The False Claims Act (FCA) is a federal statute that traces its roots to the 14th century in England. As we will see, it is very much alive and well in 2025 in the United States.
The FCA is now codified as 31 U.S.C. §§ 3729 – 3733. The Depart of Justice website describes it as follows:
The FCA provides that any person who knowingly submits, or causes to submit, false claims to the government is liable for three times the government’s damages plus a penalty that is linked to inflation.
FCA liability can arise in other situations, such as when someone knowingly uses a false record material to a false claim or improperly avoids an obligation to pay the government. Conspiring to commit any of these acts also is a violation of the FCA.
In addition to allowing the United States to pursue perpetrators of fraud on its own, the FCA allows private citizens to file suits on behalf of the government (called “qui tam” suits) against those who have defrauded the government. Private citizens who successfully bring qui tam actions may receive a portion of the government’s recovery. Many Fraud Section investigations and lawsuits arise from such qui tam actions. (emphasis added)
The Department of Justice obtained more than $2.9 billion in settlements and judgments from civil cases involving fraud and false claims against the government in the fiscal year ending Sept. 30, 2024. More information about those recoveries can be found at https://www.justice.gov/archives/opa/pr/false-claims-act-settlements-and-judgments-exceed-29b-fiscal-year-2024, and the 2024 FCA statistics can be found at https://www.justice.gov/archives/opa/media/1384546/dl.
The concept of qui tam arose in 1318 when King Edward II offered one third of the penalty to a person that successfully sued government officials who moonlighted as wine merchants.
During the American Civil War, there was extensive fraud by government contractors. As a result, Congress passed the False Claims Act, which President Lincoln signed into law in 1863.
The law included a qui tam provision for someone who successfully sued on behalf of the government which entitled such persons (relators) a percentage of any recovery. The sponsor of this legislation was US Senator Jacob M. Howard who justified payments to those we now call relators and, informally, “whistleblowers” stating:
I have based the [qui tam provision] upon the old-fashioned idea of holding out a temptation, and ‘setting a rogue to catch a rogue,’ which is the safest and most expeditious way I have ever discovered of bringing rogues to justice.
Source: Wikipedia - False Claims Act of 1863
It should be noted that not all whistleblowers are rogues. They could also be persons who are doing what they believe to be the right thing to do under the circumstances. In the modern era, they are very often business competitors.
I first learned of the False Claims Act in the early 1990s from an article in the magazine Traffic World. The article described how a furniture manufacturer based in Kansas City had been criminally charged by the federal government under one or more provisions of the Fraudulent Acts against the Government statutes, which included the False Claims Act.
The underlying situation was that this company sold furniture to the government on sales terms whereby the government was charged the invoice price of the various items plus freight charges. The company was audited by the Government Accountability Office (GAO). To the best of my recollection, the article did not report what prompted the GAO to initiate its audit so it is not known whether a whistleblower was involved.
The audit revealed that the furniture manufacturer had an arrangement with its carriers whereby they received an “allowance” from the carriers which was either credited toward payment for future shipments or refunded in cash. The effect of this was to reduce the amount of the freight charges the company actually paid. The company did not refund or disclose such credits to the government which led to the criminal charges. The company pled nolo contendere (no contest) and paid a $7,000,000 fine!
I had this case in mind when I wrote a previous PARCEL Counsel column titled “Marking Up the Freight: Lawful Revenue Center, or Illegal Fraud” for the December 2010 issue of PARCEL magazine. It should also be kept in mind that in addition to the federal False Claims Act, most states have statutes regulating business and trade which would make this conduct a misdemeanor in transactions involving private parties as well as in transactions involving the government.
Which brings us to 2025 and international shipping when in June of 2025 the Ninth Circuit Court of Appeals announced its decision in the case of United States ex rel. Island Industries Inc. v. Sigma Corp., No. 22‑55063, __ F.4th __. A portion of the court’s summary of its decision reads as follows:
A jury found Sigma Corp. liable under the False Claims Act for knowingly making false statements on customs forms to avoid paying tariffs on some of its imports from China. Island Industries, Inc., filed suit under the False Claims Act, alleging that Sigma made two types of false statements on customs forms to evade antidumping duties that applied to welded outlets.
The court held that:
19 U.S.C. § 1592 [of the Tariff Act], which provides a specific mechanism for the United States to recover fraudulently avoided customs duties, does not displace the False Claims Act as to claims like Island’s. Rather, § 1592 overlaps with the False Claims Act, which reaches antidumping duties that an importer has fraudulently evaded paying.
So what is the significance of that very legally technical excerpt from the decision? In plain English, it dramatically raises the stakes for violations of the laws and regulations administered by U.S. Customs and Border Protection (CBP).
The jury returned a verdict in favor of Island Industries finding that Sigma was liable for violating the FCA and that it owed $8,085,546.00 in underpaid duties. The court trebled this amount to $24,256,638.00 and added additional penalties resulting in a total judgment of $26,080,783.00. Based on the decision of the Circuit Court of Appeals, the trial court awarded more than 2.7 million dollars as a qui tam payment to Island Industries.
Sigma had argued that the Tariff Act applies, and not the False Claims Act. The court ruled that both the Tariff Act and the FCA could apply, meaning that the FCA can be applied to tariffs covered by the Tariff Act.
So what does this mean for businesses importing goods into the United States? The consequences for noncompliance with the laws and regulations administered by the CBP have very significantly increased. As in other areas of the law, saying that one was not aware of the law is not a defense. Accordingly, importers must take steps to review and make certain that all of their procedures strictly comply with the CBP rules.
To conclude, whenever conducting business with the federal government or being involved in activities subject to government regulation, strict compliance with the applicable rules, whether they be in a statute, regulation or the terms of a contract, should be strictly adhered to.
All for now!
Brent Wm. Primus, J.D., is the CEO of Primus Law Office, P.A., the Senior Editor of transportlawtexts, inc., and Director of Virtual Education for the Transportation and Logistics Council, Inc.Your questions are welcome at brent@primuslawoffice.com.
The information contained in this article is intended to be general background information. It does not constitute and should not be relied upon as legal advice. Readers should contact a qualified attorney should they have a specific legal question.
This article originally appeared in the Cross-Border/Global 2025 Issue.
