Legislation that would drastically expand the scope of the False Claims Act and make it easier for whistleblowers to file lawsuits on the government’s behalf is back in the Senate. Senators Chuck Grassley (R-Iowa) and Dick Durbin (D-Ill.) recently reintroduced legislation to amend the FCA, similar to a bill introduced in the 110th Congress that cleared the Judiciary Committee by unanimous voice vote.

The FCA, which was signed into law in 1863 by President Lincoln to thwart war profiteering by government contractors during the Civil War, has recovered nearly $22 billion for the U.S. Treasury since 1986, when it was amended to allow individuals to file lawsuits on behalf of the federal government. Grassley was a sponsor of the ’86 amendments.

In a Feb. 24 floor statement introducing the FCA Clarification Act, Grassley cited the bailout as one of the reasons the legislation is needed, noting that the government is “on the hook for trillions of dollars in new government spending in an attempt to kick-start our ailing economy” and the Treasury has taken “unprecedented steps to bail out financial institutions with hundreds of billions of taxpayer dollars.”

Grassley said he’s concerned that the spending “has occurred too quickly and could be ripe with opportunities for fraud and abuse.”

The bill would have a major impact on several high-profile court decisions that have limited the FCA’s scope, including the 2004 D.C. Circuit Court of Appeals decision in U.S. ex rel. Totten v. Bombardier Corp., the 2008 Supreme Court decision in Allison Engine Co., v. Sanders, a 2007 Supreme Court decision in Rockwell Int'l Corp. et al. v. United States, and a 2006 District Court decision in U.S. ex rel. DRC Inc. v. Custer Battles.

Among other things, the bill would remove a requirement that false claims be directly presented to the government official, instead tying the liability directly to government money and property and would require the Attorney General to file a motion to dismiss parasitic claims filed based upon publicly disclosed information. It would also clarify that non-taxpayer funds under the control of the U.S. government subject to fraud are actionable under the FCA.

The bill would also address a current split between Circuit Courts of Appeal regarding whether a government employee may file an FCA case by codifying a 2003 dissenting opinion from the Tenth Circuit in U.S. ex rel. Holmes v. Consumer Ins. Group, allowing government employees to act as qui tam relators in limited circumstances when they have reported activities up the chain of command, to the Inspector General, and to the Attorney General, if no action is taken by the government.

The bill is part of a broader Congressional push to combat fraud against the government, particularly in light of government spending related to the Troubled Asset Relief Program and the American Recovery and Reinvestment Act. It comes on the heels of legislation introduced Feb. 5 by Grassley and Patrick Leahy (D-Vt.) that would give the government more tools to investigate and prosecute financial fraud.

That bill, the Fraud Enforcement and Recovery Act, among other things, would also revise the False Claims Act to clarify that it extends to any false or fraudulent claim for government money or property, whether or not the claim is presented to a government official or employee, whether or not the government has physical custody of the money, and whether or not the defendant specifically intended to defraud the government.