United States ex rel. W. Benson Chiles, et al. v. Cooke Inc., et al.

The False Claims Act (FCA) prohibits various forms of fraud against the Government. Among other things, it imposes “reverse false claim” liability on anyone who “knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government.” 31 U.S.C. § 3729(a)(1)(G). The FCA defines “obligation” as an “established duty, whether or not fixed, arising from . . . statute or regulation.” § 3729(b)(3). The Third, Fourth, Tenth, and Eleventh Circuits hold that this provision is satisfied when an entity commits misconduct that makes it liable for a penalty or other payment, and then covers up the misconduct to prevent the Government from discovering it and assessing the penalty. By contrast, the Second, Fifth, Sixth, and D.C. Circuits hold that the provision is not satisfied where a coverup conceals the misconduct and prevents the Government from assessing the penalty, because the obligation to pay the penalty was never established. The question presented is: When a defendant commits misconduct that makes it liable to the Government for a penalty, and then covers up its misconduct to prevent the Government from assessing the penalty, has the defendant violated the “reverse false claim” provision of the False Claims Act, which prohibits “knowingly concealing or improperly avoiding” an “established duty, whether or not fixed, arising from [a] statute” to pay money to the Government?