False statements and false claims.(Twenty-Second Annual Survey of White Collar Crime)

 
  I.  INTRODUCTION 
 II.  FALSE STATEMENTS 
      A.  Elements of a [section] 1001 Offense 
          1.  Statements or Concealments 
          2.  Falsity 
          3.  Materiality 
          4.  Intent 
          5.  Jurisdiction 
      B.  [section] 1001 Defenses 
          1.  "Exculpatory No" 
          2.  Ambiguity 
          3.  Double Jeopardy 
          4.  Other Defenses 
      C.  Sentencing under [section] 1001 
III.  FALSE CLAIMS 
      A.  Elements of a [section] 287 Offense 
          1.  Presentation of a Claim 
          2.  False, Fictitious, or Fraudulent Claims 
          3.  Knowledge 
      B.  [section] 287 Defenses 
          1.  Intent-Based Defenses 
          2.  Double Jeopardy 
       C. [section] 287 Enforcement 
          1.  Enforcement Provisions 
          2.  Sentencing 
 IV.  CIVIL PROSECUTIONS UNDER 31 U.S.C. [section][section] 3729-3733 

I. INTRODUCTION

Sections 287 and 1001 of Tire 18 of the United States Code make it a crime to (1) knowingly make a false claim upon or against the United States or to any department or agency thereof (1) and to (2) knowingly and willfully make a false statement to the United States or to any department or agency thereof, (2) respectively. In addition, 31 U.S.C. [section][section] 3729-33 provide for the civil prosecution of false claims. (3) The three statutes, covered by a single statute from 1863 to 1948, contain very similar elements. (4) Often, this grants prosecutors the ability to choose the statute under which they desire to prosecute cases of fraud. (5) In some instances, it does not constitute a violation of the Double Jeopardy Clause to punish defendants under both [section] 287 and [section] 1001 because the language of the statutes demonstrates Congress intended to create two distinct violations. (6)

While prosecutors may use the statutes interchangeably, some significant differences do exist among the three statutes. For example, while materiality is an element of all three [section] 1001 offenses, (7) the circuits are split on whether materiality is an element of [section] 287. (8) In addition, [section] 1001 requires that the prosecutor prove the defendant both knowingly and willfully lied to the government. (9) However, the circuits are divided on the intent requirement for [section] 287. (10)

In addition to the two criminal statutes, 31 U.S.C. [section] 3730(b) affords private citizens the ability to bring a qui tam civil action on behalf of the government for a violation of [section] 3729. (11) Suits that are settled or successfully prosecuted under this statute impose civil penalties payable to the U.S. government and provide for the qui tam plaintiff to receive a portion of the proceeds. (12)

There are tactical reasons why a prosecutor chooses to use one statute over another. For example, the Department of Justice ("DOJ") advises its attorneys to pursue cases under [section] 287 rather than under [section] 1001 whenever possible, in order to enhance the government's ability to favorably use estoppel doctrines in subsequent civil suits. (13) Section II of this article discusses prosecutions brought under [section] 1001, the false statements statute. Section III of this article addresses criminal charges brought under [section] 287, the false statements statute. Finally, Section IV addresses the civil false claims statutes.

II. FALSE STATEMENTS

Section 1001 of Title 18 of the United States Code (14) is a broad and frequently used (15) statute that criminalizes the act of making false statements to the United States government. Title 18 also contains several more specific false statement statutes, including [section] 1014, which criminalizes false statements to influence loan and credit applications, (16) and [section] 1027, which criminalizes false statements related to Employee Retirement Income Security Act (ERISA) documents. (17) However, prosecutors use [section] 1001 most often because they can enforce it either alone or in tandem with more specific statutes, such as [section] 287. (18) Also, it is used frequently because of the comparative malleability of its elements. (19)

