After the Civil War, the ``private attorney general'' provision of the False Claims Act fell into disuse as concerns about ``piggyback'' lawsuits (based on information contained in criminal indictments, or otherwise publicly available) prompted the courts to restrict qui tam actions.

By reviving the False Claims Act in 1986, Congress essentially ``deputized'' private citizens who have knowledge of fraud against the government. Whether or not the government joins in the case, a private citizen initiating a successful qui tam case is entitled to a portion of the proceeds. To remove the problem of ``piggyback'' lawsuits, Congress stipulated that relators must be the ``original source'' for the information (meaning that cases cannot be filed based on information publicly disclosed in a government hearing, report, audit, investigation, or by news media). The government has 60 days after the case is filed to decide whether to intervene.

Congress also added significant new protection for whistleblowers. The 1986 act provides remedies including reinstatement, back-pay with interest, and, as appropriate, punitive damages for whistleblowers who are discharged, demoted, or discriminated against due to involvement with a False Claims disclosure.

Approximately 240 cases have been filed under the 1986 legislation, yielding a modest recovery of $40 million in penalties and damages, which has been divided between the Federal Treasury and the private plaintiffs.

The relatively small recovery reflects the public's lack of awareness, but also reflects the inability of the Justice Department effectively to implement the qui tam provision. The understaffed Commercial Litigation Section is unable to process the mounting number of cases. Justice has intervened in only 34 cases thus far.

Larger issues revolve around the investigations carried out after a False Claims case is filed. The Justice Department typically refers the case to the agency responsible for the contract, thus creating an inherent conflict of interest, as agencies have a vested interest in defending their earlier contract decisions.

If the Justice Department elects not to intervene, the task of the relator in carrying forward with the case is a difficult one. The department typically resists handing over investigative files, requiring the relator to duplicate the department's investigation without the government's subpoena power and other investigative tools.

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To make whistleblower lawsuits the cost-effective weapon envisioned, Congress should:

1.Empower federal inspectors general to conduct audits and investigations of all qui tam lawsuits, except those determined by the Justice Department to be frivolous. The agencies have a vested interest in defending their past contract decisions, and should not be given the job of investigating lawsuits alleging fraud in the performance of those contracts.

2.Provide additional attorneys and investigators to the Justice Department's Commercial Litigation Section. The cost of the additional resources will be more than offset by successful prosecutions under the False Claims Act.

3.Strengthen the position of the whistleblowers, in cases where the government elects not to intervene, by granting them full access to government audits and investigation. Without these tools, private plaintiffs cannot effectively pursue qui tam cases.

With these improvements in place, the False Claims Act should become a major weapon in the government's war on fraud - both by deterring fraudulent practices by contractors and grant recipients and by recovering substantial sums for the taxpayers.

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