False claims, improper payments and patent claims

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1. False claims on assistance funds

Section 640A of the Foreign Assistance Act of 1961, codified at 22 U.S.C. 2399b, sets civil consequences for false claims on assistance funds (22 U.S.C. 2399b). It reaches anyone who presents, or causes to be presented, a claim for payment from funds made available under the Act for assistance, knowing the claim to be false, fraudulent or fictitious (22 U.S.C. 2399b(a)). The claim may be made to a bank or other financial institution, or to an officer, agent or employee of a federal agency.

The section also covers three related kinds of conduct (22 U.S.C. 2399b(a)). One is knowingly claiming payment for a commodity or commodity-related service the President has found ineligible for payment from those funds. Another is supporting a claim with a certification, statement or entry on a contract, abstract, bill of lading, invoice or government form that the person knows, or in the exercise of prudent business management should know, is false. The third is using any other fraudulent trick, scheme or device to get a benefit or payment in connection with the negotiation, procurement, award or performance of a contract financed under the Act. Anyone who agrees, combines or conspires to do any of these is covered too.

2. What a violator pays

The consequences come in three parts (22 U.S.C. 2399b(a)). The person must pay the United States 25 percent of any amount sought wrongfully but not actually received. The person must forfeit and refund any payment, compensation, loan, commission or advance received as a result. For each act, the person must also pay the greater of $2,000 plus double the government’s damages, or 50 percent of the amount received. The costs of suit are added.

A person here includes any individual, corporation, partnership, association or other legal entity (22 U.S.C. 2399b(c)). The lower standard of what a person should know applies only to supporting documents.

3. How the government recovers

The President has two routes to recovery (22 U.S.C. 2399b(b)). One is a suit in the federal district court for any district where the person lives or may be found. The other is administrative withholding. After sending the person a notice of claim by registered mail, describing the basis and identifying the funds, the President may withhold the amount claimed from money any federal agency owes the person. The amount covers the refund, damages, liquidated damages and exemplary damages claimed.

Withholding becomes final unless the person acts within a year (22 U.S.C. 2399b(b)). It is a final determination of the person’s rights and liabilities for the amount withheld, unless the person sues the United States for recovery in a federal district court within one year of receiving the notice. The statute expressly authorizes that suit.

4. Money from tainted transactions

Some transactions financed under subchapter I of the Act fail to meet the Act, government rules or the terms of an agreement or contract (22 U.S.C. 2355(c)). Funds realized as a result go back to the account that financed the transaction, or to the account currently available for the same general purpose (22 U.S.C. 2355(c)).

5. Reports on improper payments and extortion

A separate 1976 provision deals with corruption around security assistance (22 U.S.C. 2394a). Within 60 days after receiving information that substantiates either of two kinds of conduct, the President must report the circumstances to Congress. The first is officials of a country receiving international security assistance taking illegal or improper payments from an American corporation in return for a contract to buy defense articles or services from it. The second is such officials extorting, or trying to extort, money or other things of value in return for letting an American citizen or corporation do business there.

The report must include the President’s recommendation on whether the United States should continue a security assistance program for that country (22 U.S.C. 2394a). Rules on agents’ fees in sales cases are covered in agents, commissions and contingent fees.

6. Patents and protected information

The Act limits how owners of patents and protected information can respond when assistance uses their rights without permission (22 U.S.C. 2356(a)). The rule applies in two situations, and the first covers only use of an invention within the United States. One is where, in furnishing assistance, an invention covered by an American patent is practiced in the United States without the owner’s authorization. The other is where information protected by law and held by the government under the owner’s restrictions is disclosed by the government, or its officers, employees or agents, in breach of those restrictions.

The owner’s exclusive remedy is a suit against the United States for reasonable and entire compensation (22 U.S.C. 2356(a)). It must be brought within six years in the federal district court where the owner resides, or in the Court of Federal Claims. Time while the government holds a written claim, before mailing a denial, does not count. The government may plead any defense a private person could. The last paragraph of section 1498(a) of title 28 also applies.

Before any suit, the head of the agency concerned may settle and pay the claim (22 U.S.C. 2356(b)). No claim may be paid unless the claimant accepts the amount tendered in full satisfaction.

7. Patented medicines

Assistance funds may not buy a drug or pharmaceutical product made outside the United States if making it in the United States would use, or be covered by, an unexpired American patent (22 U.S.C. 2356(c)). The bar does not apply if a court has already held the patent invalid in a final judgment, or if the patent owner expressly authorizes the manufacture.

Key terms

Administrative withholding	Recovery by offsetting amounts owed to a person by any federal agency.
Notice of claim	The registered mail notice that starts withholding and the one-year clock.
Prudent business management	The should-know standard for false supporting documents.
Ineligible commodity	A commodity or related service the President has ruled out for payment from assistance funds.
Exclusive remedy	The owner’s only route, a suit against the United States for compensation.
Full satisfaction	Acceptance of a settlement as complete payment of a patent or information claim.

Every statement above links to the document behind it. The full source list for this piece is on the sources page.

This page describes public United States government programs for general information. It is not legal, regulatory or procurement advice, and it does not address the facts of any particular case.

How Sentfore supports this

Clean documentation protects every party in an assistance supply chain. Sentfore works at the delivery end of defense programs in difficult environments, providing secure movement, protective security, facilities and life support. Requirements can be sent through the contact page.