The False Claims Act was passed during the Civil War because unscrupulous defense contractors sold the Union Army defective rifles, ammunition and sick pack animals. President Lincoln pioneered the legislation and, in 1863, the False Claims Act was passed. In 1986, the Act was rewritten for the modern era amid concerns that the federal budget had ballooned and much of its inflation was the result of defense contractor fraud. The press reported various unconscionable billing practices, such as the Navy paying $435 for an ordinary hammer and $640 for a toilet seat. Government enforcement agencies complained that their efforts to stop fraud were hamstrung by insufficient resources, a lack of adequate legal tools and the difficulty of getting insiders to speak up for fear they would lose their jobs. In response, Senator Charles Grassley, a Republican from Iowa, sponsored the amendments to the False Claims Act, which received wide bipartisan support. President Reagan signed the bill into law on October 27, 1986.
Whenever the government purchases goods or services there is a danger that the taxpayer does not get what it paid for: the goods may be defective or simply not up to the standards specified in the purchase agreement; or the goods may be overpriced. The goods or services in question can be anything from battleships to office supplies.
For example, in the case of U.S. ex rel. Brown v. APL, Ltd., NOL Group, et al. (N.D. Cal. February 13, 2009) (not one of ours) APL Limited agreed to pay the government $26.3 million to resolve allegations that it submitted false claims to the United States in connection with contracts to transport cargo in shipping containers to support U.S. troops in Iraq and Afghanistan.