During the last decade, the government has used [section] 1001 to prosecute a wide variety of crimes. (20) Although high profile [section] 1001 prosecutions during the Clinton administration raised criticism regarding the level of discretion that the statute provided prosecutors, (21) [section] 1001 continues to be used frequently. Government scrutiny of federal service providers has also increased, leading to convictions of health care executives who overbilled the government for health services. (22) Recent convictions, such as those of Martha Stewart and of Peter Bacanovic, have increased awareness in the corporate sphere of the consequences of lying to the government. (23) Additionally, the convictions of Soliman S. Biheiri and Faisal M. Al Salmi under [section] 1001 demonstrate that the government is now using the statute to prosecute suspected terrorists. (24) In fact, Congress recently amended the statute to enhance the penalties available if the offense involves terrorism. (25) Congress is considering another amendment that would impose a minimum 5-year prison sentence if the offense involves the failure of a convicted sex offender to register under the Sex Offender Registration and Notification Act. (26)

Section 1001 covers offenses spanning three broad categories: (i) falsifying, concealing, or otherwise covering-up a material fact by any trick, scheme, or device; (ii) making materially false, fictitious, or fraudulent statements or representations; and (iii) making or using a writing or document with knowledge that such document contains materially false, fictitious, or fraudulent statements. The last category, which is rarely prosecuted, criminalizes the use of a writing or a document to give: (i) false information for the purpose of receiving a monetary or proprietary benefit; (27) (ii) false information in order to resist monetary claims by the United States; (28) (iii) false information to pursue a governmental privilege, such as employment or a security clearance; (29) and (iv) false information to frustrate lawful regulation. (30)

Part A of this section describes the five elements of a false statement offense under [section] 1001. Part B discusses several defenses to a charge under [section] 1001. Part C explains the sanctions for this offense.

A. Elements of a [section] 1001 Offense

To convict a defendant under [section] 1001, the government must prove five elements: (i) the defendant made a statement or concealment; (ii) the statement was false; (iii) the statement or concealment was material; (iv) the statement or concealment was made "knowingly and willfully"; and (v) the statement or concealment falls within executive, legislative, or judicial branch jurisdiction. (31)

1. Statements or Concealments

Section 1001 covers all statements, whether oral or written, sworn or unsworn, voluntary or required by law. (32) Such statements include: false invoices and certifications, (33) checks naming false drawees, (34) false applications to obtain official documents, (35) false identifications given to border (36) or customs agents, (37) false Medicare claims, (38) false marriage vows given to gain citizenship, (39) false information given to federal investigators, (40) and a variety of false statements made to other governmental entities. (41) Section 1001 can also extend to affirmative acts of concealment even where no actual statement has been made. (42) Concealing information with intent to deceive the government is covered by [section] 1001, as is concealing information with the intent to cause another to violate his duty to disclose. (43) Affirmative acts include both nondisclosures and misrepresentations of material facts. (44) In addition, silence may constitute a false statement under [section] 1001 when it serves to mislead or when the individual has a duty to speak. (45)

2. Falsity

Falsity, the cornerstone of a [section] 1001 offense, can be established by either an affirmative false representation or by the concealment of a material fact. (46) To prove the falsity element, the government must show a non-disclosure of a fact through a "trick, scheme, or device." (47) However, where an affirmative representation is made, no trick, scheme, or device must be proved. (48) A statement may be considered false for [section] 1001 purposes even though it is "literally true" if it misleads federal agents. (49)

Courts disagree on whether [section] 1001 imposes a general duty to be honest and forthcoming, or whether an independent statute must explicitly or implicitly impose a specific duty. Several circuits have noted that [section] 1001 is a "catch-all" provision that imposes a general duty to be forthcoming even if the misrepresentation is not specifically prohibited by statute. (50) However, the Third, Seventh, and Eleventh Circuits have required the government to prove that the defendant had a specific legal duty to disclose the material facts allegedly concealed. (51)

The issue of whether or not there is a duty frequently arises in the context of the reporting requirements of the Federal Election Campaign Act of 1971. (52) This issue also arises under the Currency Transaction Report Act ("CTRA"), (53) which requires domestic financial institutions to file currency transaction reports ("CTRs") describing transactions and identifying parties who transfer United States currency. (54)

