The False Claims Act has been celebrated as one of the US government’s most effective tools for fighting fraud and holding fraudsters accountable. The law hinges on the initiative of whistleblowers, allowing them to bring lawsuits on behalf of the US government wherever they discover that the government is being defrauded. In return, the whistleblowers are entitled to a reward, between 15-30 percent of the amount recovered by the government. The False Claims Act has enabled the US federal government to recover billions from fraudsters since 1986. And now, a version of the False Claims Act is being considered in Guam.
Guam’s proposed false claims act, introduced by Senator Michael San Nicolas, takes cues from the federal False Claims Act, though it differs slightly by including additional provisions for curbing illegal tax activity. San Nicolas’ proposed law takes aim at those shirking taxes, allowing whistleblowers to report tax evaders and those underpaying their tax liability.
San Nicolas states that the intent of the bill is to improve collection of local taxes by protecting whistleblowers, because “whistleblowers often put their livelihoods on the line when they report illegal tax activity.” In interview with The Guam Daily Post, he adds that “it is only right that they are rewarded when that risk leads to [Guam’s government] collecting money it may not have known it was owed.”
Beyond the focus on tax evasion, Guam’s proposed law closely mirrors the federal version of the False Claims Act. Guam follows in the footsteps of thirty states and the District of Columbia that have adopted state False Claims Act equivalents.
Guam is not a stranger to whistleblower lawsuits. With a significant US military presence on the island and constant need for contracted work to maintain and expand military installations, unscrupulous contractors have made attempts to defraud the US government in its operations in Guam. A lawsuit filed in 2013 alleged that a Japanese company undertook a sham joint-venture with a small US firm to improperly qualify for a preferential bid on a construction project contract for the US military in Guam. The case was settled in 2017 for $3.1 million, with $775,000 being awarded to the two whistleblowers who brought the lawsuit.
The recovery in this example was for the federal government. If San Nicolas’ proposed law comes into effect in Guam, whistleblowers will be able to recover funds on behalf of Guam’s government.