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Supreme Court Issues Pivotal Decision About Subcontractor Liability under the False Claims Act

Today the Supreme Court issued a ruling on a key issue under the False Claims Act, i.e. whether the False Claims Act includes fraudulent claims made by subcontractors on a federal project or whether it only includes claims submitted directly to the federal government.  In Allison Engine v. Thacker , the Court held that a relator asserting claims under Sections 3729(a)(2) and (3) of the False Claims Act cannot simply show that the defendant’s use of a false record or statement resulted in payment or approval of a false claim.   Instead, the relator must show that the defendant intended to use a false record or statement to induce the government’s payment or approval of a false claim. 

Relying on the plain meaning of Section 3729(a)(3), the Court held that the False Claims Act can be applied to subcontractors and other indirect recipients of government funds.  According to the Court, the False Claims Act was intended to expose any conspiracy to defraud the government in getting a false claim approved or paid and therefore, subcontractors who submitted claims for payment that concealed defects in Gen-Sets manufactured for installation on Navy destroyers, can be liable under Sections 3729(a)(2) and (3) of the False Claims Act.


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