3. Materiality

In an attempt to resolve a conflict among the circuit courts, Congress amended [section] 1001 in 1996 to extend the applicability of the materiality element of [section] 1001 to all of subsection (a). (55) By codifying a minimal materiality threshold, the amendment ensured that defendants would not be held liable for trivial falsifications. (56) The Supreme Court has ruled that materiality is a "mixed question" of law and fact and, consequently, is best resolved by a jury. (57)

Both prior and subsequent to the enactment of the amendment, courts considered a statement to be material if it either: (i) actually influenced or (ii) has a natural tendency or capacity to influence a decision or function of a federal agency. (58) The false statement need not have actually influenced the agency for the materiality requirement to be met. (59) A voluntary, non-mandatory statement may qualify as material. (60) Moreover, a statement may be material even if the declarant derived no pecuniary or economic benefit at the government's expense. (61) However, courts have held a statement is not material where the government itself supplied the information that the defendant relied upon in making the false statement. (62)

4. Intent

Knowing and willful intent (63) to make a false statement is a necessary element of a [section] 1001 violation. (64) "Intent" under [section] 1001 encompasses the intent to deceive, mislead, or induce belief of false information. (65) The intent to "manipulate and pervert" a government agency's function satisfies the element, even where no intent to deceive in a "subjective or literal sense" exists. (66) The statute does not require the intent to defraud. (67)

Juries can infer from circumstantial evidence that the defendant acted knowingly and willfully, even if there is no direct proof of actual knowledge or willfulness. (68) A "reckless disregard of the truth" satisfies the intent element, (69) a concept often expressed to the jury in a "willful blindness" instruction. (70) Furthermore, a defendant can have the requisite intent even if he or she is unaware of the potential consequences of making a false statement. (71)

5. Jurisdiction

Submitting a false statement to any of the three branches of government, including the federal judiciary, constitutes a basis for application of [section] 1001. (72) The scope of the term "department" in [section] 1001 is consistent with the Supreme Court's interpretation of that term as set forth in United States v. Bramblett, (73) which included Congress and the federal judiciary.

The term "jurisdiction" in [section] 1001 serves a broader purpose than its typical use in the legal system. (74) In a [section] 1001 context, there is jurisdiction to prosecute a false statement when the request for information falls within the general authority of the requesting department or agency. (75) Jurisdiction exists even if the government has not lost money or property. (76) Moreover, jurisdiction exists regardless of whether the defendant communicated the statement directly to the government (77) or knew that the government had jurisdiction over the false statement. (78) Where a defendant knowingly and willfully makes a false statement to a state agency, the defendant need not have actual knowledge of the federal jurisdiction over the state agency to secure jurisdiction under the statute. (79)

B. [section] 1001 Defenses

Most successful defenses in [section] 1001 prosecutions have been based on the "exculpatory no" and "ambiguity" doctrines. The "exculpatory no" doctrine has been rejected by the Supreme Court; however, due to the constitutional implications discussed below, the United States Attorneys' Manual discourages prosecutors from pursuing "exculpatory no" situations. Ambiguity remains a viable defense. Double jeopardy and other defenses, including constitutional defenses, have been less successful. (80)

1. "Exculpatory No"

Despite the Court's traditionally broad view of the scope of [section] 1001, (81) some lower courts had limited its reach with the judicially-created "exculpatory no" doctrine. (82) The doctrine made [section] 1001 "[in]applicable to false statements that are essentially exculpatory denials of criminal activity." (83) In Brogan v. United States, (84) the Supreme Court rejected the "exculpatory no" exception, holding that there was no exception to criminal liability for false statements consisting of a mere denial of wrongdoing. (85) The Brogan Court stated that the "plain language of [section] 1001 admits no exception for an 'exculpatory no'" (86) and excluding denials of wrongdoing from [section] 1001 under the "exculpatory no" exception would pervert the government's investigatory function. (87) The Court held that the petitioner's "cruel trilemma" was not a valid reason to create an exception to [section] 1001. (88) The Court rejected the argument that eliminating the "exculpatory no" exception would open [section] 1001 up to prosecutorial abuse, explaining that the petitioner had failed to demonstrate a history of "prosecutorial excess." (89)

