Compliance goals for corporations are more often than not a moving target. The ever-changing regulatory landscape may mean that even the most well-intentioned of businesses inadvertently break the law. Consultation and advice of seasoned compliance counsel are paramount to protecting business interests against a whistleblower claim.
The qui tam provisions of the False Claims Act, 31 U.S.C. §§ 3729-33, permit a whistleblower to file an action on behalf of the United States for fraud committed against the government. Among other grounds, the False Claims Act imposes liability on any person who “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval” or “knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim.”
To prevent the punishment of innocent mistakes or negligent claims submission, the False Claims Act defines “knowingly” to mean that a person, with respect to the information presented in a claim, (1) “has actual knowledge of the information;” (2) “acts in deliberate ignorance of the truth or falsity of the information;” or (3) acts in reckless disregard of the truth or falsity of the information.” The government bears the burden of proving the defendant acted “knowingly.”
Liability under the False Claims Act can be avoided if a defendant can show that he acted in good faith on the advice of counsel. The 5th Circuit has long-recognized this advice of counsel defense to negate criminal intent, and under the False Claims Act, to negate the requirement that a false claim be made “knowingly.”
What is required to establish this defense? A defendant relies in good faith on the advice of counsel if he can show that:
- Before taking action, he in good faith sought the advice of an attorney whom he considered competent to advise him on the matter; and
- He consulted this attorney for the purpose of securing advice on the lawfulness of his possible future conduct; and
- He made a full and accurate report to his attorney of all material facts that he knew; and
- He then acted strictly and in accordance with the advice of his attorney.
Raising the advice of counsel defense is not without risk. The defense generally waives attorney-client privilege concerning the advice received, and the defense applies only where the advice was sought prior to taking action in violation of the False Claims Act. Sumner Schick attorneys are well-versed in counseling health care providers regarding business and legal risks.