Underpayment of Federal Obligations: The Reverse False Claim

The False Claims Act also covers false statements made to avoid payment of money to the government. Typically, the FCA is used to return government payments to the treasury while those funds are in the hands of the business that earned them fraudulently. When false statements are instead used by a company to avoid paying the federal government, it is known as a “reverse false claim” case. Whistleblowers have brought tips related to a variety of underpayments including:

FCA lawsuits for the underpayment of taxes are specifically prohibited by 31 U.S.C. § 3729(d). Visit our section on reporting tax fraud to the Internal Revenue Service instead.  If you are in New York, you may be entitled to bring a claim under their state False Claims Act.

Customs

Businesses are required to pay duties based on the origin, weight, quantity and value of goods. These items are declared to U.S. Customs and Border Protection officials. Intentional misstatements in order to avoid paying taxes violate the FCA.

Royalties

The government leases land to businesses to extract valuable resources from them, including oil and gas, timber and minerals. The terms of the contracts generally require the business to pay royalties on the value of the item extracted. If the company understates the quantity or value of the commodity, it will pay less to the government.

Environmental

Our nation’s laws impose affirmative obligations on companies to report certain harmful environmental conditions. If they do not tell the government, they are subject to a fine for failure to report it. The law permits informants to earn a percentage of the amount recovered as a result of this penalty.

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