However, in concurrence, Justice Ginsburg noted that a pure false statement doctrine vests an extraordinary authority in prosecutors to manufacture crimes. (90) To avoid problems with this issue, the United States Attorneys' Manual encourages DOJ attorneys, as a matter of policy, not to pursue prosecutions in "exculpatory no" situations. (91) Although Brogan held that an "exculpatory no" exception is not valid in a false statement prosecution, Justices Ginsburg and Souter indicated that in rare situations such an exception may be needed. (92)

2. Ambiguity

The defense of ambiguity is of varying strength in false statement prosecutions under [section] 1001. (93) The ambiguity defense asserts that a defendant cannot be convicted under [section] 1001 for a statement that may be accurate within a reasonable construction of a contract or contract clause. (94) When reporting requirements are ambiguous, the burden falls on the government to "negate any reasonable interpretations that would make the defendant's statement factually correct." (95) The government counters an ambiguity defense by: (i) establishing beyond a reasonable doubt what the defendant meant by the allegedly false statement and thereby eliminating any ambiguity, or (ii) proving beyond a reasonable doubt the falsity of any reasonable interpretation that "would make the defendant's statement factually correct." (96)

3. Double Jeopardy

Like prosecutions under the False Claims Act, (97) [section] 1001 prosecutions can often be maintained whether or not another federal statute applies. (98) In United States v. Woodward, the Supreme Court held that government prosecution of a defendant under [section] 1001 does not constitute a violation of the Double Jeopardy Clause, even if a more specific statute also covers the crime. (99) In Woodward, the court held the defendant was properly convicted under both [section] 1001 and a statute governing currency reporting violations, too Only when the statutory elements for two crimes are identical does prosecution under both violate the Double Jeopardy Clause. (l01) As long as each statute requires proof of an additional fact that the other does not, there is no violation of the Double Jeopardy Clause. (102) The courts will not review a prosecutor's decision to charge under one statute and not another unless the court finds that the prosecutor's decision discriminates against a class of defendants. (103)

4. Other Defenses

Other effective defenses include: the five year statute of limitations; (104) the good faith belief that a false statement was not a binding obligation; (105) and duress, so long as the defendant proves duress by a preponderance of the evidence. (106) Additional defenses, though thus far unsuccessful, include: multiplicity and duplicity of indictment, (107) entrapment, (108) collateral estoppel, (109) good faith reliance on expert advice, (110) "active misleading" by past governmental conduct, (111) good faith reliance on custom, (112) "literally true" answers that actively mislead the government, (113) and recantation. (114)

The Supreme Court has ruled that illegal government questioning does not constitute a defense to a violation because misstating the truth is not a valid legal method to challenge the government's right to ask questions. (115) Finally, in United States v. Hubbell, (116) the D.C. Circuit rejected Hubbell's procedural challenge to a false statement charge on the ground that the indictment was impermissibly vague. (117) In response to Hubbell's claim that the indictment failed to fairly inform him of the charges against him, the court held that [section] 1001 allows for the charging of "scheme crimes." Therefore, a false statement count need not specify each and every alleged false statement at issue. (118)

C. Sentencing Under [section] 1001

The United States Supreme Court recently held the United States Sentencing Guidelines ("the Guidelines") to be advisory only, excising two statutory provisions: (1) 18 U.S.C. [section] 3553(b)(1), which made the Guidelines mandatory; and (2) 18 U.S.C. [section] 3742(e), an appeals provision that the Court determined was inextricably linked to [section] 3553(b)(1). (119)

However, the Court explained that "[t]he district courts, while not bound to apply the Guidelines, must consult those Guidelines and take them into account when sentencing." (120) The controlling statutory provision in sentencing is 18 U.S.C. [section] 3553(a), which states that the Guidelines are one among a number of factors--including the purposes of punishment and the nature and circumstances of the offense and the history and characteristics of the defendant--to be considered in imposing federal sentences. Accordingly, the Guidelines …