Supreme Court Narrows Key Whistleblower Law

WEBWIRE – Monday, June 9, 2008

Washington, D.C. June 9, 2008. Today the Supreme Court handed down its decision in Allision Engine Co., Inc., et al. v. United States ex rel. Sanders , a whistleblower case filed under the False Claims Act. In its decision the Court narrowed the scope of the False Claims Act, and upheld a defense which permits companies that profit from illegally obtained government monies to escape liability.

The ruling, based on a hyper-technical reading of the law, rejected a lower court determination that whistleblowers can prevail in False Claims Act cases if they demonstrate that “a false statement resulted in the use of Government funds to pay a false or fraudulent claim.” The Court went on to explain that “Had Congress intended [the False Claims Act] to apply to any one who conspired to defraud a recipient of Government funds, it would have so provided.”

 Stephen M. Kohn, the President of the National Whistleblower Center, issued the following statements concerning the decision:

“The Supreme Court’s ruling highlights the urgent need for Congress to pass the False Claims Correction Act. Every time a recipient of federal funds escapes punishment for improperly spending those dollars, the taxpayer is the big loser. No government contractor should be permitted to rip off taxpayers and profit from that misconduct. Congress must immediately close the loopholes in the False Claims Act.”

“The Supreme Court’s decision reinforces the need for Congress to act. The Court specifically held that it could not ”deviate“ from the strict words in the statute -- regardless of the intent of Congress, and regardless of how many billions of dollars are ripped off. In its concluding paragraph the Court laid the responsibility for fixing the law directly on Congress: ’Had congress intended’ the False Claims Act to ’apply to any one who conspired to defraud’ the government ’it would have so provided.’”

The Court’s decision still permits whistleblowers to file claims against government contractors and subcontractors, but it narrowed the scope of the law and now requires additional evidence of intent in order to hold subcontractors liable under the law.