In Allison Engine Co., Inc. v. United States ex rel. Sanders, the United States Supreme Court resolved a split in the Federal Circuit Courts of Appeal over whether fraud liability under the False Claims Act (FCA) could derive merely from a prime contractor’s use of “government money” to pay a subcontractor’s false claim. In a unanimous opinion, the Supreme Court held that, to establish liability under the False Claims Act, the court must find a “direct link” between the false or fraudulent statement and payment of a claim with Treasury funds:
If a subcontractor or another defendant makes a false statement to a private entity and does not intend the Government to rely on that false statement as a condition of payment, the statement is not made with the purpose of inducing payment of a false claim “by the Government.” In such a situation, the direct link between the false statement and the Government’s decision to pay or approve a false claim is too attenuated to establish [fraud] liability.
The Allison Engine decision clarifies that it is no longer sufficient under the FCA to show that a false claim (or false statement made in support of a claim) was “presented” for payment and paid with federal monies. Rather, the Court’s decision establishes that the false record or statement be “material” to the Government’s (not a third party’s) approval and payment of a claim. 553 U.S. ___ (2008).