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Revised Civil False Claims Act Targets Financial Institutions and Other TARP Fund Recipients

June 10, 2009

By KirD. Behre, Mark Koehn and Elizabeth Stevens

Recent amendments to the Civil False Claims Act open the door to potential fraud investigations and suits against financial institutions and other Troubled Asset Relief Program (TARP) fund recipients. The Civil False Claims Act, 31 U.S.C. §§ 3729-3733 (FCA), has been used in the past to target alleged government contractor fraud and healthcare fraud. It is important for TARP fund recipients to understand the implications of potential FCA liability.

On May 20, 2009, President Obama signed the Fraud Enforcement and Recovery Act (FERA), amending the FCA. The amendment expands liability to requests for funds by a contractor, grantee, or other recipient, if the money or property is to be spent or used on the Governments behalf or to advance a Government program or interest[.] FERA, Pub. L. No. 111-21, 123 Stat. 1617, sec. 4(a) (2009). It is unclear how courts will interpret the vague and potentially expansive language used on the Governments behalf and to advance a Government program or interest. Yet the Senate Report accompanying the bill provides support for use of the revised FCA to police the extraordinary economic support the government has provided to the banking system under TARP as established by the Emergency Economic Stabilization Act of 2008.