Amendments to False Claims Act May Affect “Original Source” Issues

The False Claims Act amendments found in the Fraud Recovery Enforcement Act of 2009 appear to broaden the “original source” rules by eliminating the requirement that a person must have “direct” knowledge of information underlying False Claims Act allegations.

While some might say the provisions do not eliminate the need for firsthand knowledge, this is not what the statute now says. As amended, the statute would seemingly allow anyone who acquires information secondhand from public sources to bring a qui tam suit and share in any recovery provided the source “materially adds to the publicly disclosed allegations to qualify as an original source.” Importantly, this language does not preclude a party without direct knowledge from obtaining non-public information and using it as a relator, nor does it say exactly what is meant by “materially add” in the new statute. Rather than preclude parasitic litigation, the problem with the False Claims Act for years, it would seem that these amendments may have the tendency to promote such litigation.

Be ready for the fights over “materially add” and the elimination of “direct” knowledge. Be ready for a whole new class of relator (i.e., relators who “figure it out” and look to cash at the end of the day without any “direct” knowledge of facts).

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