The False Claims Act, also known as the "Lincoln Law," was enacted during the Civil War to combat the fraud perpetrated by companies that sold supplies to the Union Army.

War profiteers were shipping boxes of sawdust instead of guns, for instance, and swindling the Union Army into purchasing the same cavalry horses several times. "You can sell anything to the government at almost any price you’ve got the guts to ask," boasted one profiteer who made millions unloading moth-eaten blankets to the military.

President Abraham Lincoln strongly advocated passage of the False Claims Act. It contained "qui tam" provisions that allowed private citizens to sue, on the government’s behalf, companies and individuals that were defrauding the government. "Qui tam" is short for a Latin phrase, "qui tam pro domino rege quam pro se ipso in hac parte sequitur," which roughly means "he who brings an action for the king as well as for himself." Congress passed the statute on March 2, 1863.

The original False Claims Act assessed wrongdoers double damages and a $2,000 civil fine for each false claim submitted. Those who filed lawsuits, known as "relators," were entitled to receive 50 percent of the amount the government recovered as a result of their cases.

The statute remained virtually unchanged until 1943 when Congress radically altered the qui tam provisions. The changes included a drastic cut in the relator’s reward, so there was less of an incentive for people to report fraud.

Another damaging change was a provision that prohibited qui tam lawsuits based on evidence or information already in the possession of the federal government. This provision effectively prevented whistleblowers from filing a qui tam lawsuit if any government employee had received a tip about the fraud or if any information about the fraud was contained in any government file, even if the government was not investigating the matter or trying to stop the fraud, and even if the whistleblower was the source of the government’s knowledge.

The 1943 amendments emasculated the False Claims Act, and it fell into almost complete disuse.

In the mid-1980s, Congress took another look at the law, spurred by reports of widespread fraud against the government. Defense contractor practices were receiving the greatest media attention. In part, this was due to the vastly increased defense spending spurred by the Reagan administration’s response to the Cold War.

The public was reading a steady stream of stories describing outrageous billing practices, such as the Navy paying $435 for an ordinary claw hammer and $640 for a toilet seat. In 1985, the Department of Defense reported that 45 of the largest 100 defense contractors -- including nine of the top 10 -- were under investigation for multiple fraud offenses.

Government enforcement agencies, meanwhile, complained that their efforts to investigate and stop fraud were hamstrung by insufficient resources, a lack of adequate legal tools and the difficulty of getting individuals with knowledge of fraud to speak up for fear they would lose their jobs.

Frustrated with the government’s inability to respond effectively to outrageous charges and other improper billing behavior by government contractors, Congress decided to revise the False Claims Act to encourage more whistleblowers to come forward and to create incentives for private attorneys to use their own resources to investigate fraud. Congress sought to create a partnership between public institutions and private citizens in keeping with President Reagan’s promise of greater privatization of government functions and the use of market forces to enhance government services.

Senator Charles Grassley, a Republican from Iowa, and Representative Howard Berman, a Democrat from California, sponsored the amendments to the False Claims Act, which received wide bipartisan support. President Reagan signed the bill into law on Oct. 27, 1986.

The amended False Claims Act provided that whistleblowers who brought successful cases were entitled to 15 percent to 30 percent of the government’s recovery, and their attorneys were guaranteed payment of their regular hourly fees by the defendant. Companies and other entities that defraud the government are liable for treble damages and a $5,000 to $10,000 penalty for each false claim.

When Congress amended the law, it also ensured that people who had provided information about fraud to the government could once again file a qui tam lawsuit.

As more people have become aware of the False Claims Act, the number of lawsuits has jumped tremendously.  More than 3,000 qui tam cases have been filed since 1986.

Legislative history of the 1986 amendments to
the False Claims Act

Sept. 18, 1985 -- False Claims Reform Act: Hearings before the Subcommittee on Administrative Practice and Procedure of the Senate Judiciary Committee, 99^th Congress, 1^st Session.

Feb. 5 and 6, 1986 -- False Claims Act Amendments: Hearings before the Subcommittee on Administrative Law and Governmental Relations of the House Judiciary Committee, 99^th Congress, 2^nd session.

House Report 99-660 on H.R. 4827, "False Claims Amendments Act of 1986," June 26, 1986.

Senate Report 99-345 on S. 1562, "False Claims Reform Act of 1985," July 28, 1986.

Congressional Record
July 29, 1986 -- Senate, S9805-9816. Statements by Grassley, Cohen and Hatch introducing amendments reached by a compromise between S.1562 and S.1134.

Aug. 11, 1986 -- Senate, S11238-11249. Statement by Dole introducing S.1562 for consideration, followed by a statement by Grassley discussing the changes incorporated in the amendments, and passage of the bill.

Sept. 9, 1986 -- House, H6475-6488. Statement by Glickman introducing H.R.4827 and commenting on changes in the language of the qui tam provisions, administrative remedies and contract disputes act. Fish discusses amendments dealing with the intent standard and burden of proof. Brown discusses consequential damages and civil investigative demands. Bedell makes general statement. Passage of bill.

Oct. 3, 1986 -- Senate, S15018-15023. Introduction of Grassley amendment No. 3214 to S.1562. S15036-15064. General statement by Grassley introducing Senate-House compromise bill S.1562, a summary of agreed-upon changes and Senate concurrence in the compromise bill.

Oct. 7, 1986 -- Senate, S15515. Introduction of omitted remarks of Oct. 3, 1986 concerning a summary of agreed-upon changes after negotiation of S.1562.

Oct. 7, 1986 -- House, H9382-9389. Introduction by Glickman of the Senate amendments to the House amendments. Berman reads in legislative history. House concurrence in the compromise bill.

Nov. 3, 1987 -- House, H9515. Colloquy between Berman and Glickman.

Oct. 18, 1988 -- Senate, S16704-16706. Clarification of provision of False Claims Act Amendments between Grassley and DeConcini.

Oct. 18, 1988 -- House, H10641. Statement by Berman regarding retroactivity application of False Claims Act.