In Allison Engine Co., Inc. v. United States, ex rel. Sanders, the plaintiff was a whistleblower, or relator, who filed a qui tam lawsuit on behalf of the U.S. government under the False Claims Act seeking the recovery of hundreds of millions of dollars of taxpayer money resulting from alleged false statements about work performed by a subcontractor to a huge multi-billion dollar Navy contract. The Supreme Court faulted the plaintiff for not proving that the subcontractor’s invoices or false statements to the contractor, in this case a huge shipyard, were actually submitted to the government to get the claim paid.

Although the plaintiff-relators in Allison Engine Co. assert in the aftermath of today’s Supreme Court decision that the proof in their case satisfies this heightened standard, today’s decision now creates a huge loop-hole in the False Claims Act and severely undercuts the ability of the government and whistleblowers to hold subcontractors accountable for fraud on the taxpayers that is committed by subcontractors.

Often the U.S. government is not billed directly for the work of subcontractors, and the subcontractors’ invoices are not submitted directly to the government.  Rather the subcontractors bill the contractor and get paid from funds that were paid by the government to the contractor.  For example, when the U.S. government hires a contractor to deliver a ship, a plane, or a weapons system, the government does not review and approve every invoice for work performed by subcontractors.

However, the Supreme Court has now held in Allison Engine Co., that without an invoice from the subcontractor submitted to the government, or other proof that the government relied on the false statements or fraud of the subcontractor to pay the claim of the contractor, then there is no recovery for the U.S..  In other words, it is not enough to prove that the subcontractor cheated to get paid on a government contract.

This decision is a green light for subcontractors to steal.  The real losers here are, once again, the US taxpayers.

It is now up to Congress change the law to stop subcontractors from robbing the taxpayers on huge government contracts and to hold subcontractors fully responsible for their fraud.